Wednesday, November 26, 2014

Economies of scale: A threat or a treat in capitalism

Chinese communities in downtown Bangkok used to brag about their wealth and business achievement as this seems to be an indicator of success in life for most of them. Today, if you hop around parties hosted by these same communities, you'll find that they tend to talk less of their personal prosperity but more on their children climbing up their career ladders or being given opportunities to work in big world-class companies.

With easy flow of capital with just one click on a computer screen, new fund is born every minute. I mean new investment or new groups of alliances, if you like. This triggers mass production of everything for global consumption with excuse of product standardization. Manufacturers then compete for victory in the game of cost manipulation. Economies of scale allows business entities with largest capital to stay wining and keep on beating the new-borns. SMEs now complain that they don't produce enough to manipulate the cost to the point at which they can gain profit margins, thus are left to die out of the market. The only way for them is to be merged or acquired by those of bigger ones for their survival.

At SevenEleven, many kinds of consumption products are sold. The technology of JIT (Just-in-time) stock management system allows its branches to realize at the end of the day which kinds or brands of products are listed as bestsellers and which ones are not. Those that do not sell very well will soon be ditched out of the shelf. Those that sells very well too will soon be replaced by the same product but now under its local home brands, yes SevenEleven! Now the company prefers to enjoy the new sales figure to its GP (Gross Profit) margins it once gained.

Couldn't imagine SevenEleven as a metaphor for the capitalist world we now live. No wonder we have inflation in everything and in all business sectors. What is sad here is to see inflation in education today with people competing to get higher degrees in education. Again economies of scale comes into play. It's the quantity, not the quality, that matters when it comes to economies of scale. Nothing we can do about it, just have to jump on the bandwagon pretending that nothing happens! But who is to blame anyway as we all contribute more or less on what's happening here, don't we?