Disadvantages of Economies of Scale
1. Initial Investment: There may be massive initial investments in technology, infrastructure and labor personnel training that would have to be made if one wants to achieve economies of scale. This can act as a barrier for smaller businesses or use up the entire pool of financial resources available to it containing other strategic initiatives.
2. Complexity: Big organizations may be trying to manage complicated operations, and it can require some inefficiencies. The complications may slow down the decision process, hinder in communication and even fail to adjust while processing new market conditions.
3. Rigidity: Increased size may result in organizational rigidity that it becomes hard for the business to respond rapidly on market changes or deploy agile strategies. Rigidity subverts innovation and responsiveness, undermining the competitiveness of a company.
4. Diseconomies of Scale: Beyond a certain stage further growth we may find ourselves in diseconomies of scale where average costs increase. Diseconomies of scale that are experiencing creating limitations to the benefits of a scalable business may result in increased overall costs for the organization.
5. Technological Constraints: Some sectors may not be able to scale efficiencies because of technological barriers. In such cases, the full potential of cost savings through technological advancements may not be realized.
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