Question

Large firms often benefit from economies of scale because they can take advantage of the efficiencies of producing in large quantities. For example, they can use:

large pieces of machinery, which produce more efficiently, or purchase large quantities of inputs at volume discounts.

large banks, which offer lower interest rates. Small companies frequently do not have the ability to bank with a large bank.

elaborate management structures with many managers and directors in charge of a few employees.

cheaper ways to store products that they cannot sell. Large companies often over produce and look for large storage buildings.

Answer 1

Large firms always have the benefit due to economics of sale when compared to small firms because of the following reasons.

1) They are already having a brand image in the market where people will be buying good from that firm rather than a small business.

2) Due to this brand image banks will be willing to given them large amount of loans at a very low interest as banks think that these firms are having the capacity to repay the loan. Even if the large firms incur losses also they may not be shutting down due to their vast business capital and revenue.

3) Large firms will have large market structure as they are having some brand image even in foreign countries which these small firms does not have.

4) Large firms will have different services and products where the small firms are mostly producing a single service or product.

5) Public and government will trust that these large businesses will earn profits and they will buy their shares.

6) Large companies will produce large quantity and they store the excess quantity in the godowns. Where as small firms produce whatever they require. So rarely they will use large godowns. Even another problem large firms will have the capacity to pay more amount of the godowns charge also which small firms can't afford to pay that much.

tll these above factors help the large to gain upper hand than a small business.