Economies of Scale

The cost advantages a business gains as its output increases. As volume grows, the fixed cost per unit falls and bulk purchasing power improves, making each additional unit cheaper to produce.

Economies of scale are a core driver of competitive advantage. A large business can profitably sell at a price that would make a smaller competitor lose money, creating a structural barrier to new entrants.

A founder who initially prints 100 copies of her planner at £8 each finds that printing 2,000 copies drops the unit cost to £2.50. Her margins improve dramatically and she can price more competitively without sacrificing profit.