An organization can only remain competitive if driven to achieve economies of scale (Bronson & Morgan, 1998). Tactics an organization may adopt to achieve economies of scale and scope will include optimal market coverage, increasing sizes, superior "internal growth" and raised capital (Bronson & Morgan, 1998). Another important consideration for organizations include efficiency. One might define efficiency as "the ratio of inputs to outputs" (Bronson & Morgan, 1998).
Efficiency of an organization may be measured in various ways including by observation through accounting (Bronson & Morgan, 1998). An organization particularly a franchised business location will continually measure efficiency to ensure they are minimizing costs and saving time to help facilitate economies of scale and scope.
Tactics Businesses Use to Compete to Win in Business Or Survive
Economies of scale and scope are vital to the airline industry. Without economies of scale and scope an airline cannot remain competitive nor generate profits. It is vital that airlines pay specific attention to organizational tactics and methods to ensure economies of scale are maintained. There are several tactics that successful airlines adopt to achieve economies of scale and scope.
Airlines that expand total operations will often realize increasing economies of scale, however much controversy exists as to whether getting larger is an adequate measure for realizing economies of scale and scope in the airline industry (O'Connor, 2001). Many have suggested that airlines that expand in size often increase economies of scope more so than economies of scale. Increasing size is one way that airlines can realize better advertising, marketing and distribution, so this assumption makes sense. However increasing size may also decrease the costs associated with providing additional products or services. Hence the confusion. The matter is at best considered controversial. Airlines adding route branching from existing networks may improve economies of scope or savings because airport personnel and facilities may be in place at the point of origin; this enables costs "to be spread over more units of output" (O' Connor, 2001: 22).
Other methods and tactics airlines may use to realize economies of scale often involve merging with other airlines (O'Connor, 2001). By doing so an airline may ensure it takes on a more profitable route for example, or improve peak business by merging with a carrier that has peak business during the primary carriers off season (O'Connor, 2001).
British Airway has adopted a variety of tactics to improve its economies of scale and scope. One method they have employed is increasing aircraft fuel efficiency by 30$% in recent years and reducing energy consumption in buildings by 2% every year (British Airways, 2005). The company is committed to expanding its economy's of scale by providing new airline destinations and cost cutting. British Airways has spent much time increasing their presence in major airports and hubs, securing new slots particularly at U.S. And other major airports (Acumen, 2005).
The company has also worked to open new franchises abroad including ones in South Africa, Denmark and is currently working on securing new franchises with Canadian Airlines (Acumen, 2005). This will help economies of scope by improving British Airway's brand name while at the same time reducing costs via economies of scale (Acumen, 2005).
British Airways has also begun serving roughly a dozen U.S.. Cities, increasing its international presence and scope of service (O' Connor, 2001). British Airways has in fact grown to the point where many consider themselves a "mega carrier" growing in size and strength to realize economies of scale (O' Connor, 2001).
BA has also extended services to distant regions including the East Indies and Asia (O' Connor, 2001). British Airways also improved its efficiency and economies of scope in 1987 when it became privatized (O' Connor, 2001). This allowed increasing revenues to be generated, a reduction in deficits, enhanced commercial viability and efficiency and less political interference in the management of the airline (O' Connor, 2001).
Unfortunately there are often many barriers to economies of scale and scope within the airline industry. As airline companies for example attempt to increase...
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