3.2.4. Reasons For Staying Small

Question 1

Survival

Answer 1

Smaller business gave lower FC to cover, making it easier to break even but with small no. of customers and over dependence on single product, change in market can destroy small firm quick

Question 2

Profit maximisation

Answer 2

Bigger firms can generate higher tot profits due to higher revenues and econ of scale

Question 3

Sales Maximisation

Answer 3

Maximising sales linked to growth

Question 4

Market share

Answer 4

Small firms may enjoy high shares of market niches, but to attain market share requires good growth

Question 5

Cost efficiency

Answer 5

Although growth brings econ of scale, diseconomies of scale likely to arise as result of growth. Smaller firms may be able to identify wastage more easily and keep tighter on costs

Question 6

Employee welfare

Answer 6

Although large firms offer bigger bonuses and benefits, it can still leave employees without sense of belonging

Question 7

Customer satisfaction

Answer 7

With fewer customer, small businesses nay provide better personal relationship with their customers

Question 8

Social objectives

Answer 8

Many social enterprises set up to address local needs and thus want to stay small.

Question 9

Reasons to stay small

Answer 9

1. Product differentiation and USPs(Porters Generic strategy)
   2.Flexibility in responding to customers needs
   3.Customer service
   4.E-Commerce- ability to reach global market and specialise in a niche.