Flexibility: small firms can adapt to change more quickly
Personal service: As firms get bigger, it becomes difficult to offer customers an individual personal service. Some people prefer to deal with the owner of a firm directly to get more personal service
Lower wage costs: Workers in small firm do not belong to trade union=> negotiation power is weaker and the owners are able to restrict pay to minimum wage
Better communication: small firms have fewer employees, the owner will be in close contact with all staff, can exchange information quicker and more efficiently
Innovation: small firms face competitive pressure to innovate
Higher cost: small firms cannot exploit economies of scale because their output is limited=> their average costs will be higher than larger rivals
Lack of finance: small firms often struggle to raise finance. Their choice of sources is limited
Difficult attracting quality staff: small firms may find it difficult to attract high qualified and experienced staff e.g. they may not be able to afford the wages or training that high quality employees require
Vulnerability: When trade conditions become challenging, small firms may find it difficult to survive than large rival. They might be at risk of takeovers
Economies of scale: average costs are likely to be lower than those of smaller rivals. They can operate in large-scale plants and exploit economies of scale
Market domination: large firm can often dominate a market. They have a higher profile in the public eye than small firms and benefit from such recognition
Large scale contracts: only large firms can win the contracts because small firms do not have the resources to carry out the work
Too bureaucratic: large firms become overwhelmed by their administration systems. Too many resources may be used up in administration. Communication channels may be too long and too many managers may be employed
Coordination and control: large business may be difficult to control and coordinate. There may be a need for more supervision that will raise costs
Poor motivation: in large organisations, people can become alienated. Personal contact between employees in large organisations may be lacking and this can result in poor worker motivation
Size of the market: some markets are too small to sustain very large companies
Nature of the market: in some markets, such as hairdressing, painting and taxi driving, the set up costs are relatively low. There is little to discourage new businesses joining the market. Also, in some markets, business serve a particular market niche
Lack of finance: some businesses would like to grow but they are not able to raise the finance need to expand
Aims of the entrepreneur: some owners do not want to grow their businesses. They may be happy running a small business. They may be making enough profit to satisfy their needs and do not want the responsibility of taking on more workers
Diseconomies of scales: Once a firm reaches a certain size, any further growth results in diseconomies of scale and average costs start to rise
As firms get bigger, it becomes difficult to offer customers an individual personal service. Some people prefer to deal with the owner of a firm directly to get more personal service.
Lower wage costs (较低的工资成本)
Workers in small firm do not belong to trade union=> negotiation power is weaker and the owners are able to restrict pay to minimum wage
better communication
small firms have fewer employees, the owner will be in close contact with all staff, and can exchange information quicker and more efficiently.
innovation
small firms face competitive pressure to innovate.
small firm advantages
flexibility
personal service
lower wage costs
better communication
innovation
high cost
small firms cannot exploit economies of scale because their output is limited=> their average costs will be higher than larger rivals
lack of finance
small firms often struggle to raise finance. Their choice of sources is limited.
difficult attracting quality staff
small firms may find it difficult to attract high qualified and experienced staff e.g. they may not be able to afford the wages or training that high quality employees require.
vulnerability
When trade conditions become challenging, small firms may find it difficult to survive than large rival. They might be at risk of takeovers.
disadvantages of small firms
high cost
lack of finance
difficult in attracting quality staff
vulnerability
large firm advantages: economies of scale
average costs are likely to be lower than those of smaller rivals. They can operate in large-scale plants and exploit economies of scale
large firm advantages: market domination
large firm can often dominate a market. They have a higher profile in the public eye than small firms and benefit from such recognition.
large firm advantages: large scale contracts
only large firms can win the contracts because small firms do not have the resources to carry out the work.
large firm disadvantages: too bureaucratic
large firms become overwhelmed by their administration systems. Too many resources may be used up in administration. Communication channels may be too long and too many managers may be employed.
large firm disadvantages: coordination and control
large businesses may be difficult to control and coordinate. There may be a need for more supervision that will raise costs.
large firm disadvantages: poor motivation
in large organisations, people can become alienated.Personal contact between employees in large organisations may be lacking and this can result in poor worker motivation.
factors influencing the growth of firms: government regulation
competition will encourage innovation, improve efficiency. Consequently, the government will monitor business activity and ensure that individual markets are not dominated. The government may sometimes prevent the growth of firms to stop them becoming too big. They can do this by blocking mergers and takeovers which threaten to reduce competition.
factors influencing the growth of firms: access to finance
business need finance to grow, they need money to make acquisition, build new factories
factors influencing the growth of firms: economies of scale
as a firm grows, average costs will fall because it is possible to enjoy economies of scale.
factors influencing the growth of firms: the desire to spread risk
risk can be reduced by diversifying selling into new markets and developing new products means if one venture fails, success in others can keep the firm going.
factors influencing the growth of firms: the desire to take over competitors
takes over rivals in the market. This is a quick way of growing and helps to reduce competition
reasons firms stay small: size of the market
some markets are too small to sustain very large companies. E.g. market for luxury yachts is limited, only a relatively small number of very wealthy people can afford to a buy a luxury yacht.
reason firms stays small: nature of the market
some markets are too small to sustain very large companies. E.g. market for luxury yachts is limited, only a relatively small number of very wealthy people can afford to a buy a luxury yacht.
reasons firms stay small: lack of finance
some businesses would like to grow but they are not able to raise the finance need to expand.
reasons firms stays small: aims of the entrepreneur
some owners do not want to grow their businesses. They may be happy running a small business. They may be making enough profit to satisfy their needs and do not want the responsibility of taking on more workers.
reasons firms stays small: diseconomies of scale
Once a firm reaches a certain size, any further growth results in diseconomies of scale and average costs start to rise.