Economies of scale

The fall in cost per unit as output rises, because fixed costs are spread over more units and larger operations buy, produce and distribute more cheaply. They are a source of cost advantage when a company's scale is large relative to its market.

A cement plant with ₹600 crore of fixed costs a year and ₹2,000 of variable cost a tonne produces at ₹5,000 a tonne at 2 million tonnes and at ₹4,000 a tonne at 3 million. A competitor half its size can't match that price without losing money.

They run out. Beyond a minimum efficient scale unit costs flatten, and very large organisations can suffer the reverse through coordination costs. Scale becomes a moat through relative size in a market that can't support many players at that scale. If anyone with enough capital can reach the same scale, the advantage doesn't last.

Scale relative to the market is what counts.