2.1.5 How small firms compete

What is product differentiation?

Making a product stand out from competitors, often through a unique selling point (USP).

How can small firms gain competitive advantage with stakeholders?

By building strong relationships with customers, suppliers, and the local community.

Why might large firms have higher costs than small firms?

Economies of scale may be limited in the industry, so large firms don’t reduce costs much.

What are diseconomies of scale?

High costs that occur when a firm grows too large, due to poor organisation, x-inefficiency, or higher wages.

How can small firms act like monopolists?

They can dominate a niche or local market, offering personalised service and charging higher prices.