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 ?
Economies of scope offers carriers a chance to diversify their operations in order to expand market share or mitigate a decline in a current market.
In terms of economies of scope, our methodology allows for pairwise comparison of two types of inspections, whereas in reality, most jurisdictions perform more than two types of inspections.
By acting concurrently in these markets, companies exploit economies of scope generated by the production and marketing of technological packages involving pesticides (chemical and biological) and GM seeds.
If on the one hand economies of scope are desirable because they increase efficiency in production, on the other hand interacting with those complex conglomerate firms may be difficult both for regulators and competing firms in unregulated markets.
Their results supported the existence of economies of scale and economies of scope.
To the extent that increasing scale is associated with diversification into additional financial services we must consider the evidence with respect to economies of scope.
Traditional rent extraction, that involves a threat to pass a law instead of a threat to enforce an existing law, may appear to provide equal economies of scope benefits, but further examination shows that this is not the case.
Now in economics you always want to look at not just the economies of scale of your operation, how many assets you have, but also the economies of scope, how many of your products do your members use.
This multinational flexibility encourages a higher degree of product diversification relatedness by facilitating the achievement of economies of scope in the activities carried out in foreign markets.
Economies of scope are present when costs are reduced by jointly producing two or more products, rather than producing the products separately.
There are also 400 new entries, including economies of scope, marginalization, rurality, and tax havens and offshore financial centres.
The parameters to be estimated are not directly interpretable, but are components of the constructs in which we are interested: economies of scale and economies of scope.