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Diseconomies of Scale
Quick revise
Diseconomies od scale occur when firms become too large or inefficient
Average costs per unit start to rise
Types of diseconomy of scale can be seen below with examples
Communication
When firms grow there can be problems with communication
As the number of people in the firm increases it is hard to get the messages to the right people at the right time
In larger businesses it is often difficult for all staff to know what is happening
Coordination and control problems
As a business grows control of activities gets harder
As the firm gets bigger and new parts of the business are set up it is increasingly likely people will be working in different ways and this leads to problems with monitoring
Motivation
As businesses grow it is harder to make everyone feel as though they belong
Less contact between senior managers and employees so employees can feel less involved
Smaller businesses often have a better team environment which is lost when they grow