Nature of Firm and Product line: AM Wire Nail is a sole proprietorship business which produces different size of nail

in its product line. The wire nail is known by its number in the market, it produced nail sizes are: 13 size nail, 14 size nail, 17 size nail, 18 size nail and 20 size nail.

Horizontal Boundary of the Firm and its Determinants The horizontal boundaries identify the quantity and the varieties of products a firm produces. The determinants of the horizontal boundaries of the firm are economies of scale, economies of scope and learning economies. AM wire nail daily use nearly 1 ton process steel wire by its production line consisting of 2 mini drawing machine and 8 nail making machine. Its economies of scale are the result of physically combining inputs to form outputs that continually reduce producer unit costs over the relevant range of demand which can be achieved in terms of volume produced with limited fixed manufacturing and administrative overhead costs (only 11 employee and worker cost around Tk. 70 thousand, rent fee costs monthly Tk. 23500 along with minimal utility costs). Its marginal cost in producing extra unit is also minimum since its produces nail in different sizes in large scale production with minimal wastage. Economies of scope result from physically combining inputs to form outputs that produce two or more related outputs within the same firm. Learning economies are present where costs fall with experience. Learning economies do not directly expand the firm, but they contribute to its success. A closer look to the operation of AM Ware Nail reveals its economies of scope because the same employees produce different sizes of Nail through utilizing same setting and resources (same machines, required raw materials, different sizes of nails are producing at the same time by same employee etc.).

Vertical Boundary of the Firm and its Determinants This firm is vertically integrated in some extent in downstream value chain, more specifically in production and further distribution to retailer. Raw material procurement and logistics are collected from market firm which are readily available and abundant in number. But the owner is think to expand the factory with a downstream integration by installing a new drawing machine to processed raw rod to 12/13 no wire, which is the main raw material for the firm. As its a construction material, its demand can be easily predicted. Combining all aforementioned things, the firm is vertically integrated in downstream.

Industrial Organization of Global Economy Term Paper (IB-504)

Information about AM Wire Nail Name of Firm: AM Wire Nail Address of firm: 296 East Nakhal Para,Tejgaon ,Dhaka Phone:02-9020905 Established: 06 September 2004,

Number of employee: Eleven

Owner of firms: A) Md. Shahidul Islam Annul size of business: 1,38,00,000.00 Taka

Submitted By: Md. Sabbir Ahmed Akash Roll:46 Department of International Business University of Dhaka

Price Determination Process AM Ware nail set price in a traditional way, they never done any type of economic calculation or advanced calculation to determine the price. Generally they determine price by comparing the demand and supply, market condition and the running price in the market. But though the firm determine price by market forces but also compare with the price and the expanses has been occurred in the production process line. The firm add all the cost including variable cost and fixed cost and add a revenue to conclude a price. There are many fixed cost which occurred in the production line is given below: Sector of expanse Salary of worker and employee Rent (office and Factory) Electricity bill Others cost transportation Fixed cost Tk 70,000.00 23,000.00 45,000.00 30,000.00 35,000.00 Tk

2,03,000.00

Variable cost calculation: The firm buy per ton processed wire named 12/13 size wire, which cost 55,500.00 tk. To get required size of wire for example 13, 17,18 or 20 size wire, firm processed wire more through its drawing machine which add more variable cost. Number of product 13/14 size nail 17/18 size nail 20 size nail Marginal cost per ton 3500.00 8000.00 15000.00 Average cost 3500.00*0.33 8000.00*0.33 15000.00*0.33 Per ton cost 1155 2640 4950

Per ton variable cost will be add with 13 no wire per ton price 55,500.00 tk. Its pricing method can be said as a mark-up pricing which include the required profit with the total per unit cost. As this firm supplied it to the supplier their unit is per ton price.