ECONOMIES OF
SCOPE
This
economies of scope occur when products share their common inputs and therefore
diversification leads to cost savings.
Theory of
economies of scope is similar to economies of scale, by introducing a new
product into the portfolio thus reducing the average costs by using the same
infrastructure used before. Therefore, average overall cost of the product is
reduced.
Example:
Different kinds
of examples like in the field of transportation, media and newspaper,
educational industries.
If we take
daily newspaper as an example, we can use the same infrastructure to printing
newspapers, magazines, sports news, articles and also reporters are used for
different classifieds.
If we take
road transportation as an example, we use same bus for marriage purposes,
education institutes, travel business etc.
With Similar
inputs, we can provide wide range of outputs is exactly about economies of
scope.
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