The Boston Matrix

With massive corporations based in looming skyscrapers, some businesses make a decision to keep small, not because they have to, but because it makes strategic sense.

People nowadays are obsessed with growth as the key measure of success. Yet for many business owners, the aim of expansion isn’t at the forefront of their operations. Staying small can offer numerous benefits, not just personal but also in terms of strategy.

This post aims to explore why business choose to stay small and why they wouldn’t want to grow bigger.

What are the advantages of keeping a business small?

• Personal service:

Customers find it harder to deal with individuals when communicating with large businesses as opposed to smaller ones. Often people will pay extra to deal with the owners rather than the automated systems and departments that you get on the end of the phone when ringing up larger corporations. The quality of the personal service received is greater when a business is smaller, which in itself can provide a USP.

• Owner’s preference:

Much of the time, staying small can be a result of the owners preferences. They may already be content with current level of profits and the rate of growth within the business. They might want to avoid the added responsibilities of growth in order to maintain the balance between work and personal life.

• Flexibility and efficiency:

Smaller business have an edge on larger business especially in this field: they are more flexible and innovative. Whilst they may not have the budgets of the larger businesses, the speed at which they can react to changes and make decisions gives them a competitive advantage over larger business. Responding quickly to customer preferences enables them to move faster and foster greater connections with customers.

• Low barriers to entry:

The set-up costs are low in some industries and there are little to stop competitors setting up a business. These low barriers to entry can make it attractive for entrepreneurs to establish a small business due to the reduced risk and ease of entry to the markets.

• Small firms can be monopolists:

If the business was providing a service to a local community, they can establish a monopoly within that area and have no need to grow into a larger corporation. As an example, customers would choose to use a local shop for convenience, rather than travel to the next town to visit one of the larger chain supermarkets.

How can smaller businesses compete through product differentiation and USP’s

Small businesses can compete with larger businesses through differentiation of products of developing a USP. Offering something that larger business don’t can provide survival for smaller businesses.

How are smaller businesses more flexible in responding to customers needs

Smaller businesses are quicker at identifying new opportunities and meeting the changing needs of customers. Size can be strength as decision making takes a shorter time than in large businesses.

How can smaller businesses provide greater customer service

Small businesses can offer better high-quality customer service to add value to products and gain an edge in the market.

Smaller businesses can now utilise e-commerce

Trading through online shops such as Ebay and Amazon give smaller businesses a simple model and allow them to compete with large businesses quite effectively. Previously, small businesses were limited to a local geographical demographic, however with developments of online platforms to sell products and services, the potential customer base small businesses can target has increased dramatically, meaning there is less of a reason to grow bigger.