6 assignment (wk 2)

2.3 First, explain how attempts at dealing with COVID-19 have resulted in less demand for a cadre of services such as airline travel, restaurants, barber shops, salons, and theme parks Economies of scale require large amounts of people working together in small areas to produce whatever product or service the company is selling. When I consider the concept of economy of scale my mind immediately goes to a factory filled with numerous workers doing various task. When Covid-19 hit the world, the scientific community felt it necessary to limit people gathering in close proximity within large groups, social distancing. The industries such as sports and entertainment were immediately closed and close behind them came the closing of non-necessary factories. The business that are listed here would all have been forced to close because of social distancing mandates, and subsequent lower demand form the shoppers. It is much more efficient to operate a cruise ship than it is to operate a private yacht. The cruise ship in this scenario represents economies to scale and the yacht represents individual services. When the world started social distancing a cruise ship was one of the last places someone would want to go to, but a private yacht was a great alternative, if you could afford it. This same pattern became apparent throughout our world as individuals looked for ways to spend leisure time and, in most instances, a different way to conduct business. One thing that is very clear, business became more remote. Secondly, explain what firms like the above are doing trying to save their businesses as they deal with the pandemic The service industry has been devastated from the pandemic. Restaurants had to refocus their efforts to take-out only operations, this helped some employees but not all of them. Theme parks were completely shut down without having a viable alternative business plan. Barber shops, banks and many others changed the rules about how many customers could come in at one point of time, removed waiting rooms by requiring customers to wait in their cars and any other creative thing that they could come up with. As the pandemic starts to wind down (hopefully) the banking industry has renewed our focuse on personal service instead of mass offering. “To maintain a competitive edge, banks need to both provide a service that clients perceive as being personalized and focus on a specific area rather than a wide range of functions” (Private banking: getting personal, 2007, pp 1). Using a personal relationship is not new and I have witnessed my clients desire to move away from large scale banking models to adopt a personal relationship-based model. The pandemic intensified that feeling that my clients wanted personal service, not large-scale corporate banking. People do not want large corporate banks and prefer the personal attentions they receive in smaller scale more responsive banks (Davis, 2012, pp 46). Are these attempts at saving their businesses being successful? What would it take to rebuild economies of scale and the associated benefits? Explain. I live in an area with a large Amish population, their businesses have exploded during the pandemic because of the personal attention each customer gets from them. The Amish do not use economies to scale and during the pandemic it has saved their businesses from financial ruin. The businesses did need to adept to using the internet more, but that was a minor adjustment. References Davis, T. (2012). BANKING GETS PERSONAL. (cover story). Business People, 25(11), 43–46. Private banking: getting personal. (2007). MarketWatch: Financial Services, 6(9), 4. ==================================== Economies of scale can be defined as the cost advantages gained by companies when production becomes efficient. On the flip side, diseconomies of scale refer to when a business expands to quickly and the cost per unit increases. COVID-19 had a negative impact on many industries, but especially the service industry. As communities issued stay at home orders, many service related business simply had to shut their doors. Such as restaurants and personal services (barber shops and hair salon, for example). These businesses provide a service, not a manufactured product. Theme parks closed laying off thousands of workers, but as they are able to re-open the environment is different and policies are in place to protect employees and patrons. To re-open successfully, small service orientated businesses may have to get creative in the way they provide services. For instance, cities have closed streets to add more outdoor dining space to provide restaurants the ability to seat customers and still be socially distant and have expanded carry out options with even to-go cocktails (in an area, where that is normally not allowed). Nail salons have put up dividers between pedicure stations to allow for earlier reopening. Small boutiques have focused their sales on online with live “fashion shows” on social media to promote new products. Safely re-opening and gaining customers back who have been sheltering at home for the last year will take patience and hard work. The business will not just bounce back to normal, small businesses will need to emerge slow and steady to be successful. Investopedia. (n.d.). Financial Terms Dictionary. Investopedia. https://www.investopedia.com/financial-term-dictionary-4769738. Farnham, P. G. (2013). Economics for Managers (Subscription). [VitalSource Bookshelf]. Retrieved from https://online.vitalsource.com/#/books/9780133252293/