Survival of Small Firms

F&D Part 1: Chapter 9

What are some of the demand factors of small firms? [CCPLN}

• Consumer preference for individuality

• Personalised services

• Convenience

• Luxury items

• New industries

How does consumer preference for individuality increase DD for small firms?

Consumers may desire for goods that are not mass produced & are willing to pay slightly more for the exclusive product.

E.g. Works of art — painting, pottery etc. 

How does personalised services increase DD for small firms?

Consumers may have personal problems that can only be resolved through one on one, direct, individual attention. 

E.g. Dentists, doctors, psychologists

How does convenience for consumers increase DD for small firms?

Population it serves is small; allows consumers to have easy access to necessities they may need

E.g. Provision shops

How does luxury items increase DD for small firms?

These markets are limited by price, which is intentionally set high for restricted prestige markets to create an exclusive nature for the good.

E.g. Yachts, sports cars, high quality jewellery (Bulgari)

How does new industries increase DD for small firms?

Entrepreneurs need to test the market before producing on a large scale.

E.g. the digital watch

What are the supply factors of small firms? 

• Diseconomies of scale

• Entreprenurial choice

• Availability of fund & managerial expertise

• Government policies

How does dis-EOS increase SS for small firms?

At low output levels, dis-EOS will be experienced by small firms.

If MES occurs at low output levels, then the expansion of the firm will be limited by dis-EOS

How does government policies increase SS for small firms?

There may be incentives for small firms that will promote the development of small firms, allowing for small firms to receive more benefits.

How does entrepreneurial choice increase SS for small firms?

Small firms may be motivated by self employment or prestige, and value independence in making decisions for their own small firms without the influence of shareholders. 

Contentment with domestic market and is unwilling to take risks associated with foreign markets. 

How does availability of funds and managerial expertise increase SS for small firms?

Experience difficulty in obtaining loans from banks as banks only loan money to firms with greater collateral; limiting the size of the firm