economies of scope


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Economies of scope

Scope economies exist whenever the same investment can support multiple profitable activities less expensively in combination than separately.

economies of scope

the cost savings which arise by carrying out a number of different activities within the same firm through sharing common inputs or jointly promoting or distributing products. For example, a building society could use its existing branches and staff not only to sell mortgages but also to offer customers other financial services such as insurance, pensions etc. Likewise, Nestlé has used the strategy of UMBRELLA BRANDING to extend its range of instant coffee products all under the ‘Nescafé’ BRAND NAME thereby reducing promotional costs. See DIVERSIFICATION.

economies of scope

the LONG-RUN reduction in AVERAGE (or unit) COSTS that occurs as the scope of the firm's activities increases. A firm can achieve economies of scope by sharing common inputs over a range of its activities or by jointly promoting or distributing its products. For example, a building society could use its existing branches and staff not only to sell mortgages but also to offer customers other financial services such as banking and insurance.

Economies of scope are often an important motive for firms undertaking ‘concentric’ DIVERSIFICATION.

References in periodicals archive ?
A second contribution lies in the empirical evidence obtained showing that firms must consider political risk and the political environment as a source of potential opportunities--in this case to obtain economies of scope and create and sustain competitive advantages in markets where competitors without experience in managing risk cannot enter- and not just as a threat or a restriction (Garcia-Canal and Guillen 2008; Oliver and Holzinger 2008; Holburn and Zelner 2010; Jimenez and Delgado 2012; Jimenez et al.
economies of scope from standardization, concerns about vendor lock-in, and alignment with corporate objectives) in a Bonus/Penalty section to arrive at a total return for the group (see instructor materials for the bonus section of the scorecard).
6 percent according to the Nomis directories, a trend that is being driven by consumer demand and economies of scope.
of centralized administrative services), whereas the latter two leverage economies of scope.
Economies of scope exist when Provision of one kind of service has a favorable impact on provision of other services.
In section 3 we introduce the notion of economies of scope.
P3: To maintain a critical mass of installed base of customers, m-commerce service providers need to exploit the demand-side economies of scope by drawing on digital assets to provide value across many different and disparate markets.
That is, good is price fully reflects the extent of economies of scope (through price reductions) or diseconomies of scope (through price increases).
In this view, product evolution is not governed by economies of scale as suggested by Hayes and Wheelwright, but rather by economies of scope where flexible equipment achieves both variety and economy because of its ability to respond easily to change or disruptions.
By not having economies of scope (different ancillary procedures within her office), she may lose out on income generated by internal referrals.
For example, economies of scale usually associated with mass production may be less relevant when a company adopts a just-in-time (JIT) approach and seeks economies of scope through smaller machines that can handle a range of products.
He reaches conclusions on the impact on firms'profits, consumer surplus and welfare depending on partial or complete coverage of the market: the economies of scope created by mix bundling reduce firm profits when the market is completely covered and increase it when the market is partially covered.