3.1 - Small Firms Flashcards
What are the key reasons to stay small?
Product differentiation
Flexibility
Customer service
Avoids higher unit costs
Responsiveness
Why is product differentiation a reason to stay small?
Easier to differentiate against larger competitors
More margain for error due to consumer perceptions
Why is flexibility a reason to stay small?
Easier to meet customer needs
Communication made simple
More customer feedback
Why is customer service a reason to stay small?
More likely to be prioritised
Most small firms are within the service sector - competitive advantage
Why is avoiding higher unit costs a reason to stay small?
Prevents high LRAC
Often prevents diseconomies of scale
Why is responsiveness a reason to stay small?
Customer needs
Changing market trends
Innovation
Why do small firms tend to survive?
Act as supplier/sub-contractor
Low PED and high YED
Avoid internal Diseconomies of scale
Lifestyle enterprise
Responsiveness to changing markets
External economies of scale
