Significance of small businesses flashcards

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SME strengths?

Flexibility, personal service, quick decisions, niche focus.

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SME weaknesses?

Limited capital, small marketing budget, higher unit costs.

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Economic role?

Job creation, innovation, competition, local employment.

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Niche markets?

Small firms serve segments unprofitable for giants — craft, local food.

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Government support?

Grants, loan guarantees, business advice, reduced corporation tax.

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vs large firms?

Large: economies of scale; small: differentiation and agility.

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Link to 1.1.2?

Many small firms founded by entrepreneurs.

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Link to 5.2?

SMEs rely on overdrafts, owner's savings, micro-loans.

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Define 'niche market' in the context of small businesses.

A specialised, small segment of a larger market that a small business can serve profitably by focusing on specific customer needs that are not being well-addressed by larger competitors.

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What are 'economies of scale'?

The cost advantages that an enterprise obtains due to its scale of operation, with cost per unit of output decreasing with increasing scale. Small businesses often lack these, resulting in higher average costs.

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List three common reasons for small business failure.

1. Lack of finance or poor financial management (cash flow problems). 2. Ineffective marketing or failure to adapt to market changes. 3. Strong competition from larger, more established firms.

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Identify two ways small businesses contribute to job creation.

1. They are a major source of new jobs in most economies, absorbing a significant portion of the workforce. 2. They provide employment for specialist workers who may not fit into large corporate structures.

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Give two examples of non-financial government assistance for small businesses.

1. Providing free or subsidised business advice and mentoring services. 2. Running training workshops on topics like digital marketing, financial accounting, and legal compliance.