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The Minimum Efficient Scale (MES) is a concept in economics that refers to the lowest point at which a company can produce its goods or services at the lowest possible cost per unit. This is particularly important in industries with fixed costs, where companies benefit from economies of scale. If a company operates below the MES, it may not be able to compete effectively with larger rivals due to higher per-unit costs. Once a company achieves MES, further growth does not necessarily result in a significant cost advantage.
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In some industries with fixed costs, companies benefit from economies of scale. In such an industry, you must know your Minimum Efficient Scale (MES), the volume required to be cost-competitive. Below MES, you will not be able to compete with larger rivals. Once you achieve MES, continued growth no longer results in a more significant cost advantage.
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Ever wondered what strategies make Apple, Amazon, and other juggernauts so successful? Better, Simpler Strategy by Felix Oberholzer-Gee shares top ins...
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