Diseconomies Scale In Production Theory

Diseconomies Scale In Production Theory Diseconomies of scale occur when a company increases its production scale beyond the optimal point, so that the average cost of production rises. This can happen due to several factors such as: 1. Delay in decision-making and coordination: as the company gets bigger, the process of decision-making and coordination between departments becomes more complex and slower. This can lead to delays in the production and shipping processes, which in turn can increase production costs. 2. Management problem: the bigger the company, the more difficult it is to manage human resources, motivate employees, and ensure product quality. If management is not able to handle this problem properly, this can result in an increase in production costs. 3. Excessive production scale: if a company produces too many products or services, then there may not be enough demand to absorb them. This can result in inventory piling up and high storage costs, which in turn increase production costs. 4. Inadequate technology and infrastructure: the larger the company, the more difficult it is to update production technology and infrastructure. If companies are unable to keep up with technological developments or upgrade existing infrastructure, this can lead to decreased production efficiency and increased production costs. 5. Dependence on suppliers: the bigger the company, the more likely it is to depend on certain suppliers. If these suppliers cannot meet the company's demands at competitive prices, this can increase production costs. In order to overcome diseconomies of scale, companies must reconsider their organizational structure and management, and consider production strategies that are more efficient and more flexible. Companies must also update technology and infrastructure regularly, and consider working with suppliers who are more reliable and efficient. In addition, companies can also look for ways to solve the problem of delays in decision-making and coordination by strengthening communication between departments, speeding up decisionmaking processes, and adopting technology that facilitates work processes. Companies can also adopt product or service diversification strategies to reduce dependence on one particular product or market. This diversification can help companies avoid risk if one market or product experiences a decrease in demand. In dealing with diseconomies of scale, it is important for companies to continue to pay attention to production costs and periodically measure efficiency. In this way, companies can identify areas requiring improvement and adopt appropriate actions to increase efficiency and reduce production costs. In addition, companies can also look for ways to improve the quality of the workforce and strengthen a positive corporate culture. This can help increase employee motivation and engagement, so that they are more productive and efficient at work. Companies can also consider reducing costs by adopting more efficient and environmentally friendly technologies. For example, replacing older production machines with more energy efficient ones, or installing a waste management system to reduce waste management costs. Finally, companies can also consider outsourcing or cooperating with other parties to reduce production costs. In some cases, outsourcing can be more efficient than producing inhouse, especially if the company does not have sufficient resources or the required special skills. In facing diseconomies of scale, companies need to make the right decisions and adopt effective strategies to overcome these problems. In this way, companies can maintain profits and strengthen their position in the market. However, companies also need to be careful in adopting an outsourcing strategy, because outsourcing can be risky if not managed properly. For example, if outsourcing is done to a party that is not trusted or does not have the same quality standards as the company, then the quality of the products produced can decrease or even damage the company's reputation. Therefore, in adopting an outsourcing strategy, companies must ensure that the outsourced party has sufficient qualifications, the same quality standards as the company, and strict control processes to ensure good production results. In dealing with diseconomies of scale, companies also need to continuously monitor market conditions and changes in industry trends. Companies must strive to constantly update their technology and production strategies in order to remain competitive and efficient. Finally, companies also need to strengthen relationships with customers and build a strong brand to maintain customer loyalty and increase market share. In this way, the company can continue to grow and develop in the midst of increasingly fierce competition in the global market.