Sources of diseconomies of scale

 A firm cannot continue to expand indefinitely or without a limit.As a firm grows or industry expands, the benefits the firm can reap or get from such growth or expansion have a limit.

Any further expansion in the scale of production beyond the limit will actually create negative which would increase the cost of production.

The negative effects to a firm due to its size or scale of production are referred to as diseconomies of scale.

Diseconomies of scale are therefore the problems a firm experiences due to expansion.

Sources of diseconomies of scale

Diseconomies of scale may arise from;

  • Managerial functions which become increasingly difficult to perform as the firm expands. Communication and consultations take more time than before.

  • Changing consumer tastes which may not be fulfilled immediately because decision-making may take too long.

  • Increase in the costs of transporting raw materials, components and finished products.

  • Labour unrest or disputes and lack of commitment from the employees because they are not involved in decision making

  • Stoppage of production process when disputes arise since all production stages are interdependent and labour specialized.

  • Lack of adequate finances for further expansion of the firm

RELATED POSTS

COMPARISON BETWEEN FISHING IN KENYA AND JAPAN

THE CONCEPT OF ENVIRONMENT, COMPONENTS OF ENVIRONMENT AND THE PROBLEM FACING ENVIRONMENT

Five (5) Advantages of questionnaire as data collection tool in research

5 DISADVANTAGES OF ROAD TRANSPORT

10 FACTORS THAT AFFECT OCEAN SALINITY

CAUSES AND EFFECTS OF OCEAN BREEZE AND SEA BREEZE

PLATE TECTONICS THEORY EXPLAINED

9 CHARACTERISTICS OF COMMERCIAL LIVESTOCK FARMING

Characteristics of tropical northern climate

12 FACTORS THAT FAVOURED THE ESTABLISHMENT OF THE ASWAN HIGH DAM PROJECT IN EGYPT

Comments

Post a Comment

Popular posts from this blog

5 TYPES OF HUMAN ACTIVITIES

Image
  Human activities are functions, tasks, or works done by human beings over time for achieving certain purposes. In total there are five types of human activities namely primary human activities, secondary human activities, tertiary human activities, quaternary human activities, and quinary human activities. These types of human activities together with their examples are going to be explained one by one below. The following are five types of human activities Primary human activities are human activities that involve extracting raw materials directly from the earth. Examples of primary activities are farming, fishing, lumbering, and livestock keeping. Secondary human activities these are human activities that involve the processing of raw materials into useful products. These activities involve converting raw materials into finished products and are mainly performed in urban areas. they accelerate the development of primary activities because they provide the market for products fr...
Read more

ROCK CYCLE - DEFINITION

Image
  Rock cycle is the cycle in which rocks tend to change from one type to another. For instance, igneous rocks may change to metamorphic rocks or sedimentary rocks ; sedimentary rocks to metamorphic or igneous rocks, etc. It is a relationship in which rocks tend to change from one type of rock to another.   Necessary conditions for rock cycle to take place 1. the molten rocks are erupted from the interior of the earth and then cool and solidify to form igneous rocks. 2. the igneous rocks are subjected to denudation process to form sedimentary rocks. 3. either igneous or sedimentary rocks undergo metamorphism, due to prolonged heat and pressure, to form metamorphic rocks. 4. metamorphic or igneous rocks can undergo weathering process through erosion and transportation of sediments which are further deposited in layers in the ocean or lake floors where they are cemented and consolidated to form sedimentary rocks and vice versa. 5. metamorphic or sedimentary rocks can be ...
Read more

WAYS OF OVERCOMING NEGOTIATION CHALLENGES

 Below are some of the strategies for handling negotiation challenges. 1. If the work load is increasing, one can look for tasks to eliminate, review the work he or she would hand him or herself, review the way to combine similar jobs or consider the use of temporary or part time help. 2. If the work load is declining, one can work on improving efficiency, do house keeping that has been postponed or start projects that could generate new work. 3. If there are problems of turnover, help employees identify with their group, try to develop stable work groups or review status implications in jobs. 4. If there is a group of employees who are controlling production, remove misunderstandings if there are any, find out if it is to the group’s advantage to slow down or find out and deal with the real problem. 5. If employees are dissatisfied with their pay, review bench mark jobs, i.e compare with similar jobs in other enterprises, compare with comparable jobs in the area, adjust assignment...
Read more