1. How can a firm determine whether it has grown too large? That is, diseconomies of scale dominate economies of scale, or the firm's competitive position erodes. Erosion of competitive position - Increase in relative unit costs - need to be able to measure units of output and average costs - Decline in relative profitability - operating margins, return on assets, return on equity - Decline in market share - requires being able to determine market and measure size of market - Decline in relative share price Economies of scale - Need to separate internal from external economies Diseconomies of scale - Need to separate out increases in prices of inputs, including what is supplied through outsourcing, from average productivity levels - need to be able to measure units of output and units of inputs - Need for additional level of "supervisors" - Increasing number of cases of miscommunication as information has to move both up and down through a company - Increase turnover of labor force