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AZ-900 Episode 2 | Principle of economies of scale | Microsoft Azure Fundamentals Full Course | Adam Marczak - Azure for Everyone | YouTubeToText
YouTube Transcript: AZ-900 Episode 2 | Principle of economies of scale | Microsoft Azure Fundamentals Full Course
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Video Summary
Summary
Core Theme
Economies of scale demonstrate how increasing the size and operational efficiency of a company leads to a reduction in the cost per unit of its services, making them more competitive.
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in our second episode we'll be talking
about economics of scale and how this
principle defines the cost of your other
services stay tuned for the second
episode let's start with learning
objectives the goal of this episode is
to help you to understand the principles
of economies of scale and how this
principle explains the cost of other
services and to explain that principle I
will use a simplified example using a
delivery company that delivers a
packages to its customers and you start
your own company you usually start at
very small scale for instance by
purchasing free delivery trucks when you
do that you will need to first of all
buy them and since the company is very
small and you're just starting you most
likely make individual purchase for each
of those cars let's imagine you paid
$10,000 for each regardless if those
cars are used or not you will need to
spend some money on the maintenance of
those cars because your company is very
small you cannot make any contracts you
will need to pay individually for each
repair each maintenance that you need to
perform on your own cars each car of
course needs to be insured so that's
additional cost that you need to make
individually and as you can imagine
there will be plenty of other costs that
you will need to incur when running your
own company based on the cost that you
need to incur and the amount of the
customers that you have you will need to
calculate the price of your service in
order to stay profitable and stay on the
market what price is called price per
unit so at price that you need to charge
for the delivery of your package or your
company to stay profitable - let me
explain to you what happens if your
company grows in size if your scale will
go from free cars for instance 300
because your company is already big you
might be able to buy your house in bulk
on the dealership at the discounted
price instead of buying them for 10,000
maybe buy them for nine again for
maintenance you will be able to sign
some contract with some car repair shop
again lowering the price of the
maintenance required for your cars same
goes for insurance because you can buy
insurance in bulk
and if you have some shared services
maybe hire some additional stuff to
maintain your company you will be also
able to reduce price per car that is
required to maintain your company
because the scale of your company is
much greater than before you are now
able to handle many more customers
without sacrificing the quality of your
service allowing you to lower the price
per unit do you get more benefits
internally by having large company you
are more efficient operationally and you
can share those benefits with your
customers by reducing the price per unit
in this case this will also make your
company much more competitive on the
market making sure that you grow even
further so to quickly summarize as your
company grows your price per unit lowers
because companies aren't getting more
efficient at what they're doing to have
a small company your price per unit will
be quite high if you have medium company
your price per unit will be better but
still at quite medium range and if you
have very large companies your price
will be quite low and very competitive
on the market and this principle
perfectly describes what is happening
with the cloud as the cloud grows and it
has more customers the price of their
services will go down because big
companies like Microsoft will get more
efficient at what they do in case of
Microsoft it will get more efficient on
building new data centers getting better
prices for the hardware there of course
will be Hardware advancements which will
again lower the price and when this
happens and my crystal wants to stay
competitive the prices of the services
that it offers will also go down and
that's really it this is how economies
of scale work and how they drive the
cost of your other services or this
episode again go to my website - episode
2 check out the study cheat sheet and
maybe take a practice test and that's it
for this episode thank you guys for
watching if you like what I do support
the channel by subscribing liking and
commenting or showing this to your
friends if you want to see the next
episode simply follow the playlist or
hit the icon on the side and see you there
there [Music]
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