Optimal Size Of A Firm

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Term Paper Title	Optimal Size Of A Firm
# of Words	819
# of Pages (250 words per page double spaced)	3.28

Optimal Size Of A Firm

Optimal Size Of A Firm

     The optimum size of a firm is a very subjective idea. The ways in which
size can help or hinder a firm vary from which angle you a looking at the
situation from. Size can have its benefits and its drawbacks, and each firm will
have its own benefits and drawbacks that come from either increasing in size, or
remaining small, and these will depend on the market in which the firm is in,
the current economy, and in some cases the preferences of the manager(s).

     For example a small firm may be small for many reasons. It may be small
because it has just started out in business, and still has relatively little
funds, so although the owner/manager may have aspirations of the business
growing, at the present time, his main concern would be keeping the business
afloat. Another small business may stay small due to the preference of the
manager/owner, for example a corner newsagent's shop may remain a small retail
business as the owner is making a profit from the business that he finds
acceptable, and does not want the hassle of either expanding his current
business, setting up new shops, or taking over another business.

     The size of a business does however depend a great deal on the market
which it is in. For example a business which makes specialist goods, or caters
to only a very small number of people, will not be able to grow beyond the
capacity of that market. This means that the optimum size for a business in a
market with little growth and only a small number of prospective customers would
be large enough to serve as many customers as it had market share for, but small
enough to ensure that they don't over produce.

     If there is a fairly large market for the product/service that a company
is providing, then there is likely to be a large amount of competition in the
market. This means that it would be fairly hard for the company to grow in that
market unless they did one of three things. Firstly they could come up with a
better and cheaper product then the rest of  their competitors, if their
customers noticed this then the customers would choose their product over their
competitors, leading to growth in the company (although internal growth can be
one of the slowest, and sometimes one of the most costly methods of growth).
Secondly the company could invest money into giving themselves a recognisable
brand name, although this can be a costly procedure, and can take a great ...

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