Sample Essay

The reason as to why the larger firms are more beneficial in terms of economies of scale is due to the fact that the smaller firms are unable to avail the economies of scale. They are dynamic in nature and can rapidly adapt to the changing environments but they do not have the marketing capability or the distribution network required to carry out operations like the larger firms.

Moreover when it comes to raising funds, large firms are much easily able to generate finance for their operations while the smaller firms have to face stress continuous inquisitions by the banks, higher interest rates and even in some cases rejection from loans. In order to benefit from the economies of large scale available to larger firms, the smaller firms have started collaborating with the larger firms.

The smaller firms however have been looking for methods of surviving with the larger firms n the same market. For this purpose they have started forming partnerships and strategic alliances with the larger firms to benefit from some of the advantages that are experienced by the large firms.

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