Economies of scope arise when one or more of a diversified company's business units are able to realize cost-saving or differentiation advantages because it can more effectively pool, share, and utilize resources or capabilities.

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Economies of scope are a well-known concept in business, referring to the cost-saving advantages that can be achieved through the sharing of resources, capabilities, or activities across business units or product lines. This can include economies of scale, where the cost per unit decreases as the volume of production increases, but it can also encompass other kinds of benefits, such as reduced transaction costs, improved learning, increased flexibility, or enhanced brand reputation. Essentially, economies of scope enable a company to generate more value from its resource base by leveraging synergies and transferable competencies across different parts of the organization.

Economies of Scope Arise When One or More of a Diversified