CIMA BA1 Syllabus B. Microeconomic And Organisational Context Of Business - Diseconomies of scale - Notes ^{2 / 9}

= rising cost per unit

Reasons for Internal diseconomies of scale are:

• Chains of command may become too long, and management will become too remote and lose control over operations.

• Morale and motivation amongst staff may deteriorate in large firms and there may be conflicts between different departments.

• There may be increased levels of bureaucracy.

External diseconomies of scale

There may also be external diseconomies of scale which affect all firms in an industry as the industry grows. 

For example, if a shortage of materials or labour occurs (due to high levels of demand across the industry) then this might lead to higher raw material and labour costs.