Diseconomies Of Scale
Diseconomies Of Scale
Growth brings with it the risk of diseconomies of scale.
Growth can lead to increase an average unit costs. For example;
1. The bigger the firm, the harder and more expensive it is to manager properly.
2. Bigger firms have more people so it can be harder to communicate within the company. Decisions take time to reach the whole workforce, and workers at the bottom of the hierarchy feel insignificant. Workers can get demotivated, which may cause productivity to go down.
4. The production process may become more complex and more difficult to co-ordinate.