digital divide network - article database

Stage - 3: Growth Of the Business

As the scale of production and other commercial activities (such as transportation, storage, bulk raw material purchase, etc.) increases, the business will earn what is technically known as economies of scale. This usually happens when optimum utilization of production, storage and transportation capacities take place with an increase in the scale of production. That just means that when a capacity (units are imaginary and are not calculated from any economic or mathematical formula) of 10, costing 20 economic units, is being used to produce 5 units of finished product, the cost of each unit of finished product will be 4 economic units (total economic units/ units of finished goods produced). Now, when the scale of production increases such that 10 finished products are produced using those same 10 units of production capacity (costing 20 economic units), the cost per unit of production comes down to 2 economic units. This will lower the overall cost of production and the business will be able to offer its products to customer at a lower price. This low-cost-low-price phenomenon makes a new business' position more competitive as even by keeping the profit percentage at par with standard industrial rates, it is able to attract more customers and run in profit at the same time.

Stage - 4: Establishment and Expansion

Once a business starts generating profits, and while it is still reaping economies of scale, it makes efforts to get as much market share of its region of commercial activities as possible. By this point, the business has already made its presence felt in the consumer market and has established its name and brand. Once it becomes a major player in its native market, an established business should start looking out for expansion opportunities. That way, even when it goes on decline in its native market (owing to entry of new competition and other economic and business environment factor changes), it can still make profits from other markets where it's revenue centers are established. Also, expansion at this point is the right thing to do as the establishment of its brand name gives it a certain leverage even in new markets which makes building a customer base there easier.

Stage - 5: Maturity and Decline

As the business spends years basking in the glory of economic returns and brand reputation, there are other business ideas that are being conceived by other venturists and new business ventures are taking shape everyday. This means that in the face of increased competition and the low prices offered by the new competitors, the existing business faces a decline in terms of competition and cost of operations. Also, as a business gets established and starts manufacturing at optimal capacity, it slowly loses out on the economies of scale. In fact, in order to maintain the established business, market its products and kill market competition, a business is compelled to undertake certain costs (advertisements, sales promotions, product cannibalization, cost of communication, inelasticity of supply, too large market share, risk of over capitalization, etc.) which are technically known as diseconomies of scale as these costs increase the per unit production cost of the goods. If the manufacturer is to keep prices the same, his profit percentage decreases and if he is to increase prices, he loses his customers to competitors. In such as situation, when stuck between the devil and the deep sea, it is a viable option for a mature business to either sell out, or agree for a merger or amalgamation.

The satisfaction of creating something fruitful from nothing - an economic enterprise from scratch - cannot be matched by anything else in the entire Creation! With its high quality products such as hammer crusher, Raymond mill, Hongxing Machinery has ascended in the front rank of the world in the exporting of mining equipment.