3.2.4 reasons for staying small

Question 1

small business survival in competitive markets

Answer 1

• product differentiation and USP
• flexibility in responding to customer needs
• customer service
• E-commerce

Question 2

product differentiation and USPs

Answer 2

focusing on a point of
differentiation and selling to a niche market to avoid direct competition from mass market providers. Many customers will look to buy products that are different from the mainstream and this is a market that small firms can target. By targeting a
smaller group of customers with specific needs, businesses can charge higher prices for their
products and achieve relatively high sales revenue.

Question 3

flexibility in responding to customer needs

Answer 3

Decision making is faster in streamlined management structures. Feedback from the shop floor is likely to reach managers quicker, enabling quicker response times to changes in the market. A small firm may be able to bring a new product to the market quickly because there will be fewer
people involved in its creation.

Question 4

customer service

Answer 4

Staff in smaller businesses feel valued and know that what they do has a big impact on the success
of the business. Owners and employees are also able to build relationships with a smaller number of
customers. therefore staff are motivated to deliver quality, personal customer service and providing a point of differentiation

Question 5

E-commerce

Answer 5

Selling goods and services online enables a business to stay small, despite selling to a potentially global audience. Customers can be reached via a business’s own or third-party website, whilst staff do not need to be physically located in other countries. This means that even the smallest business idea may be viable, even if it cannot reach enough customers in the local area to breakeven.

Question 6

reasons for staying small

Answer 6

Costs- smaller firms may have lower running costs
• Low barriers to entry- certain business activities, such as window cleaning and garden
services, have low set-up costs. There is little to stop competitors setting up.
• Convenience as a USP- small businesses are able to serve a local community and may be
more convenient than larger competitors.
• Control and efficiency- small firms may find it easier to keep control of operations and do
so efficiently.
• Owner preferences- some owners may be happy with the level of profit they are earning.
Increased earnings would lead to more complicated accounts and administrative burdens.

Question 7

staying small basically:

Answer 7

small= fewer layers= decision makers are close to customers= quicker response to changing tastes