Economies of scope are conceptually similar to
economies of scale. Whereas economies of scale primarily refer to efficiencies associated with supply-side changes, such as increasing or decreasing the scale of production, of a single product type, economies of scope refer to efficiencies primarily associated with demand-side changes, such as increasing or decreasing the scope of
marketing and
distribution, of different types of
products. Economies of scope are one of the main reasons for such marketing strategies as
product bundling,
product lining, and
family branding.
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Scope economies exist whenever the same investment can support multiple profitable activities less expensively in combination than separately.
cost savings achieved by one company conducting business in two or more areas that would not be achieved by separate companies conducting business in each of those areas.
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