Strategy
Economies of scope
Cost falls when related products share resources.
Last reviewedWhat does Economies of scope mean?
Economies of scope mean it is cheaper to produce or sell several related products together than separately, because they share resources such as a brand, a sales force, a distribution network or a factory. They are one reason companies expand into adjacent products.
Where does it come up in case interview prep?
Related terms
- Economies of scaleCost per unit falls as volume rises.
- SynergyExtra value created when two businesses combine.
- Barriers to entryWhat makes it hard for new competitors to enter a market.
- Switching costsThe cost or effort for a customer to change supplier.
- Network effectsA product becomes more valuable as more people use it.
- Competitive advantageWhat lets a firm earn more than its rivals over time.
- Vertical integrationOwning more stages of your own supply chain.
- Horizontal integrationCombining with firms at the same stage, often competitors.