Economies of scope refer to cost reductions that are achieved by related businesses in a multibusiness corporation that share common activities such as manufacturing, distribution, or marketing. By sharing costs across businesses, the company can achieve lower costs than if each business operated independently. This is known as cost-saving strategic fit along the value chains of related businesses.

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Economies of Scope

Question 33

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Economies of scope

A) are cost reductions that flow from cost-saving strategic fits along the value chains of related businesses in the business lineup of a multibusiness corporation.
B) arise only from strategic fit relationships in the production portions of the value chains of sister businesses.
C) are more associated with unrelated diversification than related diversification.
D) are present whenever diversification satisfies the attractiveness test and the cost-of-entry test.
E) arise mainly from strategic fit relationships in the distribution portions of the value chains of unrelated businesses.

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