Economies of scale - reduction in unit costs achieved as the scale of production increases

Internal economies of scale :

Purchasing economies - this is the benefit of being able to buy resources in bigger amounts, this usually gives the business a discount reducing its unit cost

Financial Economies - larger business are able to negotiate cheaper loans as they are seen to be less risky to the bank

Managerial economies - larger businesses are able to employ better managers as they can pay a bigger wage

Technical economies - a bigger business has more capital to invest in the best most expensive equipment than smaller ones

Marketing economies - some expensive types of marketing like television is only available to larger companies

Risk-bearing economies - larger firms have more money to expand into different markets, reducing their risk

External economies of scale :

Concentration economies - when an area that a business is located in becomes richer, more skilled workers will move there which gives the business better option during recruitment

Information economies - access to data and information about an industry makes it easier for a business to plan. The internet has provided companies with this advantage

Diseconomies of scale - an increase in unit costs as a result of an increased scale of production

Communication problems - as a business increases it becomes harder to communicate within it in an effective way

Problems in managing production - the larger a production becomes the harder it is to manage

Reduction in morale - the bigger a company gets usually workers lose morale as they feel less important to the business