Critically examine the view that firms can continue to grow without experiencing diseconomies of scale.

      

Critically examine the view that firms can continue to grow without experiencing diseconomies of scale.

  

Answers


Lydia
Internal diseconomies of scale are normally assumed to be the result of management problems. For example:
• in a large organisation it can be difficult to co-ordinate the work of a whole range of different sections and therefore some workers may be underutilised
• large organisations often experience communication problems and therefore important information may get lost or delayed
• it is also difficult to keeping an eye on every worker in a large organisation and therefore slack may occur
• in large organisations industrial relations can deteriorate and worker morale can suffer which reduces productivity. It could be argued that advances in technology have made communications systems more effective and have made it easier for firms to keep an eye on staff to ensure slack does not occur.
Technology has also made it easier to produce detailed production plans to ensure that workers are fully utilised at all times. Improved management techniques should also help to maintain effective industrial relations which should in turn motivate staff and improve productivity.
The use of outsourcing also allows the firm to grow its output without experiencing the increased cost associated with employing additional workers/resources directly.
It has also been argued that the increased globalisation of markets has significantly reduced the significance of external diseconomies of scale.
However, experience would seem to suggest that when firms grow beyond a certain point they are likely to experience diseconomies of scale despite the impact of globalisation or the use of modern management techniques.
lydiajane74 answered the question on July 5, 2018 at 07:51


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