Economies of Scope

Abstract

Economies of scope exist when the cost of joint production of two outputs is less than the cost of producing the components separately. These may arise from the leveraging of a core competence based on knowledge and learning, from the efficient use of resources or from spreading the cost of a network across a wider range of products. Scope is concerned with the consequences of increased variety of products produced and not the increases in volume. Scope is a key driver of strategy because the drivers of scope are often very difficult to imitate.