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Diseconomies of scale are disadvantages faced by large organizations such as bureaucracy, heavy weight processes, inability to change and failure to innovate. It is often observed that companies tend to be less efficient, creative and responsive as they grow. This opens opportunities for smaller competitors who may eventually topple the larger firm's dominant position in a market. The term diseconomies of scale is also used to describe government departments that appear to have become dysfunctional due to their size. |
| Function | Economics | | Definition | Inefficiencies faced by large firms or government departments. | | Examples | Excessive confidence and hubris.
Failed initiatives of change.Bureaucracy and heavy weight processes.Failure to listen to critics, dissatisfied customers or warnings from regulators.Duplication of effort.Excessive office politics.Top heavy organizations with many middle managers who deliver questionable value.Lack of accountability for decisions.Big thinking resulting in needless complexity, overspending and overcapacity. | | Related Techniques | Economies Of ScaleEconomies Of ScopeResistance To Change |
Economics
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