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30-11-2022
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Economies of scope is one of the two key factors in determining whether a corporate strategy is adding value through diversification. The other key factor is opportunities. vertical horizontal geographic globalization revenue-enhancement

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Tutorconsortium255 Tutorconsortium255

03-12-2022

The marginal cost is less when two or more goods are produced jointly than when they are produced separately. It's known as an economy of scope in this situation.

Economy of scale versus Economy of scope

Businesses can improve their production processes in two ways: economies of scope and economies of scale. In the former, diversification takes precedence over cost reduction for a single product.

Economies of scope: Businesses with a diverse product offering can save money by utilizing economies of scope. It enables higher output with a negligible increase in fixed costs.

Economies of scale: An economy of scale is when a company produces more of the same product at a lower marginal cost. This is especially effective in the manufacturing sector, where the construction of factories, the setup of assembly lines, and the hiring of key personnel represent the major fixed costs.

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