3.2.4-Reasons For Staying Small

Question 1

Definition of a Small Business

Answer 1

• The usual definition of small and medium sized enterprises (SMEs) is any business with fewer than 250 employees.

Question 2

Differentiation Strategy for Small Businesses

Answer 2

• Creates value; highlights quality or durability of the product
• Non-price competition; a differentiation strategy will focus on other ways of attracting customers such as taste and style
• Brand loyalty; a differentiation strategy can gain customer loyalty
• No perceived substitute; a differentiation strategy that focuses on quality and design may give the impression that there are no suitable substitutes in the market place

Question 3

USP’s of Small Businesses

Answer 3

• USP stands for unique selling point or proposition, it means what makes this product different from others on the market?
• It is a way of promoting the features of the product or service of the business; quality, customer service, delivery, price, technical features or functions e.g. a feature is the reliability of the product, the benefit to the customer is less breakdowns and repairs

Question 4

Flexibility small businesses have in responding to customer needs

Answer 4

• A small business can gain significant competitive advantage over larger companies if it responds quickly to customers needs
• It can do this by
• Carrying out research into opinions,
looking at customers websites
• Gaining feedback; forums, polls, users groups, online communities
• Track social media discussions about the products
• Collect data on customer transactions
• Collaborate with customers to produce new products or services

Question 5

Flexibility small businesses have in responding to customer needs

Answer 5

• A small business can gain significant competitive advantage over larger companies if it responds quickly to customers needs
• It can do this by
• Carrying out research into opinions,
looking at customers websites
• Gaining feedback; forums, polls, users groups, online communities
• Track social media discussions about the products
• Collect data on customer transactions
• Collaborate with customers to produce new products or services

Question 6

Differentiation through customer service

Answer 6

By giving excellent customer service.
• Consumers appreciate businesses that give them more for their money, especially when times are tough.
• Efficient service, fast delivery and flexible payment terms will help to persuade customers to spend with them rather than a competitor.

Question 7

Small businesses survival through e-commerce

Answer 7

• Small businesses can sell successfully through third party websites such as Ebay and Amazon
• 85% of UK consumers aged 18 or over already shop on the Internet