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Economies of scope

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Economies of scope is an economic theory that reflects the cost advantages a business can achieve by producing a wide variety of products instead of specializing in just one product or service. This concept is closely related to, but distinct from, economies of scale[1], which pertains to cost benefits gained from increasing production volume of a single product. Economies of scope are often demonstrated in industries with high joint costs, such as cable networks and airlines, where the same resources can be used to deliver different services. It plays a key role in natural monopolies and has significant implications for a company’s product design[2], response to market changes, cost predictability, and risk reduction. The theory contributes to overall economic efficiency and supports strategies such as mass customization and optimal cost structures.

Terms definitions
1. economies of scale. Economies of scale is a term used to describe the increased efficiency of production as the number of goods being produced increases. Typically, a company that achieves economies of scale lowers the average cost per unit through increased production because fixed costs are shared over an increased number of goods. Factors contributing to economies of scale include purchasing (bulk buying of materials through long-term contracts), managerial (increased specialization of managers), financial (obtaining lower-interest charges when borrowing from banks and having access to a greater range of financial instruments), marketing (spreading the cost of advertising over a greater range of output), and technological (taking advantage of the inverse relationship between the capital cost of the equipment and its size). It's important to note that economies of scale can also be enjoyed externally, for example, through the growth of an industry within a specific geographical area.
2. product design. Product design is a comprehensive process that involves generating ideas, evaluating them, and creating a tangible product. It includes stages such as analyzing the feasibility of the idea, developing the concept, and synthesizing the final product. This process makes extensive use of digital tools for communication, visualization, and 3D modeling. Two key aspects of product design are industrial and engineering design. Industrial design focuses on the form, usability, and mass production aspects while engineering design ensures functionality and problem-solving. Concept development and analysis are crucial stages where designers commit to the project, gather research materials, define the key issues, and set the project's objectives. Synthesis and prototyping involve brainstorming, selecting successful ideas, and building prototypes. Product design also embraces innovation, either by addressing market opportunities or through advancements in design ideas. Finally, designers should consider the end consumer's perception, creating products with personality and a compelling story.
Economies of scope (Wikipedia)

Economies of scope are "efficiencies formed by variety, not volume" (the latter concept is "economies of scale"). In economics, "economies" is synonymous with cost savings and "scope" is synonymous with broadening production/services through diversified products. Economies of scope is an economic theory stating that average total cost of production decrease as a result of increasing the number of different goods produced. For example, a gas station that sells gasoline can sell soda, milk, baked goods, etc. through their customer service representatives and thus gasoline companies achieve economies of scope.

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