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Diseconomies of scale

Diseconomies of Scale

First imagine a fat person and a


normal person competing in a 100
metres sprint. Who would win?

VS

Diseconomies of Scale
The normal guy would win right? That is
because he is smaller and quicker theref
ore he got less weight to carry unlike the
fat
guy just like Diseconomies
scale.
Diseconomies
of scaleofare
factors

that increase
the unit costs as a firms scale of operation
increases beyond a certain size. These
diseconomies are related to the management
problems of trying to control and direct an
organization with many thousand workers, in many
separation divisions, often operating in several
different countries. Basically the business is too
big(too handsome). There are three main causes
of management problems.

Diseconomies of Scale
1) Communication problems
Large scale operations will often lead to:
Poor feedback to workers
Excessive use of non-personal
communication media which could be difficul
t for some people
Communication overload with the volume of
message being sent
Long chain of command

Diseconomies of Scale
2) Alienation of the work force
The bigger the organization, the more difficult it
is to directly involve every worker and to give
them a sense of purpose and achievement.
They may feel insignificant in the overall
business plan and become demotivated, failing
to do their best. Larger manufacturing firms are
the one that most likely to adopt flow-line
production and workforce alienation is a real
problem due to repetitive and boring tasks.

Diseconomies of Scale
3) Poor-coordination and slow decision-making
The problems for senior management are coordinate these operations and take rapid
decisions in such a complex organization.
Smaller business with much tighter control over
operations and much quicker and more flexible
decision-making may benefit from lower
average production costs as a result.

Business growth

Business growth

Why do businesses grow?


Increased profits
Increase market share
Increased economies of scale
Increased power and status of the
owners and directors
Reduced risk of being a takeover target

Business growth
There are two types of business growth:
Internal growth
Expansion of a business by means of opening new
branches, shops or factories. Also known as organi
c growth
External growth
Business expansion Achieved by means of
merging or taking over another business, from
either the same of different industry. This
included: horizontal integration, forward vertical
integration, backward vertical integration and
conglomerate integration.

Ansoffs matrix

SEE WHAT I
DID????

Ansoffs matrix
Ansoffs matrix is a model used to
analyse growth strategies. It suggests four
alternative marketing strategies which
hinge on whether products are new or
existing. They also focus on whether a
market is new or existing. Within each
strategy there is a differing level of risk.
Market penetration
The four strategies are:
Market development
Product development
Diversification.

Ansoffs matrix
Ansoff considered that the two main variables in a
strategic marketing decisions were:
The market in which the firm was going to
operate
The product(s) intended for sale
In terms of the market, managers have two
options:
To remain in the existing market
To enter new ones
In terms of the product, the two options are:
Selling existing products
Developing new ones

Ansoffs matrix
This is how Ansoffs matrix look like

Increasin
g
risk

Increasing risk

Ansoffs matrix

Market penetration : the objective of


achieving higher market shares in
existing markets with existing products
Product development: the
development and sale of new products
or development of existing product in
existing markets.
Market development: the strategy of
selling existing products in new
markets
Diversification: the process of selling
different, unrelated goods or services

TIME FOR SOME


You failed!!! just
QUIZES!!!!!!!
like
Liverpool
Identify and briefly explain all
the

failed
to win
diseconomies of scale main
causes
of the
Premier
managerial problem.
league!!!!!!!!!!!!
List at least four reasons why businesses
want to grow
Identify and explain all the Ansoffs matrix
strategies