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Chapter 13 Small Firms

The document discusses barriers to growth for small firms, including limited finance, small market size, and owner reluctance to expand. It also outlines methods of survival for small firms, such as lower capital requirements, personal services, flexibility, government assistance, and better labor relations. These factors contribute to the persistence and adaptability of small firms in the economy.

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54 views1 page

Chapter 13 Small Firms

The document discusses barriers to growth for small firms, including limited finance, small market size, and owner reluctance to expand. It also outlines methods of survival for small firms, such as lower capital requirements, personal services, flexibility, government assistance, and better labor relations. These factors contribute to the persistence and adaptability of small firms in the economy.

Uploaded by

suyeebnayeem
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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ABU NAYEEM MOHAMMED SUYEEB

CONTACT: 01752408560, 01857175686

CHAPTER 13 SMALL FIRMS


Barriers to growth
• Limited sources of finance: While it is cheap and easy to set up a small firm, more
finance is required in order to increase in size. A large number of firms remain small
because of lack of finance, which prevents them from growing.
• Size of the market: The markets for certain products may be small, for example, where
consumers demand a wide variety of patterns, styles, and designs. In these cases, there
is a very limited demand for a particular style or model, and mass production is not
required. Small firms are better suited to adapt to consumer demand.
• Choice of the owner: A firm with growth potential may remain small because its owner
is reluctant to expand the size of his business. This could be because he is satisfied with
the level of income and is not willing to deal with the risks associated with growth.

Methods of Survival
• Less capital required: It is relatively cheap and easy to set up a small firm. A person
wishing to start a business can use his personal savings, and borrow from friends
and family if required.
• Personal services: Industries which provides personal services usually consist of a
large number of small firms. Hairdressers, tailors, or family doctors pay personal
attentions to their clients, and as a result the size of these firms are small.
• Flexibility: Small firms are much more flexible, and can adapt much better chances in
the economy, or in the demand pattern. This accounts for the survival of a large
number of small firms.
• Government assistance: Small firms can benefit the economy in different ways, and
therefore they receive help from the government in the form of subsidies, tax
incentives and grants.
• Better labour relations: Small firms have better labour relations than large firms, and
therefore there are less strikes. The owner of a small firm will usually have a more
personal relationship with his employees, and is therefore better equipped to
discuss and resolve any difficulties.

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