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The Position and Behaviour of Smaller
Firms in the Motor Industry
by D . G . Rhys
In the British and European motor industry there co-exist firms which
differ widely in size. Given the existence of economies of scale the smaller
firms are faced with the problem of survival; more precisely, of being
able to charge a premium price to offset higher unit costs. After con-
firming the existence of scale economies this paper looks at the corporate
strategies of smaller firms, but first it is necessary to clarify what we
mean by smaller firms.
In any market for any good where economies of scale exist in its
production, firms smaller than the optimum could, if no non-scale
problems exist, be at a cost and, with competition, a profit disadvantage.
However, in the motor industry the term smaller covers various types
of operation.
The Categorisation of Smaller Firms
As well as the mass produced motor car, three other types can be distinguished. Firstly,
the quality car made by medium sized firms, firms which are now sometimes mere
divisions of larger companies; secondly, the luxury executive limousine or grand
touring car, vehicles which compete less directly than do the quality cars with the
products of the mass producers; thirdly, the products of the sports car factory or
workshop, cars which are aimed at the eccentric affluent customer, the average income
customer, and the younger element who are often in receipt of less than average
income.
The first group of firms are very busy in the field of persuading customers that their
product is better than those of the mass producer, even if this claim can be shown as
difficult to substantiate in terms of the normal definition of a
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