The Possibility

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There are three basic situations of the size that can be identified with respect to the market:-one where the quantity demanded is clearly lower than the lowest possible install producing units. -One in which the quantity demanded is equal to the minimum capacity that can be installed. -One in which quantity demanded is greater than the largest possible install producing units. To broaden your perception, visit Peet’s Coffee. This measure of demand function is defined 1 with which faces the project in study and discusses its future projections with the object that the size not only respond to a temporary situation of short-term, but that is optimized against the dynamism of demand. The analysis of the projected quantity demanded has both interest and the geographical distribution of the market. Many times this variable will lead to select different sizes, depending on the decision with regard to define one or more factories, size equal or different, in different places and with number of shifts that may vary between them.

The availability of inputs, both human and material, and financial, is another factor that affects the size of the project. Inputs may not be available in the quantity and quality required, limiting the ability of using project or increasing supply costs, and can even make recommended the abandonment of the idea that originated it. Click Symantha Rodriguez for additional related pages. In this case, it is necessary to analyse, in addition to resource levels existing at the time of the study, those expected in the future. Among other aspects, it will be necessary to investigate the reserves of renewable and non-renewable resources, the existence of substitutes and even the possibility of changes in real prices of inputs in the future. The availability of inputs is interrelation in turn with another determining factor of size: the location of the project. While farther east of input sources, most high will be the cost of its supply.

The above determines the need to evaluate the option of a large plant or a medium-sized plant to serve a wide area of the population and/or to meet minor local demands. The greater the coverage area of a plant, the greater the size of the project and its cost of transport, although probably you can access savings by economies of scale by the possibility of obtaining better prices by buying larger quantities of raw, by the distribution of administrative expenses, sales and production, between more units produced, by specialization of labour or by the integration of processes, among other reasons. Size many times must be contingent, over which the quantity demanded in the market and the business strategy that is defined as the most cost-effective or the safest for the project, according to the nature of the goods and/or services to be generated. For example, it is possible that to concentrate on a segment of the market is achieved to maximize the profitability of the project. In some cases selected technology allows the expansion of the productive capacity in fixed lengths. On other occasions, technology prevents the gradual growth of the ability, so it may be advisable to invest initially in a superior installed capacity than that required at an early stage, if it is expected that in the future behavior of the market, the availability of inputs or other variables will enable profitable utilization of that increased capacity.