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mw-list-item"><a href="https://az.wikipedia.org/wiki/%C4%B0mkan_iqtisadiyyatlar%C4%B1" title="İmkan iqtisadiyyatları – Azerbaijani" lang="az" hreflang="az" data-title="İmkan iqtisadiyyatları" data-language-autonym="Azərbaycanca" data-language-local-name="Azerbaijani" class="interlanguage-link-target"><span>Azərbaycanca</span></a></li><li class="interlanguage-link interwiki-de mw-list-item"><a href="https://de.wikipedia.org/wiki/Verbundeffekt" title="Verbundeffekt – German" lang="de" hreflang="de" data-title="Verbundeffekt" data-language-autonym="Deutsch" data-language-local-name="German" class="interlanguage-link-target"><span>Deutsch</span></a></li><li class="interlanguage-link interwiki-es mw-list-item"><a href="https://es.wikipedia.org/wiki/Econom%C3%ADa_de_gama" title="Economía de gama – Spanish" lang="es" hreflang="es" data-title="Economía de gama" data-language-autonym="Español" data-language-local-name="Spanish" class="interlanguage-link-target"><span>Español</span></a></li><li class="interlanguage-link interwiki-fr mw-list-item"><a href="https://fr.wikipedia.org/wiki/%C3%89conomies_d%27envergure" title="Économies d'envergure – French" lang="fr" hreflang="fr" data-title="Économies d'envergure" data-language-autonym="Français" data-language-local-name="French" class="interlanguage-link-target"><span>Français</span></a></li><li class="interlanguage-link interwiki-ko mw-list-item"><a href="https://ko.wikipedia.org/wiki/%EB%B2%94%EC%9C%84%EC%9D%98_%EA%B2%BD%EC%A0%9C" title="범위의 경제 – Korean" lang="ko" hreflang="ko" data-title="범위의 경제" data-language-autonym="한국어" data-language-local-name="Korean" class="interlanguage-link-target"><span>한국어</span></a></li><li class="interlanguage-link interwiki-it mw-list-item"><a href="https://it.wikipedia.org/wiki/Economie_di_scopo" title="Economie di scopo – Italian" lang="it" hreflang="it" data-title="Economie di scopo" data-language-autonym="Italiano" data-language-local-name="Italian" class="interlanguage-link-target"><span>Italiano</span></a></li><li class="interlanguage-link interwiki-he mw-list-item"><a href="https://he.wikipedia.org/wiki/%D7%99%D7%AA%D7%A8%D7%95%D7%9F_%D7%9C%D7%94%D7%99%D7%A7%D7%A3" title="יתרון להיקף – Hebrew" lang="he" hreflang="he" data-title="יתרון להיקף" data-language-autonym="עברית" data-language-local-name="Hebrew" class="interlanguage-link-target"><span>עברית</span></a></li><li class="interlanguage-link interwiki-nl mw-list-item"><a href="https://nl.wikipedia.org/wiki/Synergievoordeel" title="Synergievoordeel – Dutch" lang="nl" hreflang="nl" data-title="Synergievoordeel" data-language-autonym="Nederlands" data-language-local-name="Dutch" class="interlanguage-link-target"><span>Nederlands</span></a></li><li class="interlanguage-link interwiki-ja mw-list-item"><a href="https://ja.wikipedia.org/wiki/%E7%AF%84%E5%9B%B2%E3%81%AE%E7%B5%8C%E6%B8%88" title="範囲の経済 – Japanese" lang="ja" hreflang="ja" data-title="範囲の経済" data-language-autonym="日本語" data-language-local-name="Japanese" class="interlanguage-link-target"><span>日本語</span></a></li><li class="interlanguage-link interwiki-pl mw-list-item"><a href="https://pl.wikipedia.org/wiki/Korzy%C5%9Bci_zakresu" title="Korzyści zakresu – Polish" lang="pl" hreflang="pl" data-title="Korzyści zakresu" data-language-autonym="Polski" data-language-local-name="Polish" class="interlanguage-link-target"><span>Polski</span></a></li><li class="interlanguage-link interwiki-pt mw-list-item"><a href="https://pt.wikipedia.org/wiki/Economia_de_escopo" title="Economia de escopo – Portuguese" lang="pt" hreflang="pt" data-title="Economia de escopo" data-language-autonym="Português" data-language-local-name="Portuguese" class="interlanguage-link-target"><span>Português</span></a></li><li class="interlanguage-link interwiki-ru mw-list-item"><a href="https://ru.wikipedia.org/wiki/%D0%AD%D1%84%D1%84%D0%B5%D0%BA%D1%82_%D0%BE%D1%85%D0%B2%D0%B0%D1%82%D0%B0" title="Эффект охвата – Russian" lang="ru" 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<div class="mw-indicators"> </div> <div id="siteSub" class="noprint">From Wikipedia, the free encyclopedia</div> </div> <div id="contentSub"><div id="mw-content-subtitle"></div></div> <div id="mw-content-text" class="mw-body-content"><div class="mw-content-ltr mw-parser-output" lang="en" dir="ltr"><p class="mw-empty-elt"> </p> <div class="shortdescription nomobile noexcerpt noprint searchaux" style="display:none">Efficiencies formed by variety of products or services offered</div> <p class="mw-empty-elt"> </p><p><b>Economies of scope</b> are "efficiencies formed by variety, not volume" (the latter concept is "<a href="/wiki/Economies_of_scale" title="Economies of scale">economies of scale</a>").<sup id="cite_ref-hbr_1-0" class="reference"><a href="#cite_note-hbr-1"><span class="cite-bracket">[</span>1<span class="cite-bracket">]</span></a></sup> In the field of <a href="/wiki/Economics" title="Economics">economics</a>, "economies" is synonymous with cost savings and "scope" is synonymous with broadening production/services through diversified products. Economies of scope is an economic theory stating that <a href="/wiki/Average_cost" title="Average cost">average total cost (ATC)</a> of production decrease as a result of increasing the number of different goods produced.<sup id="cite_ref-econ_2-0" class="reference"><a href="#cite_note-econ-2"><span class="cite-bracket">[</span>2<span class="cite-bracket">]</span></a></sup> For example, a <a href="/wiki/Filling_station" title="Filling station">gas station</a> primarily sells gasoline, but can sell soda, milk, baked goods, etc. and thus achieve economies of scope since with the same facility, each new product attracts new dollars a customer would have spent elsewhere.<sup id="cite_ref-econ_2-1" class="reference"><a href="#cite_note-econ-2"><span class="cite-bracket">[</span>2<span class="cite-bracket">]</span></a></sup> The business historian <a href="/wiki/Alfred_D._Chandler_Jr." title="Alfred D. Chandler Jr.">Alfred Chandler</a> argued that economies of scope contributed to the rise of American business corporations during the 20th century.<sup id="cite_ref-3" class="reference"><a href="#cite_note-3"><span class="cite-bracket">[</span>3<span class="cite-bracket">]</span></a></sup> </p> <meta property="mw:PageProp/toc" /> <div class="mw-heading mw-heading2"><h2 id="Economics">Economics</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Economies_of_scope&action=edit&section=1" title="Edit section: Economics"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>The term and the development of the concept are attributed to economists John C. Panzar and Robert D. Willig (1977, 1981).<sup id="cite_ref-Scope_4-0" class="reference"><a href="#cite_note-Scope-4"><span class="cite-bracket">[</span>4<span class="cite-bracket">]</span></a></sup><sup id="cite_ref-scope81_5-0" class="reference"><a href="#cite_note-scope81-5"><span class="cite-bracket">[</span>5<span class="cite-bracket">]</span></a></sup> Their 1981 article notes that they had coined the term several years previously, and felt that its logic was "intuitively appealing".<sup id="cite_ref-scope81_5-1" class="reference"><a href="#cite_note-scope81-5"><span class="cite-bracket">[</span>5<span class="cite-bracket">]</span></a></sup><sup class="reference nowrap"><span title="Page / location: 268">: 268 </span></sup> </p><p>Whereas economies of scale for a firm involve reductions in the <a href="/wiki/Average_cost" title="Average cost">average cost</a> (cost per unit) arising from increasing the scale of production for a single product type, economies of scope involve lowering average cost by producing more types of products. Hofstrand notes that the two types of economy "are not mutually exclusive".<sup id="cite_ref-6" class="reference"><a href="#cite_note-6"><span class="cite-bracket">[</span>6<span class="cite-bracket">]</span></a></sup> </p><p>Economies of scope make <a href="/wiki/Diversification_(marketing_strategy)" title="Diversification (marketing strategy)">product diversification</a> efficient, as part of the <a href="/wiki/Ansoff_Matrix" class="mw-redirect" title="Ansoff Matrix">Ansoff Matrix</a>, if they are based on the common and recurrent use of proprietary know-how or on an indivisible physical asset.<sup id="cite_ref-7" class="reference"><a href="#cite_note-7"><span class="cite-bracket">[</span>7<span class="cite-bracket">]</span></a></sup> For example, as the number of products promoted is increased, more people can be reached per unit of money spent. At some point, however, additional <a href="/wiki/Advertising" title="Advertising">advertising</a> expenditure on new products may become less effective (an example of the opposite effect, diseconomies of scope). Related examples include <a href="/wiki/Distribution_(business)" class="mw-redirect" title="Distribution (business)">distribution</a> of different types of <a href="/wiki/Product_(business)" title="Product (business)">products</a>, <a href="/wiki/Product_bundling" title="Product bundling">product bundling</a>, <a href="/wiki/Product_lining" title="Product lining">product lining</a>, and <a href="/wiki/Family_branding" class="mw-redirect" title="Family branding">family branding</a>. </p><p>Economies of scope exist whenever the <a href="/wiki/Total_cost" title="Total cost">total cost</a> of producing two different products or services (X and Y) is lower when a single firm instead of two separate firms produces by themselves.<sup id="cite_ref-8" class="reference"><a href="#cite_note-8"><span class="cite-bracket">[</span>8<span class="cite-bracket">]</span></a></sup> </p> <dl><dd><span class="mwe-math-element"><span class="mwe-math-mathml-inline mwe-math-mathml-a11y" style="display: none;"><math xmlns="http://www.w3.org/1998/Math/MathML" alttext="{\displaystyle TC(QX+QY)<TC(QX)+TC(QY)}"> <semantics> <mrow class="MJX-TeXAtom-ORD"> <mstyle displaystyle="true" scriptlevel="0"> <mi>T</mi> <mi>C</mi> <mo stretchy="false">(</mo> <mi>Q</mi> <mi>X</mi> <mo>+</mo> <mi>Q</mi> <mi>Y</mi> <mo stretchy="false">)</mo> <mo><</mo> <mi>T</mi> <mi>C</mi> <mo stretchy="false">(</mo> <mi>Q</mi> <mi>X</mi> <mo stretchy="false">)</mo> <mo>+</mo> <mi>T</mi> <mi>C</mi> <mo stretchy="false">(</mo> <mi>Q</mi> <mi>Y</mi> <mo stretchy="false">)</mo> </mstyle> </mrow> <annotation encoding="application/x-tex">{\displaystyle TC(QX+QY)<TC(QX)+TC(QY)}</annotation> </semantics> </math></span><img src="https://wikimedia.org/api/rest_v1/media/math/render/svg/32c118b48005e9c8aac52ca6a553983604d4e29d" class="mwe-math-fallback-image-inline mw-invert skin-invert" aria-hidden="true" style="vertical-align: -0.838ex; width:39.275ex; height:2.843ex;" alt="{\displaystyle TC(QX+QY)<TC(QX)+TC(QY)}"></span></dd></dl> <p>The degree of economies of scope (DSC) formula is as follows: </p> <dl><dd><span class="mwe-math-element"><span class="mwe-math-mathml-inline mwe-math-mathml-a11y" style="display: none;"><math xmlns="http://www.w3.org/1998/Math/MathML" alttext="{\displaystyle DSC={TC(q1)+TC(q2)-TC(q1,q2) \over TC(q1,q2)}}"> <semantics> <mrow class="MJX-TeXAtom-ORD"> <mstyle displaystyle="true" scriptlevel="0"> <mi>D</mi> <mi>S</mi> <mi>C</mi> <mo>=</mo> <mrow class="MJX-TeXAtom-ORD"> <mfrac> <mrow> <mi>T</mi> <mi>C</mi> <mo stretchy="false">(</mo> <mi>q</mi> <mn>1</mn> <mo stretchy="false">)</mo> <mo>+</mo> <mi>T</mi> <mi>C</mi> <mo stretchy="false">(</mo> <mi>q</mi> <mn>2</mn> <mo stretchy="false">)</mo> <mo>−</mo> <mi>T</mi> <mi>C</mi> <mo stretchy="false">(</mo> <mi>q</mi> <mn>1</mn> <mo>,</mo> <mi>q</mi> <mn>2</mn> <mo stretchy="false">)</mo> </mrow> <mrow> <mi>T</mi> <mi>C</mi> <mo stretchy="false">(</mo> <mi>q</mi> <mn>1</mn> <mo>,</mo> <mi>q</mi> <mn>2</mn> <mo stretchy="false">)</mo> </mrow> </mfrac> </mrow> </mstyle> </mrow> <annotation encoding="application/x-tex">{\displaystyle DSC={TC(q1)+TC(q2)-TC(q1,q2) \over TC(q1,q2)}}</annotation> </semantics> </math></span><img src="https://wikimedia.org/api/rest_v1/media/math/render/svg/379665321050877c86e9ffbe4a421dbaadeccc89" class="mwe-math-fallback-image-inline mw-invert skin-invert" aria-hidden="true" style="vertical-align: -2.671ex; width:40.403ex; height:6.509ex;" alt="{\displaystyle DSC={TC(q1)+TC(q2)-TC(q1,q2) \over TC(q1,q2)}}"></span></dd></dl> <p>If <span class="mwe-math-element"><span class="mwe-math-mathml-inline mwe-math-mathml-a11y" style="display: none;"><math xmlns="http://www.w3.org/1998/Math/MathML" alttext="{\displaystyle DSC>0}"> <semantics> <mrow class="MJX-TeXAtom-ORD"> <mstyle displaystyle="true" scriptlevel="0"> <mi>D</mi> <mi>S</mi> <mi>C</mi> <mo>></mo> <mn>0</mn> </mstyle> </mrow> <annotation encoding="application/x-tex">{\displaystyle DSC>0}</annotation> </semantics> </math></span><img src="https://wikimedia.org/api/rest_v1/media/math/render/svg/cf41295a175e1ea1806e58f83dd3e9c850accb40" class="mwe-math-fallback-image-inline mw-invert skin-invert" aria-hidden="true" style="vertical-align: -0.338ex; width:9.451ex; height:2.176ex;" alt="{\displaystyle DSC>0}"></span>, there are economies of scope. It is recommended that two firms <a href="/wiki/Cooperate" class="mw-redirect" title="Cooperate">cooperate</a>, or systems merge, to produce together. </p><p>If <span class="mwe-math-element"><span class="mwe-math-mathml-inline mwe-math-mathml-a11y" style="display: none;"><math xmlns="http://www.w3.org/1998/Math/MathML" alttext="{\displaystyle DSC=0}"> <semantics> <mrow class="MJX-TeXAtom-ORD"> <mstyle displaystyle="true" scriptlevel="0"> <mi>D</mi> <mi>S</mi> <mi>C</mi> <mo>=</mo> <mn>0</mn> </mstyle> </mrow> <annotation encoding="application/x-tex">{\displaystyle DSC=0}</annotation> </semantics> </math></span><img src="https://wikimedia.org/api/rest_v1/media/math/render/svg/22526b36ec0ccb5a6435375fc29e3a03b588c94e" class="mwe-math-fallback-image-inline mw-invert skin-invert" aria-hidden="true" style="vertical-align: -0.338ex; width:9.451ex; height:2.176ex;" alt="{\displaystyle DSC=0}"></span>, there are no <a href="/wiki/Economies_of_scale" title="Economies of scale">economies of scale</a> nor economies of scope. </p><p>If <span class="mwe-math-element"><span class="mwe-math-mathml-inline mwe-math-mathml-a11y" style="display: none;"><math xmlns="http://www.w3.org/1998/Math/MathML" alttext="{\displaystyle DSC<0}"> <semantics> <mrow class="MJX-TeXAtom-ORD"> <mstyle displaystyle="true" scriptlevel="0"> <mi>D</mi> <mi>S</mi> <mi>C</mi> <mo><</mo> <mn>0</mn> </mstyle> </mrow> <annotation encoding="application/x-tex">{\displaystyle DSC<0}</annotation> </semantics> </math></span><img src="https://wikimedia.org/api/rest_v1/media/math/render/svg/ec51abd9636e27dbe650b8bf39317ec4281b00f8" class="mwe-math-fallback-image-inline mw-invert skin-invert" aria-hidden="true" style="vertical-align: -0.338ex; width:9.451ex; height:2.176ex;" alt="{\displaystyle DSC<0}"></span>, there are diseconomies of scope. It is not recommended for the two firms to work together.<sup id="cite_ref-:0_9-0" class="reference"><a href="#cite_note-:0-9"><span class="cite-bracket">[</span>9<span class="cite-bracket">]</span></a></sup> Diseconomies of scope means that it is more efficient for two firms to work separately since the merged cost per unit is higher than the sum of stand-alone costs.<sup id="cite_ref-:0_9-1" class="reference"><a href="#cite_note-:0-9"><span class="cite-bracket">[</span>9<span class="cite-bracket">]</span></a></sup> </p><p>For a company, if it wants to achieve diversity, the economy of scope is related to resource, and it is similar to resource requirements between enterprises. Relevance supports the economy by improving the applicability of resources in the merged companies and supporting the economical use of resources (such as employees, factories, technical and marketing knowledge) in these companies.<sup id="cite_ref-:1_10-0" class="reference"><a href="#cite_note-:1-10"><span class="cite-bracket">[</span>10<span class="cite-bracket">]</span></a></sup> </p><p>Unlike economies of scale, "which can be reasonably be expected to plateau into an <a href="/wiki/Diminishing_returns" title="Diminishing returns">efficient state</a> that will then deliver high-margin revenues for a period", economies of scope may never reach that plateau, or point at all. As Venkatesh Rao of Ribbonfarm explains it, "You may never get to a point where you can claim you have right-sized and right-shaped the business, but you have to keep trying. In fact, managing the ongoing scope-learning process is the essential activity in business strategy. If you ever think you’ve right-sized/right-shaped for the steady state, that’s when you are most vulnerable to attacks."<sup id="cite_ref-venkat_11-0" class="reference"><a href="#cite_note-venkat-11"><span class="cite-bracket">[</span>11<span class="cite-bracket">]</span></a></sup> </p><p><a href="/wiki/Research_and_development" title="Research and development">Research and development</a> (R&D) is a typical example of economies of scope. In R&D economies, unit cost decreases because of the spreading R&D expenses. For example, R&D labs require a minimum number of scientists and researchers whose labour is indivisible. Therefore, when the output of the lab increases, R&D <a href="/wiki/Average_cost" title="Average cost">costs per unit</a> may decrease. The substantial indivisible invest in R&D may also implies that average fixed costs will fall rapidly due to the output and sales increase. The ideas from one project can help another project (positive spillovers).<sup id="cite_ref-12" class="reference"><a href="#cite_note-12"><span class="cite-bracket">[</span>12<span class="cite-bracket">]</span></a></sup><sup id="cite_ref-13" class="reference"><a href="#cite_note-13"><span class="cite-bracket">[</span>13<span class="cite-bracket">]</span></a></sup> </p><p><a href="/wiki/Strategic_fit" title="Strategic fit">Strategic fit</a>, also known as complementarity that yields economies of scope, is the degree to which, or what kind of activities of different sections of an entrepreneur corporates with each other that complement themselves to achieve <a href="/wiki/Competitive_advantage" title="Competitive advantage">competitive advantage</a>. Throughout the strategic fit, diversified firms can merge with interrelated businesses and share the resources. These kind of corporations can limit the duplication of research and developments, provide a more planned and developed selling pipelines for businesses.<sup id="cite_ref-:1_10-1" class="reference"><a href="#cite_note-:1-10"><span class="cite-bracket">[</span>10<span class="cite-bracket">]</span></a></sup> </p> <div class="mw-heading mw-heading3"><h3 id="Joint_costs">Joint costs</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Economies_of_scope&action=edit&section=2" title="Edit section: Joint costs"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>The essential reason for economies of scope is some substantial <a href="/wiki/Joint_cost" title="Joint cost">joint cost</a> across the production of multiple products.<sup id="cite_ref-14" class="reference"><a href="#cite_note-14"><span class="cite-bracket">[</span>14<span class="cite-bracket">]</span></a></sup> The cost of a cable network underlies economies of scope across the provision of broadband service and cable TV. The cost of operating a plane is a joint cost between carrying passengers and carrying freight, and underlies economies of scope across passenger and freight services. </p> <div class="mw-heading mw-heading3"><h3 id="Natural_monopolies">Natural monopolies</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Economies_of_scope&action=edit&section=3" title="Edit section: Natural monopolies"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>While in the single-output case, economies of scale are a sufficient condition for the verification of a <a href="/wiki/Natural_monopoly" title="Natural monopoly">natural monopoly</a>, in the multi-output case, they are not sufficient. Economies of scope are, however, a necessary condition. As a matter of simplification, it is generally accepted that markets may have monopoly features if both economies of scale and economies of scope apply, as well as <a href="/wiki/Sunk_cost" title="Sunk cost">sunk costs</a> or other <a href="/wiki/Barriers_to_entry" title="Barriers to entry">barriers to entry</a>. </p> <div class="mw-heading mw-heading3"><h3 id="Empirical_Evidence">Empirical Evidence</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Economies_of_scope&action=edit&section=4" title="Edit section: Empirical Evidence"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>In a 2022 article in the <i><a href="/wiki/Journal_of_Political_Economy" title="Journal of Political Economy">Journal of Political Economy</a></i>, researchers used data from the <a href="/wiki/Manufacturing_in_India" class="mw-redirect" title="Manufacturing in India">Indian manufacturing sector</a> to estimate the economies of scope arising from factor-biased productivities that are jointly used across product lines. They found that economies of scope are important determinants of product market entry, and that they change entry probabilities by several percentage points.<sup id="cite_ref-15" class="reference"><a href="#cite_note-15"><span class="cite-bracket">[</span>15<span class="cite-bracket">]</span></a></sup> </p> <div class="mw-heading mw-heading2"><h2 id="Examples">Examples</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Economies_of_scope&action=edit&section=5" title="Edit section: Examples"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>Economies of scope arise when businesses share centralized functions (such as finance or <a href="/wiki/Marketing" title="Marketing">marketing</a>) or when they form interrelationships at other points in the business process (e.g., <a href="/wiki/Cross-selling" title="Cross-selling">cross-selling</a> one product alongside another, using the outputs of one business as the inputs of another).<sup id="cite_ref-econ_2-2" class="reference"><a href="#cite_note-econ-2"><span class="cite-bracket">[</span>2<span class="cite-bracket">]</span></a></sup> </p><p>Economies of scope served as the impetus behind the formation of large international <a href="/wiki/Conglomerate_(company)" title="Conglomerate (company)">conglomerates</a> in the 1970s and 1980s, such as <a href="/wiki/BTR_plc" title="BTR plc">BTR</a> and <a href="/wiki/Hanson_plc" class="mw-redirect" title="Hanson plc">Hanson</a> in the <a href="/wiki/UK" class="mw-redirect" title="UK">UK</a> and <a href="/wiki/ITT_Corporation" class="mw-redirect" title="ITT Corporation">ITT</a> in the <a href="/wiki/United_States" title="United States">United States</a>. These companies sought to apply their financial skills across a more diverse range of industries through economies of scope. In the 1990s, several conglomerates that "relied on <a href="/wiki/Cross-selling" title="Cross-selling">cross-selling</a>, thus reaping economies of scope by using the same people and systems to market many different products"—i.e., "selling the financial products of the one by using the sales teams of the other"—which was the logic behind the 1998 merger of <a href="/wiki/The_Travelers_Companies" title="The Travelers Companies">Travelers Group</a> and <a href="/wiki/Citigroup" title="Citigroup">Citicorp</a>.<sup id="cite_ref-econ_2-3" class="reference"><a href="#cite_note-econ-2"><span class="cite-bracket">[</span>2<span class="cite-bracket">]</span></a></sup> </p><p>The application of information technology to manufacturing has allowed processes to become more flexible and generated more opportunities for economies of scope than were possible with older forms of technology, when equipment tended towards greater specialization in how it could be used. Goldhar and Jelinek argue that the use of computers in manufacturing generates economies of scale via the following capabilities: </p> <ul><li>extreme flexibility in <a href="/wiki/Product_design" title="Product design">product design</a> and product mix</li> <li>rapid responses to changes in market demand, product design and mix, output rates, and equipment scheduling</li> <li>greater control, accuracy, and repeatability of processes</li> <li>reduced costs from less waste and lower training and <a href="/wiki/Changeover" title="Changeover">changeover</a> costs</li> <li>more predictability (e.g., maintenance costs)</li> <li>faster <a href="/wiki/Throughput_(business)" title="Throughput (business)">throughput</a> thanks to better machine use, less <a href="/wiki/Work_in_process" title="Work in process">in-process</a> <a href="/wiki/Inventory" title="Inventory">inventory</a>, or fewer stoppages for missing or broken parts: *<a href="/wiki/Distributed_control_system" title="Distributed control system">distributed</a> <a href="/wiki/Process_control" class="mw-redirect" title="Process control">processing capability</a> made possible and economical by the encoding of process information in easily replicable software</li> <li>reduction in <a href="/wiki/Risk" title="Risk">risk</a>: a company that sells many <a href="/wiki/Product_line" class="mw-redirect" title="Product line">product lines</a>, sells in many countries, or both will benefit from reduced risk (e.g., if a product line falls out of fashion or if one country has an economic slowdown, the company will likely be able to continue trading).<sup id="cite_ref-hbr_1-1" class="reference"><a href="#cite_note-hbr-1"><span class="cite-bracket">[</span>1<span class="cite-bracket">]</span></a></sup></li></ul> <p>Goldhar and Jellinek note that higher machine speeds are now both possible and economically feasible due to the sensory and control capabilities of "smart" machines and the <a href="/wiki/Information_management" title="Information management">information management</a> capabilities of <a href="/wiki/Computer-aided_manufacturing" title="Computer-aided manufacturing">computer-aided manufacturing</a> (CAM) software.<sup id="cite_ref-hbr_1-2" class="reference"><a href="#cite_note-hbr-1"><span class="cite-bracket">[</span>1<span class="cite-bracket">]</span></a></sup> </p><p><a href="/wiki/3D_printing" title="3D printing">3D printing</a> is another area which can generate economies of scope,<sup id="cite_ref-16" class="reference"><a href="#cite_note-16"><span class="cite-bracket">[</span>16<span class="cite-bracket">]</span></a></sup> as it is an example of the same equipment producing "multiple products more cheaply in combination than separately".<sup id="cite_ref-hbr_1-3" class="reference"><a href="#cite_note-hbr-1"><span class="cite-bracket">[</span>1<span class="cite-bracket">]</span></a></sup> </p><p>If a sales team sells several products, it can often do so more efficiently than if it is selling only one product because the cost of travel would be distributed over a greater revenue base, thus improving cost efficiency. There can also be <a href="/wiki/Synergy" title="Synergy">synergies</a> between products such that offering a range of products gives the consumer a more desirable product offering than would a single product. Economies of scope can also operate through distribution efficiencies—i.e. it can be more efficient to ship to any given location a range of products than a single type of product. </p><p>Further economies of scope occur when there are cost savings arising from byproducts in the production process, such as when the benefits of <a href="/wiki/Cogeneration" title="Cogeneration">heating from energy production</a> has a positive effect on <a href="/wiki/Agricultural_yield" class="mw-redirect" title="Agricultural yield">agricultural yields</a>.<sup class="noprint Inline-Template Template-Fact" style="white-space:nowrap;">[<i><a href="/wiki/Wikipedia:Citation_needed" title="Wikipedia:Citation needed"><span title="This claim needs references to reliable sources. (January 2021)">citation needed</span></a></i>]</sup> </p> <div class="mw-heading mw-heading2"><h2 id="See_also">See also</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Economies_of_scope&action=edit&section=6" title="Edit section: See also"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <ul><li><a href="/wiki/Economic_efficiency" title="Economic efficiency">Economic efficiency</a></li> <li><a href="/wiki/Mass_customization" title="Mass customization">Mass customization</a></li> <li><a href="/w/index.php?title=Production,_costs,_and_pricing&action=edit&redlink=1" class="new" title="Production, costs, and pricing (page does not exist)">Production, costs, and pricing</a></li> <li><a href="/wiki/Theory_of_the_firm" title="Theory of the firm">Theory of the firm</a></li> <li><a href="/wiki/Economies_of_scale" title="Economies of scale">Economies of scale</a></li> <li><a href="/wiki/Economies_of_density" title="Economies of density">Economies of density</a></li> <li><a href="/wiki/Joint_cost" title="Joint cost">Joint cost</a></li></ul> <div class="mw-heading mw-heading2"><h2 id="References">References</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Economies_of_scope&action=edit&section=7" title="Edit section: References"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <style data-mw-deduplicate="TemplateStyles:r1239543626">.mw-parser-output .reflist{margin-bottom:0.5em;list-style-type:decimal}@media screen{.mw-parser-output .reflist{font-size:90%}}.mw-parser-output .reflist .references{font-size:100%;margin-bottom:0;list-style-type:inherit}.mw-parser-output .reflist-columns-2{column-width:30em}.mw-parser-output .reflist-columns-3{column-width:25em}.mw-parser-output .reflist-columns{margin-top:0.3em}.mw-parser-output .reflist-columns ol{margin-top:0}.mw-parser-output .reflist-columns li{page-break-inside:avoid;break-inside:avoid-column}.mw-parser-output .reflist-upper-alpha{list-style-type:upper-alpha}.mw-parser-output .reflist-upper-roman{list-style-type:upper-roman}.mw-parser-output .reflist-lower-alpha{list-style-type:lower-alpha}.mw-parser-output .reflist-lower-greek{list-style-type:lower-greek}.mw-parser-output .reflist-lower-roman{list-style-type:lower-roman}</style><div class="reflist"> <div class="mw-references-wrap mw-references-columns"><ol class="references"> <li id="cite_note-hbr-1"><span class="mw-cite-backlink">^ <a href="#cite_ref-hbr_1-0"><sup><i><b>a</b></i></sup></a> <a href="#cite_ref-hbr_1-1"><sup><i><b>b</b></i></sup></a> <a href="#cite_ref-hbr_1-2"><sup><i><b>c</b></i></sup></a> <a href="#cite_ref-hbr_1-3"><sup><i><b>d</b></i></sup></a></span> <span class="reference-text"><style data-mw-deduplicate="TemplateStyles:r1238218222">.mw-parser-output cite.citation{font-style:inherit;word-wrap:break-word}.mw-parser-output .citation q{quotes:"\"""\"""'""'"}.mw-parser-output .citation:target{background-color:rgba(0,127,255,0.133)}.mw-parser-output .id-lock-free.id-lock-free a{background:url("//upload.wikimedia.org/wikipedia/commons/6/65/Lock-green.svg")right 0.1em center/9px no-repeat}.mw-parser-output .id-lock-limited.id-lock-limited a,.mw-parser-output .id-lock-registration.id-lock-registration a{background:url("//upload.wikimedia.org/wikipedia/commons/d/d6/Lock-gray-alt-2.svg")right 0.1em center/9px no-repeat}.mw-parser-output .id-lock-subscription.id-lock-subscription a{background:url("//upload.wikimedia.org/wikipedia/commons/a/aa/Lock-red-alt-2.svg")right 0.1em center/9px no-repeat}.mw-parser-output .cs1-ws-icon a{background:url("//upload.wikimedia.org/wikipedia/commons/4/4c/Wikisource-logo.svg")right 0.1em center/12px no-repeat}body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-free a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-limited a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-registration a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-subscription a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .cs1-ws-icon a{background-size:contain;padding:0 1em 0 0}.mw-parser-output .cs1-code{color:inherit;background:inherit;border:none;padding:inherit}.mw-parser-output .cs1-hidden-error{display:none;color:var(--color-error,#d33)}.mw-parser-output .cs1-visible-error{color:var(--color-error,#d33)}.mw-parser-output .cs1-maint{display:none;color:#085;margin-left:0.3em}.mw-parser-output .cs1-kern-left{padding-left:0.2em}.mw-parser-output .cs1-kern-right{padding-right:0.2em}.mw-parser-output .citation .mw-selflink{font-weight:inherit}@media screen{.mw-parser-output .cs1-format{font-size:95%}html.skin-theme-clientpref-night .mw-parser-output .cs1-maint{color:#18911f}}@media screen and (prefers-color-scheme:dark){html.skin-theme-clientpref-os .mw-parser-output .cs1-maint{color:#18911f}}</style><cite id="CITEREFJoel_D._GoldharMariann_Jelinek1983" class="citation news cs1">Joel D. 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class="citation news cs1">Lee, Leonard (26 April 2013). <a rel="nofollow" class="external text" href="http://insights-on-business.com/electronics/3d-printing-transforming-the-supply-chain-part-1/">"3D Printing – Transforming The Supply Chain: Part 1"</a>. <i>IBM Insights on Business blog</i>.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Ajournal&rft.genre=article&rft.jtitle=IBM+Insights+on+Business+blog&rft.atitle=3D+Printing+%E2%80%93+Transforming+The+Supply+Chain%3A+Part+1&rft.date=2013-04-26&rft.aulast=Lee&rft.aufirst=Leonard&rft_id=http%3A%2F%2Finsights-on-business.com%2Felectronics%2F3d-printing-transforming-the-supply-chain-part-1%2F&rfr_id=info%3Asid%2Fen.wikipedia.org%3AEconomies+of+scope" class="Z3988"></span></span> </li> </ol></div></div> <div class="navbox-styles"><style data-mw-deduplicate="TemplateStyles:r1129693374">.mw-parser-output .hlist dl,.mw-parser-output .hlist ol,.mw-parser-output .hlist ul{margin:0;padding:0}.mw-parser-output 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href="/wiki/Consumer_choice" title="Consumer choice">Consumer choice</a></li> <li><a href="/wiki/Convexity_in_economics" title="Convexity in economics">Convexity</a> and <a href="/wiki/Non-convexity_(economics)" title="Non-convexity (economics)">non-convexity</a></li> <li><a href="/wiki/Economic_cost" title="Economic cost">Cost</a> <ul><li><a href="/wiki/Average_cost" title="Average cost">Average</a></li> <li><a href="/wiki/Marginal_cost" title="Marginal cost">Marginal</a></li> <li><a href="/wiki/Opportunity_cost" title="Opportunity cost">Opportunity</a> <ul><li><a href="/wiki/Implicit_cost" title="Implicit cost">Implicit</a></li></ul></li> <li><a href="/wiki/Social_cost" title="Social cost">Social</a></li> <li><a href="/wiki/Sunk_cost" title="Sunk cost">Sunk</a></li> <li><a href="/wiki/Transaction_cost" title="Transaction cost">Transaction</a></li></ul></li> <li><a href="/wiki/Cost%E2%80%93benefit_analysis" title="Cost–benefit analysis">Cost–benefit analysis</a></li> <li><a href="/wiki/Deadweight_loss" title="Deadweight loss">Deadweight loss</a></li> <li><a href="/wiki/Distribution_(economics)" title="Distribution (economics)">Distribution</a></li> <li><a href="/wiki/Economies_of_scale" title="Economies of scale">Economies of scale</a></li> <li><a class="mw-selflink selflink">Economies of scope</a></li> <li><a href="/wiki/Elasticity_(economics)" title="Elasticity (economics)">Elasticity</a> <ul><li><a href="/wiki/Cross_elasticity_of_demand" title="Cross elasticity of demand">Cross elasticity of demand</a></li> <li><a href="/wiki/Income_elasticity_of_demand" title="Income elasticity of demand">Income elasticity of demand</a></li> <li><a href="/wiki/Price_elasticity_of_demand" title="Price elasticity of demand">Price elasticity of demand</a></li> <li><a href="/wiki/Price_elasticity_of_supply" title="Price elasticity of supply">Price elasticity of supply</a></li></ul></li> <li><a href="/wiki/Economic_equilibrium" title="Economic equilibrium">Equilibrium</a> <ul><li><a href="/wiki/General_equilibrium_theory" title="General equilibrium theory">General</a></li></ul></li> <li><a href="/wiki/Trade" title="Trade">Exchange</a></li> <li><a href="/wiki/Externality" title="Externality">Externality</a></li> <li><a href="/wiki/Theory_of_the_firm" title="Theory of the firm">Firms</a></li> <li><a href="/wiki/Goods_and_services" title="Goods and services">Goods and services</a> <ul><li><a href="/wiki/Goods" title="Goods">Goods</a></li> <li><a href="/wiki/Service_(economics)" title="Service (economics)">Service</a></li></ul></li> <li><a href="/wiki/Family_economics" title="Family economics">Household</a></li> <li><a href="/wiki/Income%E2%80%93consumption_curve" title="Income–consumption curve">Income–consumption curve</a></li> <li><a href="/wiki/Information_economics" title="Information economics">Information</a></li> <li><a href="/wiki/Indifference_curve" title="Indifference curve">Indifference curve</a></li> <li><a href="/wiki/Intertemporal_choice" title="Intertemporal choice">Intertemporal choice</a></li> <li><a href="/wiki/Market_(economics)" title="Market (economics)">Market</a></li> <li><a href="/wiki/Market_failure" title="Market failure">Market failure</a></li> <li><a href="/wiki/Market_structure" title="Market structure">Market structure</a> <ul><li><a href="/wiki/Competition_(economics)" title="Competition (economics)">Competition</a> <ul><li><a href="/wiki/Monopolistic_competition" title="Monopolistic competition">Monopolistic</a></li> <li><a href="/wiki/Perfect_competition" title="Perfect competition">Perfect</a></li></ul></li> <li><a href="/wiki/Duopoly" title="Duopoly">Duopoly</a></li> <li><a href="/wiki/Monopoly" title="Monopoly">Monopoly</a> <ul><li><a href="/wiki/Bilateral_monopoly" title="Bilateral monopoly">Bilateral</a></li> <li><a href="/wiki/Complementary_monopoly" title="Complementary monopoly">Complementary</a></li></ul></li> <li><a href="/wiki/Monopsony" title="Monopsony">Monopsony</a></li> <li><a href="/wiki/Oligopoly" title="Oligopoly">Oligopoly</a></li> <li><a href="/wiki/Oligopsony" title="Oligopsony">Oligopsony</a></li></ul></li> <li><a href="/wiki/Pareto_efficiency" title="Pareto efficiency">Pareto efficiency</a></li> <li><a href="/wiki/Preference_(economics)" title="Preference (economics)">Preferences</a></li> <li><a href="/wiki/Price" title="Price">Price</a> <ul><li><a href="/wiki/Price_controls" title="Price controls">Price controls</a></li> <li><a href="/wiki/Price_ceiling" title="Price ceiling">Price ceiling</a></li> <li><a href="/wiki/Price_floor" title="Price floor">Price floor</a></li> <li><a href="/wiki/Price_discrimination" title="Price discrimination">Price discrimination</a></li> <li><a href="/wiki/Price_signal" title="Price signal">Price signal</a></li> <li><a href="/wiki/Price_system" title="Price system">Price system</a>/<a href="/wiki/Free_price_system" title="Free price system">Free</a></li> <li><a href="/wiki/Pricing" title="Pricing">Pricing</a></li></ul></li> <li><a href="/wiki/Production_set" title="Production set">Production</a></li> <li><a href="/wiki/Profit_(economics)" title="Profit (economics)">Profit</a></li> <li><a href="/wiki/Public_good_(economics)" title="Public good (economics)">Public goods</a></li> <li><a href="/wiki/Rationing" title="Rationing">Rationing</a></li> <li><a href="/wiki/Economic_rent" title="Economic rent">Rent</a></li> <li><a href="/wiki/Returns_to_scale" title="Returns to scale">Returns to scale</a></li> <li><a href="/wiki/Risk_aversion" title="Risk aversion">Risk aversion</a></li> <li><a href="/wiki/Scarcity" title="Scarcity">Scarcity</a></li> <li><a href="/wiki/Shortage" title="Shortage">Shortage</a>/<a href="/wiki/Excess_supply" title="Excess supply">Excess supply</a></li> <li><a href="/wiki/Substitution_effect" title="Substitution effect">Substitution effect</a></li> <li><a href="/wiki/Economic_surplus" title="Economic surplus">Surplus</a></li> <li><a href="/wiki/Social_choice_theory" title="Social choice theory">Social choice</a></li> <li><a href="/wiki/Supply_and_demand" title="Supply and demand">Supply and demand</a> <ul><li><a href="/wiki/Demand" title="Demand">Demand</a>/<a href="/wiki/Law_of_demand" title="Law of demand">Law of demand</a></li> <li><a href="/wiki/Supply_(economics)" title="Supply (economics)">Supply</a>/<a href="/wiki/Law_of_supply" title="Law of supply">Law of supply</a></li></ul></li> <li><a href="/wiki/Uncertainty" title="Uncertainty">Uncertainty</a></li> <li><a href="/wiki/Utility" title="Utility">Utility</a> <ul><li><a href="/wiki/Expected_utility_hypothesis" title="Expected utility hypothesis">Expected</a></li> <li><a href="/wiki/Marginal_utility" title="Marginal utility">Marginal</a></li></ul></li> <li><a href="/wiki/Wage" title="Wage">Wage</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%">Subfields</th><td class="navbox-list-with-group navbox-list navbox-even" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Behavioral_economics" title="Behavioral economics">Behavioral</a></li> <li><a href="/wiki/Business_economics" title="Business economics">Business</a></li> <li><a href="/wiki/Computational_economics" title="Computational economics">Computational</a></li> <li><a href="/wiki/Development_economics" title="Development economics">Development</a></li> <li><a href="/wiki/Statistical_decision_theory" class="mw-redirect" title="Statistical decision theory">Statistical decision theory</a></li> <li><a href="/wiki/Econometrics" title="Econometrics">Econometrics</a></li> <li><a href="/wiki/Engineering_economics" title="Engineering economics">Engineering economics</a></li> <li><a href="/wiki/Engineering_economics_(civil_engineering)" title="Engineering economics (civil engineering)">Civil engineering economics</a></li> <li><a href="/wiki/Evolutionary_economics" title="Evolutionary economics">Evolutionary</a></li> 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href="/wiki/Mathematical_optimization" title="Mathematical optimization">Optimization</a></li> <li><a href="/wiki/Welfare_economics" title="Welfare economics">Welfare</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%">See also</th><td class="navbox-list-with-group navbox-list navbox-odd" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Economics" title="Economics">Economics</a> <ul><li><a href="/wiki/Applied_economics" title="Applied economics">Applied</a></li></ul></li> <li><a href="/wiki/Macroeconomics" title="Macroeconomics">Macroeconomics</a></li> <li><a href="/wiki/Political_economy" title="Political economy">Political economy</a></li></ul> </div></td></tr><tr><td class="navbox-abovebelow" colspan="2"><div> <ul><li><span class="nowrap"><span class="noviewer" typeof="mw:File"><a href="/wiki/File:Emblem-money.svg" class="mw-file-description"><img alt="icon" 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