Problems arising from Growth - Diseconomies of scale 3.2.1

Growth - A common corporate objective which means expanding the sales revenue of a business, probably in the hope that profits will increase too.

Diseconomies of scale - occurs when a business grows so large that the costs per unit increase. As output rises, it is not inevitable that unit costs will fall. (UNIT COSTS RISING AS WELL OUTPUT RISING)

When a business expands, they expect economies of scale, but are often shocked to find that they are outweighed by diseconomies.

Diseconomies of scale can occur due to:

1. POOR INTERNAL COMMUNICATION BETWEEN DIFFERENT DEPARTMENTS AND ALONG THE CHAIN OF COMMAND - the more layers there are in the business hierarchy and the wider the spans of control for managers, the greater the risks of workers receiving unclear instructions about what they are supposed to do.
2. POOR EMPLOYEE MOTIVATION - which is where workers can feel more isolated or alienated and less appreciated in a larger business so their loyalty and productivity may reduce - with less contact with managers, good team working may suffer and the quality of work will also suffer.
3. POOR MANAGERIAL COORDINATION - which is where it is harder to ensure workers are aiming to achieve the correct business goals as managers have less time to check on individual performance and concerns such as productivity, work quality and watsage of resources.