As a business gets bigger, it is able to buy larger quantities at once (in bulk). They will be given discounts for buying more, which will reduce the unit cost of each product bought.
Purchasing Economies
If a business purchased 100 products, they may be charged £12 for each product. If a business purchases 500 products, they may be charged £7.50 for each product.
Managerial Economies
Larger businesses can employ specialists to manage a particular aspect of the business. This improves efficiency in different business functions.
Risk-bearing economies
Larger businesses can afford to have more product ranges, perhaps different products in different markets to minimise risk - e.g. Apple has iPhones, iPads, Watches, TV service, and Computers. If sales don't do well in one, survival is easier due to sales in the others.
Marketing Economies
A large firm can spread its advertising and marketing budget over a large output - e.g. because McDonald's sales are high, a national advertisement campaign for a new burger is more effective in cost to reach its customers than lots of smaller method of advertising. A smaller business does not have the funds to reach that many people in one go.
Financial economies
Large businesses have more collateral and can raise more capital [especially if a PLC close brackets and receive a better rate of interest and terms of payment.
Technological economies
Larger businesses can invest in the best technology. For example, a supermarket chain such as Tesco or Sainsbury's can invest in technology that improves stock control. It might not, however, be viable or cost-efficient for a small corner shop to buy this technology.
