Unlike where
Economies of Scale involves
reduction of average cost with increase in production units of a single
product, Economies of Scope involves
reduction of average cost with increase in production of different variety of
products.
Product Multifariousness leads to cost savings because of
Economies of Scope. The scope for Economies of Scope is higher than Economies
of Scale because there is more capability of producing more variety of goods,
less risk involved, there is more control over the production, greater reliability.
Businesses, Organisations, Companies gets the opportunities of producing more
varieties of products, incurring less cost and earning more revenues.
One great
example of Economies of Scope is Sony.
Sony produces many varieties of products from smartphones to Blu-ray Disc to
Play Stations. The cost of producing these products are very low as because
there are varieties of products being manufactured by Sony.
So, Economies of Scope is the reason behind
Product Multifariousness which in
turn results in or leads to cost savings.
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