I recently came across two articles that brought up the topic of Economies of Scale. The first was regarding recent comments made by Michael Dell, CEO of Dell Computers. In his remarks Michael discusses the recent decision of HP to discontinue their consumer PC business. This situation has changed since the articles was published with HP now looking at spinning their consumer PC division off into a separate entity. Dell's reasoning is that if HP stopped making consumer PC's they would no longer have either the buying power or production capability that they previously had. This would result in the rise of prices in their high end server products, which would become their primary product. Several analysts in the industry have concluded that Dell's remarks helped change the minds over at HP.
The second article discusses what role Apple Inc. will play in the tech industry, following the death of founder Steve Jobs. This articles also discusses the concept of Economies of Scale, and attributes Apple's continued success to their current dominance in the industry. By being the largest manfacturer of non-traditional tech devices such as the IPad and IPhone, Apple has the resources and capability to hold off any of its competitors. It is able to offer higher quality products at a price similar to that of their competition. Both of these articles bring up the important role that Economies of Scale plays in manufacturing. This could be especially true in the tech industry in which a consumer often has multiple products of similar capabilites from which to choose from. Often price becomes the deciding factor for them in the end.
Both of these articles bring up important points. This brings a few questions to mind.
1) If HP knew their decision would adversely impact their company overall, then why head in that direction?
2) Does Apple's dominance in the tech industry and the benefit they recieve from Economies of Scale negatively affect the end consumer by limiting their options to purchase?
http://www.computerweekly.com/Articles/2011/10/06/248080/Expect-HP-server-price-hike-warns-Dell.htm
The second article discusses what role Apple Inc. will play in the tech industry, following the death of founder Steve Jobs. This articles also discusses the concept of Economies of Scale, and attributes Apple's continued success to their current dominance in the industry. By being the largest manfacturer of non-traditional tech devices such as the IPad and IPhone, Apple has the resources and capability to hold off any of its competitors. It is able to offer higher quality products at a price similar to that of their competition. Both of these articles bring up the important role that Economies of Scale plays in manufacturing. This could be especially true in the tech industry in which a consumer often has multiple products of similar capabilites from which to choose from. Often price becomes the deciding factor for them in the end.
http://news.medill.northwestern.edu/chicago/news.aspx?id=190199
Both of these articles bring up important points. This brings a few questions to mind.
1) If HP knew their decision would adversely impact their company overall, then why head in that direction?
2) Does Apple's dominance in the tech industry and the benefit they recieve from Economies of Scale negatively affect the end consumer by limiting their options to purchase?