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Economies of Scope

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The term economies of scope refers to employing the same management, staff and facilities to offer several products or services.

A business that is said to have economies of scope is able to reduce the per-unit cost of production and delivery of goods or services.

Economies of scope are often a reason for mergers. It may be that two separate companies could use the same management and sales teams to achieve the same revenues, thus increasing net income by eliminating the duplicate functions (reducing costs).

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