Re: scale economies

["Anthony P D'Costa" <ecsadc@xxxxxxxxxxxxx>]

I do know a few things about scale economies in the steel industry.
Typical scale 3 million tons for an integrated steel making process.
Capital requiremnet on the average 3-4.5 billion dollars.  The capitalist
imperative would be to bring the scale (entry barrier) down.  recent
minimills are designed to do that.  Typical scale 0.5 mt to 2 mt, cost 500
million dollars.

cost advantages are signifcant for an integrated mill since one things
that is possible is wider product range which the minimills are cannot do.
They are more specialized.  However, the question is is one talking about
plant level scale or firm level scale.  I have mentioned plant level
(which is more technologically based).

the plant size of the auto ind has come down too.  100,000 vehicles are
pretty good.  however, when you think of parts and components the scale
goes up considerably.  some parts will run into several hundred thousand.
for a national level auto industry production ought to be a good million
vehicles or so..
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Anthony P. D'Costa			(Upto December 12, 1997)
Associate Professor			Senior Fellow
Comparative International Development	Department of Economics
University of Washington		National University of Singapore
1900 Commerce Street			10 Kent Ridge Crescent
Tacoma, WA 98402-3100 USA		Singapore 119260
Ph: (253) 692-4462			FAX: (65) 775-2646
Fax: (253) 692-5612			Ph: (65) 874-6009
E-Mail: dcosta@xxxxxxxxxxxxxxxx		E-mail:ecsadc@xxxxxxxxxxxxx
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On Sat, 15 Nov 1997, Doug Henwood wrote:

> Someone posted this to another list:
>
> >Scale economies--the savings (in unit costs) that come with higher
> >volumes of output--are typically exhausted rather rapidly in most
> >industries.  The common estimate in the auto industry, for example, is that
> >there are no cost savings beyond 7.5% of the U.S. car market.  At that
> >volume, unit costs are as low as they can be driven with the existing
> >technology.  There are virtually no industries in which a market share
> >greater than 10% of the U.S. market is required to exhaust all scale
> >economies--to reach the lowest (technologically) attainable cost per unit.
>
> Does anyone know how true this is?
>
> Doug
>
>
>