Growth and sustained development remain the key drivers of firms’ activities within their industries. However, growth patterns may vary, reflecting different objectives and aspirations of specific organizations. In this regard, it is vital to obtain a profound understanding of the differences between economies of scale and economies of scope. Both notions are applied to the growth of a business through merger agreements or acquisitions of other entities. The differences reveal themselves during a closer examination of the purposes and objectives of such actions. In the case of economies of scale, the emphasis is laid on the increased production of an already popular product (Froeb, 2018). For example, two car manufacturers may form an alliance to produce their vehicles with a higher capacity and productivity, improving each entity’s positions on the global market. The economies of scope rely on mergers and acquisitions to diversify their portfolios of products of services. Facebook was a leading social network that acquired Instagram and WhatsApp to enter the sectors of photography-based media and messengers.
The case of the merger of Strayer University and Capella University pertains in the economy-of-scale category. Both entities are institutions of higher education that decided to form a united organization and solidify their market positions as for-profit institutions. This way, the new entity encompasses a broader range of stakeholders, utilizing the benefits of both universities and contributing to their resilience at the age of uncertainty.
I agree with the presented differentiation between economies of scope and economies of scale. These are two distinct models of business in the contemporary environment, providing companies with an array of benefits when chosen correctly. Today, the competitive landscape of most industries has become highly intense, which often poses major challenges for even the strongest organizations. Through the specified actions, they are capable of withstanding these challenges either through efficiency optimization or diverse scope of the business. I found your examples highly illustrative, as they clearly outline the key differences between economies of scope and scale. I am convinced that an in-depth understanding of these principles is required for managers of all levels. They are to become essential elements of strategic planning in today’s increasingly competitive environment.
Reference
Froeb, L. M., McCann, B. T., Ward, M. R., & Shor, M. (2018). Managerial economics: A problem solving approach (5th ed.). Cengage.