3.2.4 Reasons for staying small

Question 1

What is a small business?

Answer 1

Small and/or medium-sized enterprises (SMEs) are business with fewer than 250 employees.

Question 2

What are the main 4 reasons for staying small?

Answer 2

1) Product differentiation and USP
2) Flexibility in meaning customer needs
3) Deliver high standards of customer services
4) Exploit opportunities from e-commerce

Question 3

What are the positives and negatives of staying small so a business can differentiate products and provide a USP?

Answer 3

+ avoids direct competition, many substitutes, SMEs can price goods high as they are small
- reliant upon investments (R+D) (Branding/Marketing) (Market research)

Question 4

What are the positives and negatives of staying small so a business can be flexible in meeting customer needs?

Answer 4

+ relationships are closer with customers, improved feedback from reviews
- trade-offs, may not have a core product that is the focus of investment, communication diseconomies

Question 5

What are the positives and negatives of staying small so a business can deliver high standards of customer service?

Answer 5

+ small scale, generates loyalty

- staff motivated, PRP for staff (financial incentives)

Question 6

What are the positives and negatives of staying small so a business can exploit opportunities from e-commerce?

Answer 6

+ any SME can distribute globally, trends, reduces overheads e.g. rent, utilities
- growth from online sales is hard to rely upon, competition, demographics