Theme 3 Content

Question 1

3.1 - Business Growth

How to small firms survive

3.1.1 - Sizes and types of firms

Answer 1

• Many small businesses act as a supplier or sub-contractor
• They might take advantage of low-price elasticity of demand (PED) and high income-elasticity (YED) for specialist ‘niche’ or ‘bespoke’ products that can be sold at a higher price with a larger profit margin per unit - by expanding you may lose the niche or bespoke aspect so reason to stay small
• Can avoid internal diseconomies of scale
• Lifestyle enterprises where owners are looking to satisfice not maximize profits
• Innovate, flexible and nimble in responding to changes in market demand
• Consumers willing to buy online
• Keep over-head costs low
• Benefit from external economies of scale