Small firms survive because: the market is small or local (village shops, salons); products are personalised; MES is low; flexibility and personal service; owners prefer independence; lack of access to finance limits growth; they serve niche markets; they supply larger firms (sub-contracting); government support for MSMEs.
Large firms exist because of economies of scale, high MES, the desire for market power, risk reduction through diversification and the ability to fund R&D.
🔒 Also in the full notes
7.7.2 Internal growth of firms: organic growth and diversification
7.7.3 External growth of firms: integration (mergers and takeovers)
7.7.4 Cartels
7.7.5 Principal–agent problem
Exam practice: 3 practice questions
4 exemplar 20-mark essays with full model answers, mark breakdowns and common mistakes