You’re printing wedding cards. The printer charges ₹6,000 to design and set up the job, then ₹20 for each card.
Print 100 cards and each one costs you ₹80: ₹20 for the card, ₹60 as its share of the setup.
Print 1,000 and each one costs ₹26. Same printer, same paper, same design. The setup cost didn’t change. It just got split a thousand ways.
What’s going on
This is economies of scale: as you make more of something, the cost of making each one falls.
It happens for a few reasons:
- Fixed costs get spread thin. A factory, a design, an app or an ad campaign costs the same whether it serves a hundred customers or a million.
- Bulk buying. Big buyers get better prices from suppliers.
- Specialisation. At scale, every worker and machine can do one thing extremely well.
The car that got cheaper every year
In 1908, Henry Ford’s Model T cost about $850. Ford kept making more of them, and in 1913 he added the moving assembly line, cutting the time to build one car from over twelve hours to about an hour and a half.
By the mid-1920s, a Model T cost under $300. More cars meant cheaper cars, which meant even more buyers, which meant even cheaper cars.
Think of a shared cab
A cab from the airport costs ₹900 whether one person rides or four. Alone, you pay ₹900. With three friends, you each pay ₹225.
The ride costs the same. The cost per person is what changes. Scale is just a very full cab.
Why it matters
Economies of scale build a moat. The biggest player can charge prices a smaller rival simply can’t match without losing money. That’s why newcomers rarely win by being cheaper than an established giant. They win by being different.
It’s also why growing companies often price low early on. They’re betting that the volume will arrive and bring their costs down to meet the price.
The catch
Size has costs too. Past a point, a company needs more managers, more meetings and more rules. Decisions slow down and the left hand stops knowing what the right is doing. Economists call this diseconomies of scale.
Bigger gets cheaper, until it gets clumsy.
How to use it
Look at your costs and sort them: which ones stay the same as you grow, and which ones grow with every sale? The more of your costs are fixed, the more growth itself will lower your prices.
Size isn’t the advantage. What size does to your costs is.
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