To leave a legacy for their dependents and perhaps to establish a dynasty.Reasons for success are harder to pin down, but include:
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Module 2881 Industrial EconomicsUnit 4: “The Theory of Production & Costs”
4-1. THE GROWTH OF FIRMSThe Birth of Firms
Firms usually start small, often as a one-person concern or a family concern.According to Barclays Bank, some 465,000 new firms started up in 2003 alone. Sadly,many of these are doomed to fail. According to government statistics, in 1997, the business survival rate for new firms was only 65.1 per cent after three years; one thirdhad disappeared in that period. About half of these close down voluntarily, and about athird sell the business to another firm.In many cases they are undercapitalised, and the firm simply runs out of money andcannot borrow any more. In some cases it is a management constraint, in that the person is ambitious but not talented or skilful enough. Virtually all firms have to borrow to invest and grow.
Why do firms wish to grow?
The usual motives are:To make higher profits.To establish a business that will see them through life.Sufficient capital to tide the firm over a bad patch.Access to funds.Good contacts.Willingness to work long hours.Developing a strategy to overcome local or regional disadvantages in location.Developing a niche market or a unique selling point.The desire for to grow leads firm to try to increase their share of the market. The reallysuccessful ones may gain economies of scale and a few might become monopolies or belarge enough to compete with the big boys.