Which strategy is commonly employed by firms to achieve economies of scale?

Firms often pursue economies of scale as a way to lower their average costs per unit as production increases. Cost reduction efforts, which include strategies such as optimizing production processes, negotiating better deals with suppliers, and investing in more efficient technologies, play a crucial role in achieving this objective. By producing larger quantities, businesses can spread fixed costs over a greater number of units, thereby decreasing the cost per unit.

In contrast, while market segmentation can help a firm target specific customer groups, it does not inherently lead to lower average costs. Increased marketing campaigns may boost sales but can also increase expenses without directly contributing to economies of scale. Similarly, product diversification typically involves spreading resources across a range of products, which can sometimes lead to complexity and higher costs instead of minimizing them. Thus, concentrating on cost reduction is the most direct approach for firms aiming to exploit economies of scale effectively.