Question

How happens economies of scale in a fragmented industry?

Answer 1

Fragmented industry is nothing but the industry where the market shares are evenly distributed no single enterprise can influence the direction of the industry.

Economies of scale refers to cost saving done when the level of production increases. So, reduction in economies of scale will decrease the profit and increase in economies of scale will increase the profit.

Fragmented industry can achieve economies of scale by: -

• Focusing more on standardizing the products sold by various firm.
• Should focus on using large amount of resources
• Should minimize cost of manufacturing of products.
• More volume should be produced to give cost advantage.