Minimum Efficient Scale Essay Example | Topics and Well Written Essays - 1250 words

Minimum Efficient Scale - Essay Example The MES is hardly ever a solitary output - more likely it is a range of production levels where standard cost is minimized where the firm achieves regular returns to scale. It varies from industry to industry depending on the type of the cost structure in a particular segment of the market. When the proportion of fixed to variable costs is very elevated, there is huge potential for dropping the average cost of production. The minimum efficient scale may be expressed as a variety of production standards, but its connection with the whole market size or demand will conclude how many competitors can successfully function in the market. If the minimum efficient scale is comparatively diminutive compared to total market size many companies can survive in the same space for example computer software companies. In other industries where the minimum efficient scale is quite large due to high fixed costs, only a few major players dominate the market place for example telecom and other basic materials. There is also likely to be enormous potential to take advantage of technical economies of scale. As a consequence the MES may be a high quantity of entire market demand. There may be an opportunity merely for single business to completely exploit the economies of scale obtainable in the industry. It is presumed for a natural monopoly that the long-run average cost curve falls constantly over a very great range of output. This is illustrated in the diagram below. Companies are able to exploit the market when the range of their minimum efficiency scale is high as this applies a barrier to entry. The higher the barriers to entry, the greater the ability of established firms to raise price above the long run average costs without letting the new firms enter the market this includes foreign competition too. Although production cost barriers are faced by both local and foreign companies, the foreigners face an additional barrier of tariffs levied by the government. As the manufacturers expand their scale of production, average costs decrease to minimum efficient scale that is to the optimal point. As they expand further than that, they become incompetently large, and face increasing average costs. Hence if we assume they increased too far, and finally settled at the minimum efficient scales they have oppressed all Economies of Scale, and Diseconomies of Scale, in manufacturing. Big firms can have lesser per-unit costs due to purchasing at bulk discounts example parts, indemnity, real estate, marketing, etc. and can also bound competition by buying out competitors, setting proprietary industry values. Looking at further examples, an automobile maker can buy millions of tons of steel at one point for use in forming engine blocks and store it for an indefinite period, if this will get a superior price. On the other hand, a florist can't buy millions of tons of matured flowers to put up for sale as they will shrivel before they are sold. This results in disparate interpretations of economies of scales for diverse types of companies. The size of a business may also alter over time, as industry and marketplace circumstances change. If a dealer finds a way to produce

Why is so much expected of soft power these days Essay

Why is so much expected of soft power these days - Essay Example Hard power, which is characterized as coercive in nature, is usually measured by virtue of a state’s military strength.3 Hard power was once the only matrix by which a state’s power was measured. Nowadays, changes particularly with interdependence among the global community, information technologies and the rise of non-state and non-military actors such as corporations and non-governmental organizations have given expression to a more significant source of power: soft power.4 This research study analyzes the rise of soft power today and discusses why so much is expected of soft power these days. This paper is therefore divided into two main parts. The first part of this paper analyzes the theory of soft power and the second part of this paper, analyzes the rise of soft power and identifies why so much is expected of soft power these days. The Theory of Soft Power Joseph Nye, a diplomat and scholar of the 1980s, introduced the theory of soft power.5 Nye (2003) described soft power as: ..the ability to get what you want by attracting and persuading others to adopt your goals. It differs from hard power, the ability to use the carrots and sticks of economic and military might to make other follow your will.6 Soft power is more about using â€Å"credible claims† and less about â€Å"propaganda†.7 Nye explains how credible claims amount to soft power. It comes from the state’s cultural, political and policies’ appeal. When a state’s policies are viewed as â€Å"legitimate† the state’s soft power is exemplified.8 Although the US has used and continues to use the military in its war against terrorism, it has also used and continues to use soft power.9 Soft power in the US counterterrorism strategies include enhanced collection and sharing of intelligence, cooperation with other states and methods for cutting off financing for terrorists activities. The US has also described its war against international te rrorism as a war that uses the US’s influence, working together with its allies in an attempt to perpetuate the idea that terrorism is unlawful and is the kind of conduct that no legitimate state would tolerate or aid.10 The US has also pledge to lend assistance and support to â€Å"moderate and modern government† particularly in Muslim states as a means of ensuring that â€Å"the conditions and ideologies that promote terrorism do not find fertile ground in any nation.†11 The US’s counterterrorism strategy also involves reducing or removing the root causes of terrorism by influencing other states to target those areas vulnerable to terrorists’ influences. The US’s specifically states its intention to use soft power in the war against terrorism by stating that it intends to use: Effective public diplomacy to promote the free flow of information and ideas to kindly the hopes and aspirations of freedom of those in societies ruled by the sponso rs of global terrorism.12 Thus the US counterterrorism policies are not geared toward forcing change and cooperation. The US Counterterrorism policies are aimed at influencing and persuading a change in behaviour and thinking as a means of helping the US achieve its goal of eradicating the threat of terrorism. Aside from the wars in Iraq and Afghanistan, the US counterterrorism strategies can be distinguished from hard power as it is not coercive in nature. Hard power would have been demonstrated by the conscious use of economic and military power as a means of influencing the decisions and options of the enemy. Hard power is distinguished from soft power in significant ways. Hard power contemplates coercive techniques that can either be actual or symbolic. Soft power fosters agreement via policies and other forms of conduct that make