Why do firms seek to grow larger and are large firms in the public interest, Reasons for large firms are they better than small firms.
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Why do firms seek to grow larger and are large firms in the public interest, Reasons for large firms are they better than small firms. Firms seek to grow larger for many different reasons some of these reasons will benefit the firm others will benefit the consumers. The first reason is they want to own the most market share in whatever good they are selling preferably over 25%. They want to own this amount of market share (market segment) because then the government will then recognise this company as a monopoly, this is very good for any firm that wants to make big profits which is most of them. The advantages of a monopoly are the company can enjoy economies of scale this means cost of savings because of size-if you produce more you can save money because you can
This method is very similar to the copyright method, which prevents written things being copied. To stay large the company can use marketing barriers this means they spend a lot of money on advertising so the public goes and buys their product meaning chances of success for a smaller firm is very low because they don't have the money to compete. The main objectives of firms are: To maximise profit Survival Good quality service/products Maximise sales Satisficing- making enough to get by. If a firm can do this then they will be popular with the public. If the firm however, grows too big then it could suffer from diseconomies of scale this means that the company will have increased costs which is not good for any company.
Also if a firm is doing very well and it is quite large then it may expand and create more jobs this is another reason why larger firms are better than smaller firms. If they continue to do well they may buy out a smaller company to get rid of competition or to expand and own more of the market. They could build abroad and sell their goods there as well or finally they could conglomerate merge with another company to maximise profits and almost ensure survival in the present day economy. The only problem is if there is only one company in one area and it owns all of the market share then G.D.P will fall because there is not a lot of other companies working in that area. In other words they have to do all the producing in that area.
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