Number
What happens to the number of competitors when businesses can sell worldwide through online markets?
The number of competitors increases significantly because firms can access global markets
What advantage do larger firms have that allows them to enjoy higher profits and profit margins?
They can exploit economies of scale, greater flexibility, faster decision making, etc.
What do you call when a business monitor and copy the promotional methods of their rivals?
Copying marketing campaigns
What is a niche market and why is it useful for small businesses?
A small, specialized market that reduces direct competition by targeting a specialized segment.
When there are many sellers offering similar products, what increases among businesses?
More competition/rivalry
What advantage do smaller businesses have over larger ones when it comes to responding to customer demands?
More flexible and adaptable
What is the term for when firms secretly agree to fix prices or limit output to reduce competition?
Collusion
Why can small firms respond faster to customer feedback than large firms?
Because the owner is usually the decision-maker, therefore making it more flexible. And fewer management layers!
What is the direct effect on prices when customers have more choices in a market?
Prices go down/businesses reduce prices (due to competitive pressure)
What happens to smaller businesses’ control over price when a market is dominated by a large firm?
They have little control over the price.
What are the two negative effects of collusion on the market?
Higher prices for consumers, less innovation, reduce consumer choice, etc.
What advantage do small firms have in communication with employees?
Communication is informal, rapid, and owners have close contact with staff.
What two things must businesses focus on when profit margins become smaller due to high competition?
Cost efficiency and product differentiation
Name one way smaller firms can improve communication with customers despite having fewer resources.
e.g. Using social media or direct customer engagement
What is the term for obstacles that make it difficult for new firms to enter an industry?
Barriers to entry
Why might employees in a small firm accept lower wages compared to those in large firms?
They understand the owner has limited resources due to the size of the business.
Name the two ways businesses use innovation to stay competitive in a crowded market!
Product differentiation, strong branding, economic of scale (lower average costs due to large-scale production), etc.
How can a small business still charge higher prices even when a large firm dominates the market?
By offering differentiated or niche products with strong brand value.
Name two ways an existing business like McDonald’s or Coca-Cola can create barriers to entry for new firms.
Strong brand loyalty and large-scale advertising (or control over distribution networks).
Name two reasons why small firms are often more motivated to innovate than big firms!
They face pressure to innovate due to lack of resources and tend to take more risks