Diseconomies of Scale

• Diseconomies of 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