Text 2 Size of Firm vs Size of Plant

In evaluating giant firms, it is necessary to distinguish carefully between the size of the firm and the size of the individual physical factories, plants, or establishments that the firm owns and operates. Efficient production requires individual plants large enough to use expensive specialized equipment and to employ specialized workers. This means that firms must be large enough to own and operate these large plants. Once the firm is operating the most economical plant, however, there is no increase in engineering efficiency when the firm grows large enough to own and operate several plants, all equally efficient.

For example, fruit can be canned in a plant costing less than $100,000 (or, for that matter, in an ordinary household kitchen). With hand labor and simple equipment, however, the cost per can is very high. A larger cannery, operating on a production-line basis with automatic cooking, canning, and conveying equipment may require an investment of $ 1 million, but the production cost per can is a fraction of what it is in the smaller plant. If the output can be sold, a $ 1 million corporation with one big plant is more economical than ten $ 100,000 corporations, each operating a small, inefficient plant. But a $ 10 million corporation, operating ten efficient plants, achieves no greater production economy than ten $ 1 million corporations operating only one plant each.

The force of this point is increased when we realize that giant corporations not only operate many plants but also usually operate plants in many different industries. Thus, an automobile company not only has many plants producing automobiles, it also has plants producing trucks, locomotives, refrigerators, air-conditioning equipment, radios, television sets, and electrical generating equipment. The world's largest "steel" company is also, among other things, one of the world's largest cement producers. A large “food processing” firm also makes electric iron and other household appliances.

Assignments to text 3:

1. Read the text and find the sentences explaining the no­tion and function of specialized management.

2. Translate the text and indicate advantages/disadvantages that specialized management provides for any enterprise.

3. Read the text once more and try to understand if the author stands for or against large firms.

4. Identify and read out the sentences for or against large firms.

5. Do you agree that “people with combination of ability, imagination, energy, discipline, and drive required for effective enterprise are probably our scarcest economic resource”. Give your reasons focusing on Russian realities.

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