are derived from incremental efficiency improvements through experience as a firm grows larger
economies of scale
the cost of producing each unit declines as the quantity of a product produced during a given period increases
economies of scale
A new entrant is unlikely to quickly generate the level of demand for its product that in turn would allow it to develop economies of scale.
Economies of scale can be developed in most business functions, such as marketing, manufacturing, research and development, and purchasing.
Firms sometimes form strategic alliances or joint ventures to gain scale economies.
Becoming more flexible in terms of being able to meet shifts in customer demand is another benefit for an existing company in an industry and a possible entry barrier for the firms considering entering the industry.
Some competitive conditions reduce the ability of economies of scale to create an entry barrier such as the use of scale free resources.
Companies manufacturing customized products can respond quickly to customers’ needs in lieu of developing scale economies.
