Diseconomics of scale occurs when the long-term average cost of an organization increases. It can occur when the tissue becomes excessively large. In other words, uneconomics of Scale Causes larger org-anizations to produce goods and services at increased costs.
There are two types of scale diseconomies: internal diseconomies and external diseconomies, which are discussed as follows:
i.Internal uneconomics of the scale:
See uneconomical raising the cost of production in the organization. The main factors affecting the cost of production of the organization include the lack of determination, supervision and technical difficulties.
ii.External uneconomics of the scale:
See uneconomical to limit the expansion of an organization or industry. Factors acting as restraints on expansion include increased production costs, a shortage of raw materials and a decline in the supply of skilled workers.
Causes of diseconomics of scale.
Some of the causes that lead to uneconomics of scale are:
i.Act as the main reason for diseconomics of scale.
If the organization’s production goals and objectives are not properly communicated to employees in the organization, they can lead to overproduction or production. Therefore, this can lead to diseconomics of scale.
Separately, if the communication process in the organization is not strong, then the employee will not get enough feedback. As a result, there will be less face-to-face interaction between employees, which will affect the production process.
ii.Lack of motivation:
This leads to a decrease in productivity levels. For large organizations, workers may feel isolated and less motivated because they are less valued for their work. Because of poor communication networks, it is difficult for employers to interact with employees and build a sense of attributes. This leads to a decrease in the productivity level of output due to lack of motivation. This further leads to an increase in the cost of the organization.
iii.Loss of control:
It serves as the main problem of large organizations. Monitoring and controlling the work of all employees in a large organization becomes impossible and expensive. It is difficult to make sure that all employees of the organization are working towards the same goal. It becomes difficult for managers to direct the sub-coordinates of large organizations.
iv.Cannibalism:
It means a situation where an organization is facing competition from its products. While smaller organizations face competition from the products of other organizations, larger organizations find their products compete with each other.
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