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cies than smaller plants, there's no guaranty that they actually will. In fact, increasin. size (scale) of a plant may actually reduce operating efficiency, as depicted in Figure Workers may feel alienated in a plant of massive proportions and feel little commitme productivity. Creativity may be stifled by rigid corporate structures and off-site ma ment. A large plant may also foster a sense of anonymity that induces workers to unde form. When these things happen, diseconomies of scale result. Microsoft tries to avoid diseconom

cies than smaller plants, there's no guaranty that they actually will. In fact, increasin. size (scale) of a plant may actually reduce operating efficiency, as depicted in Figure Workers may feel alienated in a plant of massive proportions and feel little commitme productivity. Creativity may be stifled by rigid corporate structures and off-site ma ment. A large plant may also foster a sense of anonymity that induces workers to unde form. When these things happen, diseconomies of scale result. Microsoft tries to avoid diseconom

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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### Diseconomies of Scale Although large plants may have the potential to achieve greater efficiencies than smaller ones, this does not guarantee they will. In fact, increasing the size (scale) of a plant can sometimes reduce operating efficiency, as illustrated in Figure 7.10c. Workers might feel alienated in a large-scale plant and demonstrate a lack of commitment to productivity. Creativity can be stifled by rigid corporate structures and off-site management, and large plants may foster a sense of anonymity, leading to underperformance by workers. When such issues occur, they can result in diseconomies of scale. Microsoft, for example, attempts to mitigate these inefficiencies by organizing its larger corporate structure into autonomous cells or "small plants" of no more than 35 employees. When evaluating long-term strategies, it is crucial to remember that efficiency and size do not always correlate. While some firms and industries may benefit from economies of scale, others may not. Thus, bigger isn't always better.
Transcribed Image Text:### Diseconomies of Scale Although large plants may have the potential to achieve greater efficiencies than smaller ones, this does not guarantee they will. In fact, increasing the size (scale) of a plant can sometimes reduce operating efficiency, as illustrated in Figure 7.10c. Workers might feel alienated in a large-scale plant and demonstrate a lack of commitment to productivity. Creativity can be stifled by rigid corporate structures and off-site management, and large plants may foster a sense of anonymity, leading to underperformance by workers. When such issues occur, they can result in diseconomies of scale. Microsoft, for example, attempts to mitigate these inefficiencies by organizing its larger corporate structure into autonomous cells or "small plants" of no more than 35 employees. When evaluating long-term strategies, it is crucial to remember that efficiency and size do not always correlate. While some firms and industries may benefit from economies of scale, others may not. Thus, bigger isn't always better.
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