HookGreggs and WeWork. Two stories about scale.
Greggs opened its first shop in Newcastle in 1939 and reached 2,618 outlets by end-2024 — roughly 26 stores a year, every year, for 85 years. Organic, methodical, low-debt. The economies of scale are real but earned slowly: bulk flour purchasing, central baking facilities, a national distribution network. The share price went up roughly 17× between 2009 and 2024.
WeWork went from founding in 2010 to a $47bn valuation in 2019 to a Chapter 11 filing in 2023. Its growth was M&A-heavy, leveraged, and built on a category mistake: it treated short-term office leases as a tech business with venture-scale returns. The economies of scale never materialised — long-lease liabilities sit on the cost side, not the revenue side.
ModelEOS, DOS, integration
Economies of scale come in flavours: technical (specialised capital pays off at volume), purchasing (bulk discounts), managerial (specialist hires), financial (cheaper credit), risk-bearing (diversified product mix). They show up as a falling long-run average cost curve. Diseconomies of scale (DOS) — coordination costs, motivation loss, communication slowdowns — eventually kick in. The curve has a U shape, not a slide.
Integration: horizontal (same stage, same industry — Tesco buying Booker), vertical (different stages — a brewer buying its pubs), conglomerate (different industries — diversification play). Organic growth is slow and lower-risk; M&A is fast and higher-risk; joint ventures and franchising split the risk/control trade-off in different ways.
ExamWhat examiners want
Quote a specific EOS type tied to the case. "Bulk-buying flour" (Greggs) is purchasing economies, not "general economies". The mark scheme rewards the named link.
Evaluation hooks: not every firm wants to grow. Family firms often optimise for control over scale. Tech firms with negative cash flow and zero EOS still command premium valuations — for now. The reasons firms grow are not always the reasons they should grow.