Managerial Economics - Economies of Scope

ECONOMIES OF SCOPE Economies of orbit are conceptually similar to economies of subdue. Where economies of scale for a starchy primarily refers to reductions in average apostrophize (cost per unit) associated with change magnitude the scale of harvestion for a single carrefour type, economies of scope refers to lowering average cost for a firm producing two or more products. Generally speaking, economies of scale is intimately the benefits gained by the production of large volumes of a product, while economies of scope is linked to benefits gained by producing a wide variety of products by efficiently utilizing the corresponding operations. Economies of scope are present if it is cheaper for 1 firm to produce products jointly than it is for separate firms to produce the identical products independently (Browning & Zupan). Economies of scale has been known for long clock as a major factor in increasing profitability and contributing to a firms different financial and operational ratios. Mass productions of a mature, ensampleized product can apply the most efficient line-flow process and standard inputs for reducing the manufacturing cost (per unit). Mass manufacturing is also associated with a crucial market-share, and a tight supply-chain management (up to vertical integration with suppliers and retailers).

To apply the market-share, the market leader should come with continuous product improvements, so to sustain and avoid its dropping, following the products maturity in the Product Life-Cycle (PLC). Economies of scope is relatively a raw(a) approach to business strategy, and is heavily based on the exploitation of high technology. Economies of scope, as defined by using same processes for producing similar products, can fit the batch-flow or group-technology processes; nevertheless, for best results the flexible-manufacturing should be adopted. Economies of scope can be measured by as follows: Where C(Q1,Q2) is the cost of jointly producing goods A and B in the respective... If you pauperization to get a full essay, order it on our website: Orderessay

If you want to get a full essay, wisit our page: write my essay .