Internal Diseconomies of Scale

• Coordination Difficulties:

  • There may be a loss of control by management as a firm grows, particularly firms that grow internationally. Increase in workloads for managers may lead to some loss of degree of control of their surbordinates.

  • Individuals are less likely to follow organisational policies if the level of control is reduce. This means they do not follow the company approach resulting in poor decisions
• Excessive bureaucracy:

  • As firms get larger, the number of levels of management increases and this may slow down decision making and add to the costs of production
• Technical diseconomies:

  • These occur where production on a very large scale becomes extremely difficult to organise as efficiently as smaller-scale production, and so average costs start to increase
• Less flexibility:

  • In a time of rapid change, flexibility is vital because customer needs are constantly changing. The structure of many large firms makes it difficult for them to adapt to change as quickly as smaller firms.