Explain two diseconomies of scale CC might experience as it expands.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2022). The mark or mark type is shown in brackets.

1. [1] Poor communication
2. [1] more layers of hierarchy for messages to be transmitted after the takeover of NM
3. [1] more likely to be distorted
4. [1] Lack of commitment from employees
5. [1] larger businesses may make employees feel unimportant as there are so many employees in the organisation
6. [1] lower or poor morale
7. [1] increased absenteeism or higher labour turnover
8. [1] increased average costs
9. [1] Weak coordination
10. [1] decisions may be taken by some managers in country X that do not fit well with other department decisions elsewhere in the business
11. [1] leading to a lack of efficiency
12. [1] Lack of control
13. [1] because a larger business may not have a close working relationship with all employees
14. [1] so some employees may not be motivated to work hard producing chocolates
15. [1] has higher unit costs from employing and training more supervisors
16. [1] Samuel Benefit: Many years of experience working for CC - worked for 20 years - 10 of which were as the Operations Manager - very familiar with CC production methods
17. [1] Samuel Benefit: Easier for the production methods used by CC to be transferred to NM as necessary, as he has a wide range of experience and training at CC – may be more efficient as profit margin higher for CC than NM
18. [1] Samuel Benefit: Familiar with all CC brands and the processes to make them
19. [1] Samuel Benefit: Established links with CC's existing suppliers of cocoa beans - useful for future orders and consistent quality of chocolates made
20. [1] Samuel Drawback: Lowest qualified of the two applicants
21. [1] Samuel Drawback: Not familiar with the market in country Z
22. [1] Samuel Drawback: Not familiar with the brands produced by NM and these are different to those of CC
23. [1] Samuel Drawback: Only had on-the-job training and this may be less effective than the external training for Ritesh
24. [1] Samuel Drawback: May not be happy to move to country Z as lives in country X
25. [1] Ritesh Benefit: The best qualified of the 2 managers already works in country Z so may be worth keeping as he will understand the new market and the company being taken over
26. [1] Ritesh Benefit: Experience of retail outlets in country Z and this may be useful to CC when distributing its own brands in country Z
27. [1] Ritesh Benefit: Experience of working for a competitor in country Z may be able to offer an insight into the competitor which may help CC be more competitive in country Z
28. [1] Ritesh Benefit: Already has links with suppliers for the chocolate ingredients in country Z which may be useful for CC when first establishing itself there
29. [1] Ritesh Benefit: Is already familiar with the employees at NM which could be useful for motivating them when they are being taken over
30. [1] Ritesh Drawback: Not worked for NM very long and therefore not very experienced in the way NM operates
31. [1] Ritesh Drawback: Not familiar with CC brands or the way of working at CC – production process may be different at CC
32. [1] Ritesh Drawback: May not be happy to work for CC and will not have worked with managers at CC - may be less efficient
33. [1] Ritesh Drawback: May be resistant to changes CC may introduce after the takeover
34. [1] Recommendation: Samuel should be Operations Manager at NM due to extensive CC experience and familiarity with CC production methods, potentially leading to fewer errors and higher efficiency.
35. [1] Recommendation: Ritesh should be Operations Manager at NM due to superior knowledge of NM's brands and the country Z market, local supplier links, and understanding of local employees, ensuring higher efficiency.