Question One Based on the information presented in the scenario/case study discuss Albatross Anchor’s competitiveness in relation to (please address all items in the below list and provide support for your conclusions): 1. Cost a) Cost of Production: Cost of production is costs incurred by Albatross Anchor when manufacturing an anchor. The company can run into two different costs; variable and/or fixed costs. Variable costs depends on what’s needed to make the anchors. What is needed differs with how many anchors Albatross produces. Then there is fixed costs; utilities and rent, these two are always present no matter the volume of anchors being produced (Russell & Taylor, 2011, p. 230). The cost to manufacture is $11/lb. - hook anchor and $8/lb. for a mushroom anchor. Albatross sells anchors for the same price as competitors, which is how they are losing money. They should sell the anchors for a little less because then they would in return get more business and have a chance of doing better than their competitors.

b) Economies of Scale in material purchasing: When a company achieves economies of scale lowers their average cost per unit through increasing production since fixed costs are shared over an increased number of goods (Hindle,2008). When a company starts growing and their production units starts increasing, the company will have better luck decreasing the costs of their product. Economic growth may be achieved when economies of scale are realized (Heakal,2009). Two types of economies of scale are internal and external. It is external that the company benefits from the most because of their organization. Economies of scale allow companies access to larger markets by allowing them to operate with more geographical reach.
One way to save money is to purchase their goods in bulk. But since Albatross make the anchors