Existence of Small Firms is discussed below

Although there are number of advantages connected with the large-scale production, small firms can still exist side by side. The capability of these small firms to survive and compete against the larger firms can be explained as written below.

a) Personal/ Direct Service

The size of the business unit tends to be small if the work includes the provision of direct and personalised services such as those of doctors and the hairdressers.

b) Limited/ Localised Demand 

If demand is seasonal/ uncertain, small firms predominate. This also applies to commodities which are perishable or bulky which makes them impractical and not easy to transport regionally.

c) Capital and Expertise Requirement

Small firms find it much more difficult to secure finance and therefore, generally remain as a family business. The skill and efficiency of the owner enable it to continue to survive in the competition

d) Sub-Contracting/ Linking Industries

Small firms gives us essential components and services without which, the large firms cannot deliver the finished/refined product to the consumers.

e) Ability to Adapt

Small firms are able to adapt and evolve more readily to the changing tastes and choices of the customers and can make adjustment faster due to the easier organisational structure.