Economies & Diseconomies of Scale (Edexcel IGCSE Business): Exam Questions

Crest is a hotel chain that has expanded rapidly across Southeast Asia, now operating over 200 hotels in twelve different countries. Its head office is based in Thailand and manages all hotels from a central location.

Nexus is a large supermarket chain operating across Brazil. It has grown significantly over the past decade and now runs over 600 stores. It competes with several other large supermarket chains for customers across the country

Atlas is a large mining company based in South Africa. It extracts minerals including gold and platinum and supplies them to manufacturers around the world. Atlas has recently expanded its operations and significantly increased the amount it produces each year.

Kova is a coffee chain founded in Tokyo, Japan in 2001. It began with a single café and has grown to operate over 3,000 cafés across 25 countries, serving over two million customers every day. Kova sources its coffee beans from farms in Colombia, Ethiopia and Vietnam, buying several thousand tonnes of coffee each year.

It employs over 60,000 staff worldwide and has a dedicated logistics team to manage the supply of ingredients to all its cafés. Kova's main competitors are well-established global coffee brands with similar scale and resources. Despite its size, Kova has managed to keep its prices lower than many rivals.

Brio is a soft drinks manufacturer based in São Paulo, Brazil. It was founded in 1998 and now operates four factories, employing 12,000 workers. As Brio has grown, it has benefited from purchasing economies of scale, buying ingredients such as sugar and flavourings at significantly lower prices than smaller rivals.

However, in recent years Brio has also experienced diseconomies of scale. Communication between its head office and its four factories has become slower, and some factory managers have reported that workers feel poorly motivated and disconnected from the business.

Pinnacle is a construction company based in Dubai, United Arab Emirates. It was founded in 2005 and has grown rapidly, now employing over 45,000 workers on construction projects across the Middle East, Africa and Asia.

Pinnacle builds hotels, office blocks and residential developments. Its head office in Dubai manages all projects globally. In recent years, senior managers have raised concerns that the business is becoming increasingly difficult to manage. Projects in different countries are sometimes completed late or over budget, and workers on some sites have reported feeling disconnected from the company's goals and values.