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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 could be argued 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.
ExamplesExcessive 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.
Corporate NarcissismCorporate narcissism is an brash sense of overconfidence that can occur within large firms or firms with a prestigious brand. Such firms tend to have an antagonistic relationship with customers, regulators and partners. Law of Expanding BureaucracyThe Law of Expanding Bureaucracy, also known as Parkinson's Law is the idea that bureaucracies tend to grow irrespective of the amount of work that needs to be done. Large firms with high revenue may expand their organization simply because they can afford it. Such expansions may add dubious value. |
Function | | Definition | Inefficiencies faced by large firms or government departments. | Related Techniques | |
Next: Economies Of Scale
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