The large Italian company Bauli produces a variety of baked products such as croissants and biscuits, but it is most famous for its panettone, a specialty at Christmas. The original producers of panettone were small luxury bakeries, which could bake a few expensive panettone relatively easily. Michele Bauli claims that the quality of his product is what explains the company’s success: “High investment in research and technology allows us to guarantee a uniform quality that small luxury bakeries find hard to achieve”. It could be argued, however, that Bauli’s success is mainly based on its low price. A panettone produced by a luxury bakery typically costs €30. A Bauli panettone costs €8. Bauli produces on an industrial scale. Baking 12 million panettone per year for sales across Italy and in European and American markets. The company has also made significant technological innovations. According to Michele, “Attention to ingredients and the use of new technologies in production give the panettone a shelf-life of five months”.

b. Identify and explain two the economies of scale that is available for Bauli.

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1 Internal Economies of Scale An inner economic system of scale measures a corporations performance ... View the full answer