Economies of scale
Economies of scale refers to the principle that larger operations can provide products or services at lower cost per unit. They have larger plants that are more productive, can invest in more efficient equipment, can buy in larger quantities for better pricing and lower shipping costs, etc.
In business, economies of scale is one of the advantages of higher market share. A leader can have lower cost and can more easily defend market share. Competitors cannot duplicate the advantage because their plants cannot be as large without gaining market share.
Recent Mentions on Fool.com
- 5 Tips For Paying Off Your Student Loans in 4 Years or Less
- Why Panera Bread?s $200 Million Bet Can Pay Off for You
- Your 2 Keys to Picking Winning Dividend Stocks
- Are You Really Ready To Buy A House?
- Chipotle's Asian-Themed Restaurant, ShopHouse, Is a Success and May Soon Open in a City Near You
- 3 Big Movers: Yahoo!, SanDisk, and IBM