Advantages and disadvantages of large and small firms

Question 1

What is a ‘niche market’?

Answer 1

a smaller market, usually within a large market or industry.

Question 2

How is the size of a firm measured?

Answer 2

The size of a firm can be measured by turnover, the number of employees, and the balance sheet total.

Question 3

What are some disadvantages of small firms?

Answer 3

• higher costs
• lack of finance
• difficulty attracting quality staff
• vulnerability.

Question 4

What are some advantages of small firms?

Answer 4

Small firms have advantages such as flexibility, personal service, lower wage costs, better communication, and innovation.

Question 5

What are some advantages of large firms?

Answer 5

Large firms have advantages such as economies of scale, market dominance, and the ability to win large-scale contracts.

Question 6

What are some disadvantages of large firms?

Answer 6

• too bureaucratic
• difficulties in coordination and control
• poor motivation among employees.

Question 7

What factors influence the growth of firms?

Answer 7

Factors influencing the growth of firms include government regulation, access to finance, economies of scale, the desire to spread risk, and the desire to take over competition.

Question 8

Why do some firms stay small?

Answer 8

Some firms stay small due to the size of the market, the nature of the market, lack of finance, the aims of the entrepreneur, and diseconomies of scale.

Question 9

Explain two advantages of small firms.

Answer 9

Small firms have advantages such as flexibility, allowing them to adapt to change more quickly, and personal service, which can attract customers willing to pay a higher price for direct interaction with the owner.

Question 10

Describe two disadvantages of large firms.

Answer 10

Large firms may suffer from being too bureaucratic, leading to slow decision-making, and poor motivation among employees due to a lack of personal contact and the perception that individual efforts are insignificant.

Question 11

Discuss the role of government regulation in influencing the growth of firms.

Answer 11

Government regulation can influence the growth of firms by:

• monitoring business activity to ensure competition
• preventing individual markets from being dominated by a few firms
• sometimes blocking mergers and takeovers that reduce competition.

Question 12

Why do some businesses in niche markets remain small?

Answer 12

Businesses in niche markets may remain small because they serve a particular niche market with specific needs that are neglected by larger firms, creating a gap in the market that can be filled by a small business tailored to that niche.

Question 13

Describe one way that high start-up costs can be a barrier to entry.

Answer 13

If a large amount of money is needed to set up a
business many potential competitors will not be able to raise/borrow such a large amount

Question 14

Explain one reason why Heather may have decided to keep her business small.

Answer 14

• The size of the market.
• There may already be a high number of restaurants in the area.
• Meaning Heather does not want to try to compete with other restaurant chains

Question 15

State one disadvantage to firms of increased competition.

Answer 15

Reduced profit

Question 16

Explain one factor that could affect whether Abi is able to expand her business.

Answer 16

• Access to finance.
• Abi would need to obtain more money to be able to move to larger premises.
• She may not have enough/be able to borrow enough finance to fund the expansion

Question 17

Explain one disadvantage for customers of Robert being the only local firm
specializing in handmade door signs.

Answer 17

One disadvantage is that the price may be higher
this is due to a lack of choice (1) because there are no other local wood carvers that customers can use.