The digital economy and Small business

Task Discussion points pg 16

The impact of the internet eCommerce is the fastest growing retail market in Europe, sales grew by 15.8% during 2014! eCommerce has provided many opportunities for businesses But also many threats to established businesses, who have had to adapt in order to survive, and some have not, e.g. Blockbusters

Market information The internet has rapidly increased awareness of consumers, as information in much more readily available In the past buyers tended to know less about a market than the sellers, there was asymmetric information. But the internet is changing this, in many ways Search engines Comparison sites Consumer review sites

Internet can help with marketing Viral marketing – encourages the spread of information and opinions about a product or service from person to person, particularly effective using online media. Micro-marketing – A marketing strategy in which marketing efforts are focused on a group of highly- targeted consumers.

The role of small businesses Numbers of large businesses are counted in the thousands, even in large countries Numbers of small businesses are commonly counted in millions Approximately half of UK output is produced by small and medium sized firms (employing less than 250 people)

Why do you think some businesses decide not to grow? Why stay small? On your whiteboard write down reasons you think that businesses may chose to stay small Why do you think some businesses decide not to grow? Extension Task: Are there any disadvantages to staying as a small business?

Choosing to stay small Entrepreneurs will sometimes choose to stay small Reasons for choosing to stay small: Be closely involved in all aspects of business – dealing with customers, suppliers, employees – better customer service Small firm differentiation – niche markets – by focussing on a particular niche, there may not be sufficient demand to grow the business – there may be demand limits Some satisficers are simply content as things are and feel no urge to change Satisficer: people who are not attempting to maximise income, growth or any other individual objective. Satisficers target ‘good enough’ or satisfactory performance and lifestyle.

Technology Many changes in technology favour large scale operations, but others can work to the advantage of small businesses. The internet offers low-cost access to the marketplace for firms of any size Small businesses can thrive e.g. ebay

Why has E-tailing become so popular? E-tailing (less frequently: etailing) is the selling of retail goods on the Internet. Short for "electronic retailing”.

The Long Tail – what does this show?

Technology In “The Long Tail” there are many markets where some consumers prefer to move away from mass produced items to something which more precisely meet their needs Especially where technology reduces cost differential Cost Differential = a difference in cost compared to rivals. Can be a lower cost advantage, due to efficiency of better technology So modern technology can work in favour of small businesses through personalisation