Economies of Scope
Economies of scope are cost-effective advantages that result when a company produces a variety of products rather than one single product. Computer companies such as IBM and Toshiba produce an extensive assortment of products, from mainframes to personal computers. Consumer products companies like Procter & Gamble and General Foods produce numerous goods for individuals and households. Entertainment companies such as the Walt Disney Company create movies, television shows, toys, amusement parks, and vacation resorts.
The validation of various products is based on the probable benefit of creating numerous, carefully connected goods. "A production process exhibits economies of scope when the cost of producing multiple goods is less than the aggregate cost of producing each item separately" (Samuelson & Marks, 2012, p. 252).
Samuelson, W., & Marks, S. G. (2012). Managerial economics (7th ed.). Hoboken, NJ: Wiley.
