Business Studies: Diseconomies of Scale

Diseconomies of Scale

This it what happens when a firm becomes too large.

Diseconomies of scale causes problems of:

• Communication
• Coordination
• Control
• Low morale of workers.

Although there are benefits to being big, not all firms are. This is because:

• The total market might be small.
• The market may just be local.
• Some services require personal attention (eg hairdressing), and if you're too big you lose the personal touch.
• The market may be specialist.
• The owner wants to keep control.
• Lack of money to expand.