explain fully ,despite the presence economies of scale , certain firms prefer to remain small



  1. 0 Votes

    It depends on what’s being “scaled”.

    I shop at my local grocery instead of Safeway because I know the owner, we stop and chat. Sometimes he tells me about food, or uses of food that I don’t know about. He sells “day old” bread at 2-for-1, so sometimes he’s vastly cheaper than Safeway.

    Sometimes I chat with the other customers.

    I know he needs the money, whereas Safeway does not.

    The time I forgot my wallet, he just told me to pay next time. And I know he’s loaned money to other customers who can’t afford food.

    So the “economy of scale”? I can go to a not-so-great market like Safeway, not have a good time, and not really save much money. Alternatively I can go to Whole Foods, where it’s pleasant and the food is good, but then I have to dress up, drive further, and the food is usually much more expensive.

    The same sort of thing is true for many types of businesses, although the advantages differ.

    So the answer is there’s only “economy” if the only thing being considered is how much money you pay. And sometimes, not even then.

    And then there’s the issue of local business. If I buy from my local grocer, there’s a good chance he’ll buy from me (if I owned a store). So the money stays in the community, between friends, instead of being shipped off to Safeway investors.

  2. 0 Votes

    I believe it may have to do with a few things. With a larger business, like a corporation, you have much more on your plate as an owner. You must worry about more employees, more locations, more clients, and just more of everything. Some people prefer to keep their businesses small because it’s what they feel they can manage and stay afloat in the market. Also, being the boss of a huge business demands more of your time, and some people like to have time to themselves and their families. Another reason could be that they don’t feel they can compete at a higher level in business, and prefer their niche to make their money instead of risking competition with a larger rival. Dealing locally also gives some folks a sense of pride, and don’t feel like they’ve sold out.

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