Unit cost and Efficiency

• Economies of Scale

  Arise when unit costs fall as output increases
• External Economies of Scale

  Occur within an industry
• Internal Economies of Scale

  Arise from the increased output of the business itself
• Buying economies


  Buying in greater quantities usually results in a lower price (bulk-buying)
• Technical EOS

  Use of specialist equipment or processes to boost productivity
• Marketing EOS


  Spreading a fixed marketing spend over a larger range of products, markets and customers
• Network EOS


  Adding extra customers or users to a network that is already established (e.g. mobile phones)
• Financial EOS


  Larger firms benefit from access to more and cheaper finance
• Labour Capital 


  Unit costs are closely linked to the relationship between labour and capital in operations
• Labour Intensive


  Production relies on using labour resources
• Capital Intensive


  Production relies on using capital resources