Can u achieve economies of scale through diversification?

Question

Can u achieve economies of scale through diversification?

Answer 1

Yes you can do that and it is a preferred way of doing things.

Answer 2

The main object of diversification is to "not put all eggs in the same basket". It is more to protect the future recession of a particular trade which the company is now in than to achieve an economy of scales. However, Most of the times, companies find a newer trade to be in; preferably with higher return deploying lower investments; thus achieving a better economy thereby.

Economies of scales is therefore secondary in case of diversification, though a main target.