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Economies of scale

Economies of scale refers to the principle that larger operations can provide products or services at lower cost per unit. They have larger plants that are more productive, can invest in more efficient equipment, can buy in larger quantities for better pricing and lower shipping costs, etc.

Expanded Definition

In business, economies of scale is one of the advantages of higher market share. A leader can have lower cost and can more easily defend market share. Competitors cannot duplicate the advantage because their plants cannot be as large without gaining market share.

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