Range Economies Concept

Range economies represent earnings that the organizations obtain resultant from the recovery of synergies among resources and/or activities. For example, in different lines of products or services produced and/or commercialized by the organization that can use the same resources occur earnings associated to a bigger costs dilution. The case of the financial clusters formed in Portugal after the opening of the sector to the private initiative in 1985, using the same distribution channels (bank counters) for the commercialization of the different financial products (bank products, financial applications, insurances, leasing, factoring, consumer loans, etc), are a good example of the synergies recovery and consequent range economies.

As a way to be able to explore all of the range economies potential, the organization should, in first place, identify the several possible uses for the resources (commercials, technological, or others) that have available. It’s, however, necessary to have in attention that a too strong increase of the operations diversity can originate complexity costs, whose can on its turn cancel earnings resulting from the range economies.

 

 

Translated from Portuguese by Susana Saraiva, Portuguese-English and English-Portuguese translation specialist. Contact: spams@sapo.pt.