When a firm can produce goods or services more efficiently as it increases its scale of production e.g. better utilisation of machinery
Managerial economies:
Larger firms may benefit from having specialised management teams, better coordination, and more efficient decision-making processes. This can result in cost savings and increased efficiency
Marketing economies:
As firms grow larger, they often have more resources to allocate to marketing and advertising efforts. This can lead to lower advertising costs per unit sold and increased marketing presence
Financial economies:
Larger firms may have access to more favourable financing options, including lower interest rates on loans and better terms from suppliers due to their size and financial stability
Managerial diseconomies:
As firms become very large the management can become overly complex and less efficient. Communication breakdowns and bureaucracy may increase, leading to higher costs
