Business Studies – 4.4.2 Economies and diseconomies of scale | e-Consult
4.4.2 Economies and diseconomies of scale (1 questions)
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Three factors contributing to diseconomies of scale are:
- Poor Communication: As an organisation grows, communication becomes more complex and time-consuming. Information can be distorted or delayed as it passes through multiple layers of management. For example, a large manufacturing company might struggle to disseminate important policy changes effectively, leading to inconsistent application and errors. This can result in wasted resources and reduced productivity.
- Lack of Commitment or Loyalty from Employees: Large organisations can foster a sense of detachment among employees. They may feel less valued and less invested in the company's success. This can lead to decreased motivation, higher levels of absenteeism and staff turnover. For instance, a multinational retail chain might see lower customer service standards due to a lack of loyalty among its store staff.
- Weak Coordination: Coordination becomes increasingly difficult in larger organisations with multiple departments and processes. Lack of effective coordination can lead to duplication of effort, conflicting goals, and delays in production. Consider a large construction company where poor coordination between the design, procurement, and building teams can result in costly rework and project overruns.