Diseconomies of scale
A business can become so large that its unit costs begin to rise. Expanding firms can experience diseconomies of scale. Causes include:
- Ineffective communication. Coordinating large numbers of staff becomes a challenge. Big businesses can develop many levels of hierarchy which slow down communication or even lead to miscommunication.
- Reduced motivation. Staff can feel remote and unappreciated in a large organisation. When staff productivity begins to fall, unit costs begin to rise.