2.1.5 How small firms compete

Question 1

5 ways small firms can compete

Answer 1

• product differentiation and USPs
• flexibility in responding to consumer needs
• customer service
• targeting niche markets
• achieving competitive through relationships with stakeholders

Question 2

product differentiation and USPs

Answer 2

Manufacturing
- Important for small manufacturers who make to order, for the service sector and for people who create hand made products
- Small scale suppliers have more interesting and unique products

Question 3

flexibility in responding to consumer needs

Answer 3

For small businesses:
- Know their customers personally and can meet their requirements
- Small businesses respond to changes in the pattern of demand faster than a big business does
- Micro marketing lets them understand market needs even if consumers are geographically scattered

Question 4

customer service

Answer 4

• Small businesses can have a personal touch
• Can give advice/products based on specific needs/niches
• Face to face product advice can add value and overall they can gain competitive advantage

Question 5

targeting niche markets

Answer 5

• Small businesses that embrace e-commerce may develop a national/international market that make a profit even if the niche is tiny
• Long tail
• Luxury goods
• Small businesses may deliberately maintain their exclusivity by keeping output quite low and charging a high price

Question 6

achieving competitive advantage through relationships with stakeholders

Answer 6

Good for small businesses:
- Employees who can talk to their bosses can enhance motivation and efficiency
- Customers can talk directly to the business, creating customer loyalty

Small businesses and large businesses both have competitive advantage and customers choose the supplier they prefer
- Eg people use big firms as the standard of service is predictable and people know what they provide
- People use small businesses as they have more character and are better suited to their needs