Boost Juice Case Study
Economics Boost Juice Case study
Boost juice is currently experiencing economies of scale
3 reasons for Boost Juice experiencing economies of scale
1 – Purchasing inputs and raw materials in bulk • Buying in bulk means that the average cost of each unit of raw material is cheaper than if each unit was bought individually • In one year alone, Boost juice goes through more than 35 tonnes of mangos and you still have all of the other range of fruits that are bought. Therefore buying in bulk means that the average cost of the raw material decreases which therefore, using the value chain, means that the average cost per output decreases as output increases. • As the order value increases, a business obtains more bargaining power with suppliers. It may be able to obtain discounts and lower prices for the raw materials
2- Cheaper marketing costs pet outlet • Due to the rapid expansion of boost since it was established in 2000 (on average one new boost store opens every 4 days) has meant that the cost of advertising per outlet has decreased (e.g. if you had one outlet and advertising cost $10,000 and then the business expanded to 10 outlets it would mean that cost of advertising per outlet would go from $10,000 to $1000) • This has enabled boost to undergo further marketing strategies which in turn brings more consumers to the product meaning that the price of each unit output would decrease
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Economies of scale can be defined as reductions in costs per unit of output as output increases and so therefore arise when the cost per unit falls as output increases. They are the ‘savings of size’ if a firm is able to increase the size of its plant or operations in the long run production period. A business that is experiencing economies of scale in the present is the smoothie and juice making company called Boost Juice. Established in 2000, Boost Juice, managed by successful entrepreneur Janine
Boost juice is currently experiencing economies of scale
3 reasons for Boost Juice experiencing economies of scale
1 – Purchasing inputs and raw materials in bulk • Buying in bulk means that the average cost of each unit of raw material is cheaper than if each unit was bought individually • In one year alone, Boost juice goes through more than 35 tonnes of mangos and you still have all of the other range of fruits that are bought. Therefore buying in bulk means that the average cost of the raw material decreases which therefore, using the value chain, means that the average cost per output decreases as output increases. • As the order value increases, a business obtains more bargaining power with suppliers. It may be able to obtain discounts and lower prices for the raw materials
2- Cheaper marketing costs pet outlet • Due to the rapid expansion of boost since it was established in 2000 (on average one new boost store opens every 4 days) has meant that the cost of advertising per outlet has decreased (e.g. if you had one outlet and advertising cost $10,000 and then the business expanded to 10 outlets it would mean that cost of advertising per outlet would go from $10,000 to $1000) • This has enabled boost to undergo further marketing strategies which in turn brings more consumers to the product meaning that the price of each unit output would decrease
3-
Economies of scale can be defined as reductions in costs per unit of output as output increases and so therefore arise when the cost per unit falls as output increases. They are the ‘savings of size’ if a firm is able to increase the size of its plant or operations in the long run production period. A business that is experiencing economies of scale in the present is the smoothie and juice making company called Boost Juice. Established in 2000, Boost Juice, managed by successful entrepreneur Janine