Large scale production also suffers from limitations. The following are some of the disadvantages or demerits of large scale production:
Disadvantages or Demerits of Large Scale production
1. Problems in coordination: When a business grows beyond a particular size, problems arise in co-ordination. There would be multiple divisions and departments. Coordination of all their activities would prove to be difficult.
2. Difficulties in supervision: Supervision is a difficult task in large scale enterprises. The number of workers, tasks and areas of operations are many. Lack of effective supervision, might lead to inefficiencies, thefts, wastage of resources etc.
3. Loss of control: In large scale units the organization would find it difficult to exercise control. It might lose control of operations. Loss of control might lead to slackness among workers, poor work culture, wastage, customer dissatisfaction etc.
4. Lack of customization: In large scale production, standardized goods are produced in large quantities. Goods cannot be produced according to specific needs of individual customers. There is lack of customization. This might lead to customer dissatisfaction and loss of customers.
5. Luck of close customer contact: In a large scale business, the owner and the customers are miles apart. It would not be possible for the owner to meet, interact and understand customer needs. Some other competitor who is able to understand and satisfy customers would be able to overthrow the large scale producer.
6. Industrial disputes: The personal touch and contact between the employer and his employees is missing in large scale units. There is scope for misunderstanding in various issues. This might lead to grievances and finally to strikes and lockouts. The motivation level of employees declines which results in poor performance.
7. Excess supply: Large scale production might lead to a situation where production is more than the demand. Excess supply would result in unsold stocks. The organization would have to offer huge discounts to dispose of them. This affects profitability and may sometimes result in losses.
8. Dependence on exports: Large scale producers have to depend on export markets to sell their products. In case of wars or civil disturbances, exports would not be possible. For e.g. after the break up of USSR, many Indian companies which were exporting products to the USSR suffered losses.
9. Wasteful expenditure: Large scale producers spend heavily on advertisements and sales promotion measures to sell their products. In some cases, advertisement and sales promotion expenses are more than the cost of production itself(e.g. soft drinks).
10. International conflicts and wars: Competition between large scale firms might even lead to wars. Modern wars are fought for control of resources and markets. It was widely rumored that the US invaded Iraq to ensure orders for its arms manufacturers and construction companies.
11. Lack of flexibility: A large business finds it difficult to adapt itself to changing circumstances. It cannot switch easily from one business to another. Its machines, systems and processes are designed to produce a particular product or service. For e.g. Metal Box, a famous company once in India, which was manufacturing metal containers was not able to survive the competition from plastic and had to close down.
12. High risk: Large firms invest huge amounts of money in their projects. In case.there are sudden changes in technology, customer tastes or government rules, the losses would be very high. It might even threaten the survival of the business.