Value Chain Glossary: Economies of Scale
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Economies of Scale
Reduction in the average cost of each unit of production as total output increases. Economies of scale often result from the ability to spread overhead and fixed costs over more units of output. As producers tighten horizontal relationships through association or other forms of cooperation, they can achieve economies of scale by purchasing inputs in bulk, sharing the cost of access to price information, quality certification, packaging and marketing. Economies of scale can help producers reduce upgrading costs and meet market demand.
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Related Articles
- Horizontal Linkages
- Inter-firm Relationships
- Briefing Paper: Groups, Associations and Other Horizontal Linkages. McCarthy, Steve. January, 2008.
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