Honourable

In: Business and Management

Submitted By cadogan1
Words 559
Pages 3
"Even with all the cost advantages accruing to larger firms, there are some markets where they simply cannot compete".
Evaluate this statement.

Large firms have a greater chance of a more proportionate chance of receiving greater revenue, but in some markets larger firms cannot compete as they face problems like encountering diseconomies of scale.
Large firms cannot compete in some markets due to internal diseconomies of scale. This is because; wastage and loss can increase as materials might seem plentiful in supply. Bigger warehouses might lead to more things getting lost. Communication may also become more difficult as a firm grows, this in turn could affect staff morale. The main problem is that power is stretched out and the manager will perhaps not have enough control over what goes on.
Larger firms cannot compete in some markets due to external economies of scale. This is because as a whole industry gets bigger, the price of raw materials may increase as demand will be greater. Also buying large amounts of materials may not make them less expensive per unit. If local supplies aren’t sufficient, more goods from further afield will have to be brought increasing firms costs.
Large firms cannot compete in smaller markets whereby the demand for a certain type of good is generally lower. Larger firms will generally find it hard to maximise profit as the average cost to a firm making something is usually quite high if they don’t make many of the type of good, there for a large firm with larger labour forces will find it difficult to adapt to competing with smaller firms in a small market.
Large firms can compete in some markets due to purchasing economies of scale. This is the idea that large firms making lots of goods will need larger quantities of raw materials, so they have an ability to negotiate discounts with suppliers. This means that their costs will…...

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