Introduction
Objective:
This paper has the purpose to study economies of scale and economies of scope in business using Chang Cooperation which is naturally a monopoly which can produce at a lower cost than others’ firms. They are using the economies of scale in decreasing the cost of production such as plastics, bottles, and fixed cost by produce large amount of outputs to decrease the total cost. However, Chang has now entered the long-run which make the average cost of production declines throughout the entire market. As a result, Chang Corporation can supply the entire market demand at a lower cost than the others’ firm. In the economies of scope, Chang produces various kinds of products such as Chang Classic, Chang Draught, and Chang Light. This make Chang Corporation reduce average and marginal costs in long-run, due to the production of similar or related goods or services where the output or provision of an item such as beer reduces the cost of item like water which has the same intermediate goods, bottle.

Benefits:
This study shows various benefits of being large firm behavior of taking advantages. Including, economies of scale benefit, which firm earn absolute cost advantages due to producing large amount of outputs. Vice versa, there are also some external factors in affecting the economies of scale such as a better transportation network, resulting in a subsequent decrease in cost for a company working within that industry, external economies of scale are said to have been achieved. Another good example is the development of research and development facilities in local universities that several businesses in an area can benefit from. Likewise, the relocation of component suppliers and other support businesses close to the main centre of manufacturing are also an external cost saving. This make the firms are able to make barriers to prevent others’ small and medium firms can’t entry the market. Moreover, by applying the economies of scope, this makes the firm to produce the product cheaper as a result of a wider range of products rather than specialize in just a handful of products. Expanding the product range to exploit the value of existing brands is a good way of exploiting economies of scope. E.g. Chang Classic, Chang Draught, and Chang Light

Theoretical Economies of scale or increasing returns, in the context of production; imply a proportionately larger increase in output for any given increase in input. The idea of increasing returns first came from none other than Adam Smith: through his famous pin-making example, Adam Smith illustrated how specialization or division of labor could lead to lower unit costs. Adam Smith, as Kaldor (1972) remarks in his account of where economic theory went wrong, abandoned the assumption of increasing returns in favor of constant returns, from the middle of the fourth chapter of Vol. I of the Wealth of Nations; and so did the neo-classical general equilibrium theory that came later.

The economies of scope concept are defined as the process of reducing the cost of resources and skills for an individual business enterprise by spreading the use of these resources and skills over two or more enterprises according to Don Hofstrand, Co-Director – Ag Marketing Resource Center Iowa State University. As shown in Graph blow, the cost for an enterprise is cut in half if the resources are used in two enterprises rather than just one. If the use of the resources is spread over three enterprises, the cost per enterprise is reduced to a third.

Relevant past research study

Research Study: Most Beer Drinkers Prefer Glass Bottles
Jun 21, 2012
In 2011, O-I conducted a five-day qualitative study of beer drinkers to explore preferences of U.S. beer consumers. Results of the study showed that beer drinkers have a clear preference for bottled beer. In fact, ninety percent of beer drinkers prefer a bottle and they strongly associate bottled beer with superior taste and quality – the two most important elements for a drinker when choosing a beer. The study focused on beer drinkers from three key markets – Seattle, Chicago and Boston. Respondents were selected to represent a wide range of ages, genders and preferences for mainstream vs. craft beer brands within the study. The study incorporated an immersive insight blog in which respondents logged into the secure online site to complete daily assignments and participate in larger group discussions. The blog assignments and discussions utilized a multitude of interactive tools, videos and imagery to facilitate a rich exploration of attitudes, behaviors and preferences related to beer packaging. Click here for an info graphic summarizing the key research findings that highlight the reasons why consumers prefer to drink beer out of glass bottles.

The sign value of beer and the consumption of beer in Thai society
The emergence of beer as a product that appeals to a wide range of people is quite recent. Moreover since the 1990s many new brands have been introduced into the Thai beer market to cater to each class of society. Since than beer consumption in Thailand has increased enormously. So far not much research has been done on this phenomenon. The hypothesis of this thesis is that, one reason for the increase of beer consumption in Thailand can be found in the creation and acceptance of sign value behind the brands. This thesis has used advertisements of the beer companies to understand the message the brands try to create to the public. A questionnaire has been distributed to one hundred and twenty people to ask them about the reasons for their consumption of a particular brand and to determine how important sign value is to them. The framework of sign value is proposed by French philosopher Jean Baudrillard. He argues that people choose to consume goods which differentiate them from other consumers. According to Baudrillard, consumers nowadays spend money not only for the value of the product but also for the sign value. This sign value can be found in images or linkages to status, lifestyle, taste etc. By applying Baudrillard’s theory of sign value this thesis aims to demonstrate that different types of beer brands aim to create sign value which contribute to the image of the product through advertising. The finding reveal that each beer reflects a different sign value i.e. Heineken: Stylishness, Singha : Thainess, Chang : Thainess, Leo : Easy going and Cheers : Easy going. Regarding the consumption of beer appears that most people consume a particular brand because of taste and price but also because beer has become a beverage which is widely used for sharing purpose among friends, colleagues etc. Regarding the importance of sign value only a small number of people made their purchase because of this reason which took place in the premium beer market. It remains therefore open whether the theory of Sign Value as proposed by Baudrillard can be applied for the entire Thai beer market or not.
Justification of research study
There are a couple of reasons which could explain why Chang is so popular. It has genuine brand recognition. The eye-catching green logo of 2 elephants facing one another is immediately recognizable to Thais and foreigners alike. The company also has outstanding distribution and the beer is readily available in bars and shops everywhere and often in prime locations.
The combination of low price and abnormally high alcohol content makes it an attractive drink for many Thais. Westerners also seriously appreciate such qualities in immense quantities when holidaying in Thailand. At the end of the day, it is the branding of Chang that makes up for a fantastic part of this remarkable appeal. Now Chang has 70% of Thai’s beer market share. To produce low price for Thais, Chang has economics cost advantages from being largest corporation and at the same time, prevent others small business to entry the market. 1. Economies of Scale: Chang Beer is the best-selling beer brand consumed in Thailand. To produce this large amount of Out-put, It has an ability to lower an input cost that normal firm is unable to do. 2. Economies of Scope: By producing various production lines, Chang can reduce its cost by sharing some part of its products (ig.bottle) to decrease loss from making its output. The Chang Beer production lines includes; Chang Export, Chang Classic, Chang Draught, Chang Light, and Chang Beer

Conceptual model With the cost advantages from economies of scale and scope, Chang can afford lower cost. With higher market share and higher revenues, Chang can invest on machinery, and expand the firm. This allows Chang further cost cutting, higher production, and development of better products.