Theory question 110
Theory of ProductionSection B
How can the Nigerian National Petroleum Corporation achieve internal economies of scale?
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Internal economies of scale are cost savings a firm gets from its own growth. NNPC can achieve them through:
1. Technical economies: large, modern refineries, pipelines and equipment; full use of capacity.
2. Managerial economies: specialised, skilled managers and division of labour.
3. Financial economies: borrowing large sums cheaply because of its size.
4. Marketing economies: bulk purchase of inputs and bulk sale of products, cheaper advertising per unit.
5. Research and development economies.
6. Risk-bearing economies: diversifying into petrochemicals, gas, fertiliser.
7. Welfare economies: training and staff welfare that raise productivity.
8. By-product economies: using by-products such as gas.
Define internal economies, then apply each to NNPC.