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Compare and contrast the relative competitiveness of small firms and large firms - Essay Example

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Large Firms and Small Firms Introduction The firms are classified into small, medium, and large firms according to the nature and size of the business conducted by them. Each level of the firms is defined differently in different countries taking the rules and regulations into account…
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Compare and contrast the relative competitiveness of small firms and large firms
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Download file to see previous pages However, there are numerous definitions for the firms among various economists; and researchers are still on their efforts to study more on the competitive factors between large firms and small firms. Small firms Small scale firms are privately owned and operated business undertakings, classified on their characteristics like small number of employees and lower turnover. They usually occupy only a tiny segment of the market place where they are operating. For the purpose of simplifying the accounting requirements, section 382 and 465 of the Companies Act 2006 defined the Small and Medium sized firms on the basis of the amount of business carried out by the company. They define, “a small company is one that has a turnover of not more than ?6.5 million, a balance sheet total of not more than ?3.26 million and not more than 50 employees” (Small and medium sized enterprises, 2011). Large firms Large firm is often considered as an economic cluster of large profit-making corporations who have the ability to directly influence the social and political policy. Large firms are usually identified on the basis of national ranking rather than their actual size. They have many advantages in the market which the small firms do not possess, such as the flexible pricing policies. They are capable of changing the price at frequent intervals. Rebecca Hellerstein and Pinelopi Goberg (cited by Derby, 2011) write that large firms are changing their products’ prices more frequently than the small firms do, and by smaller amounts. Competitiveness Competitiveness is a word having numerous definitions. Here we will take the business aspect of competitiveness into account. Chikan (2006, p.46) gives one of the most acceptable definitions and it says, “business competitiveness is a competence of the company that allows the company to provide products and services for customers within the standards of social responsibilities, that (i) are preferred to the products and services of other competitors and (ii) provide profit for the company” (ed. Reine, 2009, p. 179). Competitiveness is considered to be a multi-dimensional perception. This term has a three diverse but interconnected stages; firm, industry, and country level. And we are concentrating on the firm level competitiveness. As both firms are taken into consideration, growth is an important point and is a performance measure that gives and additional vision of the strength and competitiveness of the firms. Firms can benefit in many ways from the competitiveness, if exploited efficiently, which includes higher efficiency in the market, improved power, capacity to withstand the changes of environment, higher profits, and enlarged prestige for the firm. The competitiveness exists not only depending on the associationalism of firms but also determined by the alliance between the local businesses and governments. Not many other economic factors have gained attention as ‘competitiveness’ has done. Competitiveness is used often to deal with any aspect regarding the market performance. The most important factors affecting the competitiveness are, product quality, capability towards innovation, being able to adjust easily according to customers’ need. Price competitiveness As we talk about the price competitiveness between the small and large firms, the most disputed issue that comes to the surface is predatory pricing, a practice implemented by the large business firms, which offers massive discounts to the consumers. This ...Download file to see next pagesRead More
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