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Long-Term Survival of Small Firms

Question

Discuss whether or not small firms are likely to survive in the long run.

Category:

Firm Behavior and Strategies

[CIE O level]

Preview Answer


Step 1 : Introduction


In every economy, there are firms of different sizes, most of which compete with each other. Several factors should be taken into consideration when determining whether small firms can survive in the long run.


Step 2: Discuss how small firms are more likely to survive in the long run.


There are several reasons why small firms are likely to survive in the long run.

➤ 2.1 Small firms may produce specialised products.

For example, small grocery stores have to find a way to compete with supermarkets and they do so by providing a range of goods which cannot be bought in a supermarket, such as speciality cheeses and wines.

➤ 2.2 The firm may be a local monopoly in a good location and may not face competition in the area.

For example, a small grocery store may be located in a remote area and be the only local seller of provisions.

➤ 2.3 Small firms may provide a personal service and may have greater contact with their customers.

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