Economies of scope is a concept in economics and business that refers to the ability of a company to produce a wider variety of goods or services at a lower cost per unit by leveraging common resources or capabilities across different product lines or business units. This is in contrast to economies of scale, which refer to the cost advantages that a company can achieve by producing larger quantities of a single product.

Economies of scope arise when a company can use shared resources, such as production facilities, distribution channels, or technology, to produce a range of different products more efficiently than it could produce each of those products independently. By spreading fixed costs over a larger range of output, the company can achieve a lower average cost per unit and increase its profitability.

For example, a company that produces both shampoo and conditioner can use the same production facilities, packaging, and distribution channels to produce both products. This enables the company to spread its fixed costs over a larger range of output, resulting in a lower cost per unit for each product.

Economies of scope can also arise from shared capabilities, such as research and development or marketing. A company that has expertise in a particular technology or market can leverage that expertise across different product lines, reducing the overall cost of research and development or marketing for each product.

Overall, economies of scope enable companies to increase their competitiveness by offering a wider range of products or services at a lower cost, while also leveraging their core capabilities and resources more effectively.