What is the main risk associated with diseconomies of scale?

The main risk associated with diseconomies of scale is rising operational costs. As a company grows and increases production, it can encounter inefficiencies that lead to higher costs per unit produced. This often occurs due to factors such as increased complexity in coordination, communication challenges, and diminished employee productivity. For instance, larger organizations may struggle with bureaucracy, leading to slower decision-making processes and wasted resources.

Additionally, logistical complexities can increase transportation and production expenses, as managing a more extensive supply chain often requires more resources. The balance of scale advantages can tip into disadvantages, resulting in increased prices that can affect competitiveness. Understanding this concept is crucial for businesses that aim to expand while maintaining efficiency and profitability.