Economies of Scope in Competitive benefit

Question

Explain about Economies of Scope in Competitive benefit.

Answer 1

Economies of Scope:

A Path to Competitive benefit: One of the most valuable competitive benefits that a related diversification strategy can generate is lower costs than competitors. Linked businesses frequently present opportunities to merge convinced value chain activities or use common resources and thereby eliminate prices. Such price savings are called economies of scope – an idea distinctly different from economies of scale. Economies of scale are price savings that accumulate directly from a larger-sized operation.

Economies of scope stalk directly from price-saving strategic fits along the value chains of linked businesses. Most generally, economies of scope are the outcome of two or more businesses distribution technology, performing R&D together, using allocation facilities or common manufacturing, sharing a dealer/ distributor network or common sales force, or using the similar well-known brand name and/or sharing the similar administrative infrastructure. The superior the economies associated with the cost-saving strategic fits, the superior the potential for a linked diversification strategy to yield a competitive benefit based on lower prices.