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Economies of scale occurs when there is an increase in output as cost decreases.  This means, as a company, it will have a better chance to decrease its costs.  There are two ways of achieving this, internal and external economies of scale. 

Internal economies of scale occurs due to the change in size of individual firm and are not dependant upon the industry as a whole.  This can be achieved in two ways: 1) Firm level  and 2)  Plant level (replacing humans with machines to cut costs and be more efficient in production).

External economies of scale occurs due to a growth in the industry as a whole.  The individual firms need not grow, however, the entire industry around them does.