3.2.4 Reasons For Staying Small

Question 1

What reasons are there as to why small firms exist?

Answer 1

• They offer a more personalised service & focus on building relationships with their customers
• By remaining small, there is high ability to respond quickly to changing customer needs/preferences
• Rapid growth can cause diseconomies of scale which can be difficult to deal with & so many owners choose to avoid these
• They are unable to access finance for expansion

Question 2

How do small businesses survive in competitive markets?

Answer 2

Product differentiation & USPS:
- They often survive y focusing on product differentiation, offering unique products/services that stand out in the market.
- Their USPS can be highly specialised or niche targeting a specific customer group that large companies may overlook

Flexibility in responding to customer needs:
- They are often more agile & can quickly adapt to changing customer preferences or market trends

Customer Service:
- With fewer customers to manage they can build strong relationships & attend to individual needs

E-Commerce:
- Has made it easier for small businesses to compete on a larger scale without needing to expand physically
- A small business can sell its products online, reaching a global market, while still maintaining a manageable size.