Bulk Buying Economies

As businesses develop they are required to order larger amounts of production inputs. For instance, they will order more raw materials. As the order value enhances, a company is then able to acquire greater bargaining power with their suppliers. It may be able to obtain discounts and lower prices for the raw materials. Businesses with large-scale production are able to use more highly

, or use the technology they already have in a more efficient way. This might consist of using mass production techniques, which are a more proficient type of production. A larger firm is also able to afford to invest more in research and development. A good number of smaller businesses find it difficult to get hold of finance and when they do acquire it, the cost of the finance is usually quite high. This is because smaller businesses are believed as being riskier than larger businesses that have developed a well established background. Bigger sized firms as a result find it easier to find probable lenders and to raise money at

. All of the parts of marketing have a cost, which is for the most part accomplished through promotional methods such as advertising and running a sales force. A lot of of these marketing costs are fixed costs and so as a business becomes larger in size, it has the ability of being able to spread the cost of marketing over a larger range of products and sales thus, cutting the average marketing cost per unit.

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