Benefits of growth

• Economies of scale occur when unit costs fall as business expands, these economies relate to volume of output
• Purchasing economies of scale is a reduction in unit costs as a result of buying in large quantities
• Technological economies of scale are lower unit costs because larger firms are able to use more efficient technologies of production
• Financial economies of scale is where larger firms have greater access to sources of finance at lower costs (lowering unit costs)
• Managerial economies of scale are where larger firms have a greater scope to benefit from the specialisation of labour at supervisory and managerial levels in each of the functional areas, they will be able to make better decisions lowering unit costs
• Economies of scope occur when a business gains cost advantages from providing a variety of products rather than specialising in the production or delivery if a single item - cost savings on all units if one part started cost saving
• Synergy is when the whole sum is greater than the sum of parts, synergy is sometimes summarised as 1+1=3 e.g. a team of people work better than individual people or synergy can be claimed as benefit or of a merger of a takeover
• An example of synergy is Kraft Foods buying Cadbury and Kraft didn't sell into India and Cadbury didn't sell into South America and now they can do both