Question

What is the difference between economies of scale and economies of scope? Suppose Nike’s managers were considering expanding into producing sports beverages. Why might the company decide to do this under the Nike brand name?

Answer 1

Economies of scale and scope are different where economies of scope tells that reduction in average total cost with increase in the variety of goods while economies of scale tells the decrease in the average cost at higher levels of production of the same good. Mike manages can get to do it under the Nike name because it is already having an established brand value as a result of which people can get to buy the product even the cost is high due to the loyals it had as a result of which the profitability increases all in all.