Diseconomies of scope

Scope diseconomies occur when the production of a company as a whole is less than the production of each of the companies separately, each producing a single product (given some production factors).

This concept is contrary to the  economies of scope , since the goods produced do not have the same relationship or properties  and therefore, the same resources or machinery cannot be used for their production ( synergies ), as if the economies of scope do reducing the average cost of production. The diseconomies of scope therefore have a higher cost for all companies.

In some cases, economic theory says that scope diseconomies are very good for small businesses that have a significant degree of specialization and access to resources to produce. It is also important that they have a distribution and logistics network nearby that allows them to reduce costs and increase production to improve the level of sales.

It is important to note that there is no relationship between scope diseconomies and economies or diseconomies of scale, but it is no less true that there are economies of scalewhen large quantities are produced or vice versa.

Advantages of scope diseconomies

  • The diseconomies of scope that produce a good or service separately, know the tastes of its consumers about that good, being able to calculate their production expectations and the corresponding utility curves that allow improving the levels of efficiency and productivity of each company involved In each activity.
  • Out-of-scope diseconomies favor the SMEsector and the creation of local jobs since companies can separately access production resources close to the workplace and reduce costs whose margin can be invested in other business segments and new products, diversifying its business model, expanding more rapidly over time.

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