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Economies of scale
A proportionate saving in costs gained by an increased level of production - as production increases, the average unit cost falls.
Internal economies of scale
When a business invests in larger-scale production to achieve economies of scale.
Technical economies of scale
Economies of scale arising in manufacturing, construction and transport - a bigger ocean tanker with double the capacity will not need double the crew.
Marketing economies of scale
Economies of scale involving advertising and promotion activities - for example, Coca-Cola can use the same advert with different voiceovers in several countries.
Managerial economies of scale
Focusing on having specialists in management roles - a large business can have specialists in accountancy, human resources and marketing whereas a smaller one might not be able to.
Financial economies of scale
Arise when a bank sees a larger firm as more secure so charges a lower rate of interest.
Bulk-buying economies of scale
Because producing more gives economies of scale to the supplier, the customer is able to pay a lower price per unit when buying in bulk.
Risk-bearing economies of scale
When a larger business attempts to enter a new market, it can bear the risk of it failing more easily - for example, Cadbury's can release new chocolate bars frequently, knowing some will fail.
External economies of scale
Unit cost reductions shared by a whole industry, rather than a single firm. Common when firms are concentrated in one location.
Minimum efficient scale
The lowest level of output at which average or unit costs are minimised because the firm can make full use of economies of scale. Businesses smaller than this have a cost disadvantage.
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