Economies of scope, an economic theory, highlights the cost benefits a company can reap by diversifying its product or service offerings rather than focusing on a single specialty. While it shares similarities with economies of scale[1] – a concept that deals with cost advantages stemming from increased production volume of a single item – they are fundamentally different. Industries such as cable networks and airlines, characterized by high joint costs, often exemplify economies of scope, as they utilize the same resources to provide diverse services. This theory is instrumental in natural monopolies and significantly impacts a business’s product design, market adaptability, cost predictability, and risk mitigation. Economies of scope enhance overall economic efficiency and underpin strategies like mass customization and optimal cost structures.
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. The business historian Alfred Chandler argued that economies of scope contributed to the rise of American business corporations during the 20th century.