An economy of scale is a phenomenon where the average cost of production is quite low due to increased production of goods. Companies and organizations where manufacturing is implemented on a large scale and the average cost of production is quite low due to this mass production it is referred to as economies of scale.
Economies of scope on the other hand is dependent on producing different products in a single factory depending on the changing patterns in demand and without heavy investment in amendments and changes in the assembly line (McAuliffe, 1999). Chinese firms usually apply the model of mass manufacturing where economies of scale are best applied in several industries such as stationary, office supplies and paper. Automobile manufacturers now establish manufacturing plants where several types and models of automobiles can be manufactured depending on changing demand levels.
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