1.5 - External Economies of Scale

Technological innovations increase productivity within an

industry with significant cost savings. 

T: This offers cost savings as the location of premises can

be in more affordable areas. 

Improved transportation networks: Globalized transportation networks have enabled firms to

import raw materials and finished goods that have been manufactured at much lower costs. 

Improved transportation networks: Increased convenience from improved logistical networks allows for

 

faster deliveries at lower costs. 

Abundance of skilled labour : Certain locations may benefit from

reputable education and training facilities.  

Abundance of skilled labour : Local businesses benefit from this by having a

suitable pool of educated and trained labour. 

• This reduces costs of recruitment and training 

Regional specialisation: Certain locations or countries have established reputations for specialising in  

specific goods and services. 

Regional specialisation: Firms in those locations benefit from having access

to specialist labour, sub-contractors and suppliers. 

• They are also able to charge a premium price for their products