IGCSE, A Level Business Student Forum

Q25 Analyse the reasons, why businesses remain small. [6]

Possible Structure:
[KN]
[AN]
[AN+]

[KN]
[AN]
[AN+]

[KN] Lack of Management Expertise.
[AN] Owners of small businesses may lack the necessary management skills and experience to handle larger operations effectively.
[AN+] This can be a barrier to growth and restricts them from expanding.

[KN] Limited Capital
[AN] Small businesses often have limited access to financial resources, making it challenging to expand.
[AN+] They may struggle to secure loans or investments needed for growth.

[KN] lack of capital
[AN] Insufficient capital is one of the primary reasons businesses remain small. Without access to funds for expansion
[AN+] it can be challenging to invest in new equipment, hire additional staff, or enter new markets.

[KN] limited resources for marketing
[AN] Small businesses often have limited marketing budgets, making it challenging to reach a broader customer base.
[AN+] This can hinder growth, as marketing is essential for acquiring new customers and expanding the business's reach.

KN: Limited Capital
AN: Small businesses often lack access to the necessary capital to expand
AN+: This can be due to difficulty securing loans or attracting investors
KN: Resistance to Change
AN: Some business owners may resist change and expansion due to concerns about losing control or changing the company's culture
AN+: Thus to retain the control they don’t expand

[KN] lack of capital
[AN] lack of funds makes a barrier for the firms to expand.
[AN+] it can be challenging to invest in new equipment hire additional staff or enter new markets.

[KN] limited resources
[AN] Small businesses mostly have limited budgets.
[AN+] Thus this prevents the development of firms in expanding.

[KN]Focus on Niche Markets
[AN]Small businesses often focus on niche markets or specialized products or services. By doing so, they can cater to a specific customer base with unique needs or preferences.
[AN+]This strategy allows them to establish a strong brand presence and compete effectively in a smaller, specialized market.

[KN]Personal Lifestyle Considerations
[AN]The owners of small businesses may prioritize a certain lifestyle over rapid business growth. They may want to strike a balance between work and personal life, avoiding the demands that come with rapid expansion.
[AN+] Choosing to remain small can lead to a more manageable workload, reduced stress, and the ability to enjoy non-business-related pursuits.

[KN] Limited Access to capital
[AN] Many small businesses struggle to secure the necessary capital for growth. Banks and investors may be hesitant to provide funding to smaller, riskier ventures.
[AN+] Without sufficient capital, businesses may find it challenging to invest in expansion, hire more staff, purchase equipment, or explore new markets.

[KN] Risk aversion
[AN] Some entrepreneurs and business owners may be risk-averse and comfortable with the size and scope of their current operations.
[AN+] They may prefer to maintain a small business because it involves less complexity, lower stress, and a manageable workload.

(Kn) lack of capital (an) less funds resulting in not enough available for expansion (an+) such lower funds would rather be used on the daily activities than expansion lowering any chance if available
(Kn) hard to manage(an) the larger a business gets the more difficult it becomes to manage it (an+) most owners dont want to take such responsibility or risks

(kn)keeps the cost low
(an)it keeps the business from spending more on inventory, rent etc
(an+)hence in case of any emergency the business will be able to recover quickly
(kn)less stress
(an)as its a small business their problems can be solved easily
(an+)and the entrepreneur can have more leisure time

[KN] To avoid the hassle of managing a large business.
[AN] Big fish often comes with greater responsibility so in order to avoid such burden businesses may decide to stay small.
[AN+] Thus this leads to better management and stress free working environment.

[KN] To keep peace in business and in personal life.
[AN] Owners of small businesses often prefer mind with peace rather than stress so they don't go towards expanding opportunities which may increase stress levels.
[AN+] Thus this leads to a positive and a friendly environment.

[kn] a lot of owners have there own preference of staying small
[an] as they intentionally don't want the pressure to pursue growth and manage a large scale business
[an+] which may be because they want proper control and well built relationships with workers
[kn] the business might itself be of such a market that has a small market size
[an] since they have a limited number of customers they can get and expanding wont help increase the number for example local hairdressers
[an+] they will remain small as expanding wont increase profits

[kn] the category of the business
[an] service related businesses usually stay small as catering to large amounts of people consecutively is impossible
[an+] this does not allow them to expand

[kn] may not be the aim of the owner
[an] the owner might want to have greater influence over decision-makinng and flexibility in operating the business
[an+] less stress and direct contact with customers improving cutomer and business relationships

[KN] Lack of capital
[AN] when a frim has low capital it can not expand
[AN+] this would result in small size

[KN] Higher Risk
[AN] when there is very low chances for the firms to expand and be successful
[AN+] so they choose to be small in size

[kn] the market segment
[an] the business may be only having a limited customer base which will not increase no matter how far the business expands
[an+] thus the business remains small as it doesn't put its money in loss by investing to expand as it would not increase profits
[kn] lack of resources
[an] the business may not have access to resources that other larger companies may have
[an+] as they may not have capital or banks may not be willing to lend loans leading to lack of technology or labor to increase in size.

[KN]Lack of capital to fund expansion
[AN]A small business might not have made enough revenue to fund expansion and to make their business larger
[AN+]The revenue made is usually used to buy machinery etc

[KN]Large business is difficult to manage
[AN]Small businesses may remain small so that they dont have to deal with the responsibilities of a large business
[AN+]Thus they instead enjoy the stress free management of a small business