9.1.2—Scale of operations

Scale of operations is the size at which a business produces or delivers output. Larger scale can create economies such as purchasing or technical efficiency, but diseconomies can arise from complexity and communication.

The relevant scale depends on demand, capacity, finance and the ability to coordinate. A smaller operation may be more flexible or closer to customers.

A national chain may negotiate lower input prices, while a small specialist can customise quickly and avoid layers of management.

Economies of scale are not guaranteed forever, and growth in output is not the same as better performance.