Title: How Does Specialization Help Companies Achieve Economies of Scale?
Headings: How Does Specialization Help Companies Achieve Economies of Scale?
How Does Specialization Help Companies Achieve Economies of Scale?
Economies of Scale
Specialization
Specialization Leads to Economies of Scale
Example of Specialized Labor and Economies of Scale
Additional Economies of Scale
The Bottom Line

Content: One of his theories was that the division of labor through specialization will lead to growth. He described this idea as far back as 1763, in his book, An Inquiry into the Nature and Causes of the Wealth of Nations. Smith's belief was, that as a company grows, it is able to hire more workers, and hiring more workers allows a company to divide the workers into certain roles, meaning they will have fewer responsibilities and are able to improve and specialize in one core skill. Once a worker becomes more efficient at their task, this will result in increased production levels, utilizing less time and less cost. Let's take a look at the terminology behind Smith's theory. Economies of Scale
Economies of scale describes a cost advantage achieved by a company when production becomes efficient. Increasing production and lowering costs results in economies of scale because the costs are spread out over a larger number of goods. Or to look at it another way, producing additional goods does not require a significant increase in costs. Reducing the cost of units per production is the main benefit of economies of scale. Larger companies are more likely to achieve economies of scale than smaller companies because they are able to produce more goods and therefore can spread out costs over a larger number of goods.