<Li> Less risk: A company that sells many product lines, sells in many countries, or both will benefit from reduced risk (e.g., if a product line falls out of fashion or if one country has an economic slowdown, the company will likely be able to continue trading) </Li> <P> However, not all economists agree on the importance of economies of scope; some argue that the concept applies only to certain industries, and then only rarely . </P> <P> Economies of scope arise when businesses share centralized functions (such as finance or marketing) or when they form interrelationships at other points on the business process (e.g., cross-selling one product alongside another, using the outputs of one business as the inputs of another). </P> <P> Economies of scope served as the impetus behind the formation of large international conglomerates in the 1970s and 1980s, such as BTR and Hanson in the UK and ITT in the United States . These companies sought to apply their financial skills across a more diverse range of industries through economies of scope . In the 1990s, several conglomerates that "relied on cross-selling, thus reaping economies of scope by using the same people and systems to market many different products"--i.e., "selling the financial products of the one by using the sales teams of the other"--which was the logic behind the 1998 merger of Travelers Group and Citicorp . </P>

Economies of scope refer to cost savings that arise when the
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