Diseconomies Of Scale - GCSE Business Definition

Diseconomies of scale occur when a business grows beyond an optimal size and its costs per unit start to increase.

This happens because, as businesses expand, they can face challenges such as communication breakdowns, management inefficiency and increased complexity in operations. These issues can lead to production processes becoming less efficient, causing the cost to produce each unit to rise.

It's important to understand that while growth can lead to advantages such as economies of scale, growing too much or too quickly without proper management can result in diseconomies of scale, which negatively impact profitability.