what is the difference between economies of scale and economies of scope? This is a topic that many people are looking for. newyorkcityvoices.org is a channel providing useful information about learning, life, digital marketing and online courses …. it will help you have an overview and solid multi-faceted knowledge . Today, newyorkcityvoices.org would like to introduce to you Economies of Scope. Following along are instructions in the video below:
“There here s a concept that sounds very similar to economies of scale. But is is actually called economies of scope. So what s the difference well firstly. What are of scope well this also involves a business experiencing a fall in unit costs.
But the reason why unit costs fall is because the business produces or supplies. A wider range of products rather than just specializing in in one product or service..
And this is why unit costs would fall because of this wider range of products. Let s just give you two or three examples to hopefully help explain how this works now for example. Why is it that amazon is highly efficient with very low unit costs for each product that it ships out from its warehouses well one of the reasons for this an important reason is that it offers a vast range of products from its warehouses. Therefore.
Spreading the cost of the warehouse capacity and machinery across a much wider range of products similarly a business like a large hotel complex. Rather than just selling rooms that people stay in overnight..
If it offers a wider range of products and services using its facilities for different uses for example. I don t conferences weddings speeches that kind of stuff that it s able to spread the costs the fixed cost of operating a hotel over a wider range of products and therefore economies of scope clicking to play and similarly this also works with businesses like procter gamble unilever. Heinz nestle. All the big multinationals who have large profit portfolios as that product portfolio gets wider and larger economies of scope arise.
Because some fixed cost gets spread over each of the individual products in the portfolio finally another way to think about this is the large hypermarkets. The supermarket s if it was just selling fruit and veg the costs..
The unit costs of fruit and veg will be would take into account all of the fixed cost of the supermarket. But because the hypermarket or the supermarket offers a while a range of products and services. Then the unit costs of selling those products and services can also be lowered. So this is what we mean by economies of scope.
It s very similar to the idea of economies of scale. But this is specifically where unit costs fall as a result of this wider range of products..
Hopefully. That s useful is an important term well worth remembering the difference between economies of scope. ” ..
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