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Can someone explain to me the difference between economies of scale and economies of scope in terms of production?

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تم إضافة السؤال من قبل Zain Khater , Project Supervisor – StartUp Project , Injaz
تاريخ النشر: 2016/12/06
Saad Ahmed Shaikh
من قبل Saad Ahmed Shaikh , Management Trainee , Motilal Oswal Financial Services Ltd

Economies of scale is when a firm produces products in such a volume so as to distribute its fixed cost of production over a large number of products making fixed cost nigligible, bringing overall cost of production down & overall cost becomes a function of only variable cost.

 

Economies of scope is an advantage an existing firm has over a new one when launching a new product, since existing firm already has distribution channel, customer base, supplier base etc in place.

Hope this helps.

Duncan Robertson
من قبل Duncan Robertson , Strategy Consultant , Duncan Robertson Consultancy

Economy of scale is when you do one thing a lot, and so the overall costs per unit are less.   This are various ways in which economy of scale can be achieved.  For example, fixed costs per unit of production are less because, no matter how many widgets you make, you still only need one CEO and do one kind of market research and train one set of workers. 

Economy of scope is when you achieve savings by producing different but related things.

For example, imagine a family bakery.  They can achieve economies of scale by making and selling more bread.  There will of course be costs associated with the extra bread, but they still need just one company auditor and one shop.   Economies of scope can be achieved by baking cakes during the day when the oven is not being used to make bread.  Unlike fresh bread, cakes will keep overnight and can be sold the next day.

Economies of scale and scope are both forms of efficiency.

FYAIZ MUSTAFA
من قبل FYAIZ MUSTAFA , Duty Manager Operations Control , BAYVIEW EDEN

I agree with my friend saad ahmed sheikh

Ahmed ibrahim
من قبل Ahmed ibrahim , Shift Supervisor , EL OLA steel

 

I think it's related to the new product

 

The product needs a new simple possibility starter product

This is the so-called economy of scale

 

In the case of good marketing and demand on the product

It must enumerate the potential user need in order to suffice

Conform to the needs of the market

  This so-called economy of scope 

 

 

Omar Saad Ibrahem Alhamadani
من قبل Omar Saad Ibrahem Alhamadani , Snr. HR & Finance Officer , Sarri Zawetta Company

Thanks 

I am sorry, this question is out of my specialty

Regards  

Ashraf E. Mahmoud (PhD)
من قبل Ashraf E. Mahmoud (PhD) , University Lecturer, Freelancer Consultant and Trainer for Int'l Business & Banking TF. , FreeLancer

Thanks for invitation,

Agree with Mr Saad Ahmed's reply.

osama faitor
من قبل osama faitor , مدير فرع , المصرف الزراعي

In follow-up

 

thanks for the invitation

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