What Are The Economies Of Scale Of Tesco?


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Tesco is an international grocery and general merchandising retail chain. It was established in East  London, Britain in the year 1919 and is currently the largest British retailer and 4th largest world retailer.

Economies of scale is when the average cost of production is reduced due to the increase in total output. Tesco has a very large scale business. It is opening new stores every day. There are currently more than 1,000 stores of Tesco world over.  Since they are opening new stores everyday, they have to produce more, so as the volume of production increases, their average cost per unit has decreased. This has given Tesco a huge advantage over the other supermarkets especially those that are smaller in size.

Another feature of their sales strategy is that they encourage customers to buy in bulk. They have special offers for that such as buy one get one free etc. These offers compels customers to buy more quantity, which in turn gives Tesco the advantage of selling more and consequently buying more which in turn gives them lower average cost.

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