economies of scope

Economies of scope occur when a company reduces costs by producing multiple products together instead of separately. Essentially, by sharing resources, technologies, or processes across different product lines, the company becomes more efficient. For example, a bakery that makes both bread and pastries can use the same oven and staff, lowering overall costs compared to running two separate businesses. This synergy allows the company to expand its offerings while maintaining cost-effectiveness, creating a competitive advantage and potentially increasing profits through diversified production.