LO and Big Layoffs LO5802

Thu, 22 Feb 96 20:04:59 GMT

Ivan wrote in message LO5770

> Achieving economies of scale, at least in the traditional sense, means
> to accumulate resources, production capabilities, etc.. In today's
> business environment it represents a big loss in flexibility. All the
> outsourcing and other forms have changed the notion of economies of
> scale!

I think that the notion of 'fit' between environment-structure-
strategy is still valid (even if I know that this approach is also under
challenge). True is, that economies of scales has become less important
for some businesses. There is to mention JIT as we find it in the car
supply industry, there are the described steel mini mills, there are small
oil refineries who compete successful with their niche products.

However, the notion that ecomomies of scales has become less
important does not mean that this is true for all kind of businesses. If
you are still in a mass oil refinery, where the customer still values
mainly price, and where JIT is not important, you are on the wrong way if
you think that economies of scales has become less important. It cannot be
correct to think that ecomomies of scale are always important, but also it
cannot be correct to say that they will not be important in any case. I
think it is important to adjust any 'general' theory to the special

You are still earning better performance if you have a superior
fit between environment-structure-strategy, or in other words: if you run
a small niche refinery you are in another business and in another
environment then if you run a classical mass refinery.

Wolfgang Schmid
e-mail: ws2@student.open.ac.uk
Compuserve: 100101.3210@Compuserve.com ($!!)

company address:
OMV AG Raffinerie Schwechat
Mannswoertherstrasse 28
A-2320 Schwechat



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