economies of scale

                                     ECONOMIES OF SCALE:

When larger groups of goods and service can be produced but with less cost input then that is called economies of scale.Eg:when a company reaches to a high level and all the productions of the company increases,then the company will have a better chance of decreasing their cost.

This method of scale is used by companies mainly for getting or creating cost advantage. Mcdonalds which has about14,098 dwarf stations is more famous then Wendys  that has about 5.876 dwarf site locations.this may be due to advertising expenses put by Mcdonalds are way higher than the expenses made by wendys.Secondly, due to the high rate of advertising and great numbers of locations Mcdonalds gets more consumers,Thirdly  marketing expenditure as well as the14,098 locations make it seem that Mcdonald is a big and ever increasing profit making organisation which makes it have less numbers of competitors.a firms average cost may fall due to more reasons,like due to bulk buying a fast food company like Mcdonalds that is spread all over the producers need to get the raw materials in bulk,hence the suppliers are striked with deals,since the larger the  company the more bargaining power is possible this will lead to reduction in the cost per unit of the goods bought.Mcdonalds is a name that all banks and insurance companies trust this is such a brnd tht has a really high rate of brand loyalty so if the organisation has capital flow barriers then due to the brand loyalty for this company the financial barriers can be solved easily as the banks and insurance companies will help out.Small organisations are not able to make use of all the technologies in their organisation but for a large industry like Mcdonalds all their technologies are made fully utilised and also the labour count is increased since more labourers are needed to work  the machines.