Economies of scope

Under the composite effect (English economies of scope ), including composite or composite yield advantage, the qualitative effect of individual simultaneously on several products related activities is understood on the cost functions of market participants. This means for example, that despite increasing product variety through a composite effect of synergies and cost benefits can be realized. Composite effects can be described as more efficient production through joint production of different products and the multiple use of resources. Economies of scope are present when two or more products can be jointly produced at lower cost than separate. The term also includes efficiency gains by increasing the power output width or depth.

On a practical example, the composite effect can be explained as follows: Produced she has a firm butter probably a cost advantage in the production of low-fat milk.

We distinguish basically two types of composite effects: bundling effects and chaining effects, which may each be of factual, spatial or temporal in nature.

Pooling effect

By bundling effect is when a horizontal bundling of product segments is. Therefore corresponds to an increase of the performance spectrum. This distinction can be made between

• Substantive bundling effect: bundling is advantageous by objective characteristics of activities. This is the case, for example, when joint products. This actually can be used as starting materials in another production process using unwanted by-products. Other examples include improved utilization due to additional production from other products on the same machine or economies of scale in research for products with related technology. Also in newspaper and magazine companies bundling effects can occur if once created or paid for several items, separated produced titles will be used.

• Spatial pooling effect: bundling is advantageous due to proximity of activities. This is the case, offer a telephone hotline for various companies, for example in call centers. Another example, the sharing of power and telephone lines or be the common carriage of passengers and cargo. To distinguish these different types of spatial bundling effects, can be created, after which they are characterized, firstly, by their mobility and on the other hand according to their proximity to the customer a schema. Thus, the call center is stationary and customer- away, the shared line also stationary but customer- and the common transport is carried out mobile and also customer-centric.
• Temporal pooling effect: bundling is advantageous by simultaneous execution of activities. This occurs, for example, in the mobile phone purchase including mobile phone contract. Here are two products are sold, thus saving distribution costs at the same time.

Chaining effect

By chaining effect is when a vertical chain of value creation stages. This therefore corresponds to an increase in the depth of performance. Here, you can distinguish between factual, spatial and temporal chaining effect analogously.

Requirements for composite effects

For the production of individual products shared resources ( production equipment, technologies, distribution channels, research departments, etc. ) can be used. Upon the failure as a consequence the total cost of production of a product program (ie product assortment ) is lower than the sum of the production costs of the individual products, with separate production, this is called composite positive effect. This can especially by not arbitrarily divisible input factors (especially in terms of public goods / resources, such as patents ) be due. Composite effects and resulting synergies are often cited as a reason for mergers, but they are, in many cases, if at all, only partially existent.

Risks

The possibilities of achieving cost savings is the danger of composite disadvantages ( diseconomies of scope), for example, due to possible increasing transaction costs of large companies, across.