Description of a Small Enterprise in Bd

Nature of Firm and Product line:

AM Wire Nail is a sole proprietorship business which produces different size of nail in its product line. The wire nail is known by its number in the market, it produced nail sizes are: 13 size nail, 14 size nail, 17 size nail, 18 size nail and 20 size nail.

Horizontal Boundary of the Firm and its Determinants

The horizontal boundaries identify the quantity and the varieties of products a firm produces. The determinants of the horizontal boundaries of the firm are economies of scale, economies of scope and learning economies. AM wire nail daily use nearly 1 ton process steel wire by its production line consisting of 2 mini drawing machine and 8 nail making machine. It’s economies of scale are the result of physically combining inputs to form outputs that continually reduce producer unit costs over the relevant range of demand which can be achieved in terms of volume produced with limited fixed manufacturing and administrative overhead costs (only 11 employee and worker cost around Tk. 70 thousand, rent fee costs monthly Tk. 23500 along with minimal utility costs). Its marginal cost in producing extra unit is also minimum since its produces nail in different sizes in large scale production with minimal wastage. Economies of scope result from physically combining inputs to form outputs that produce two or more related outputs within the same firm. Learning economies are present where costs fall with experience. Learning economies do not directly expand the firm, but they contribute to its success. A closer look to the operation of AM Ware Nail reveals its economies of scope because the same employees produce different sizes of Nail through utilizing same setting and resources (same machines, required raw materials, different sizes of nails are producing at the same time by same employee etc.).

Vertical Boundary of the Firm and its Determinants

This firm is vertically integrated in some extent in downstream value chain, more...