'A family retail business should stay small rather than setting growth as an objective.' Do you agree? Justify your answer.

Mark scheme

Marking points from the official mark scheme (Feb/Mar 2018). The mark or mark type is shown in brackets.

1. [20] A traditional small business typically has 5–25 employees and $1–5 million in sales; growth objectives aim to increase business size via earnings, products, or locations.
2. [20] **Arguments for staying small:** Small businesses are easy to control, can maintain high profits with low overheads, foster strong customer relationships for repeat sales, can thrive in niches with high prices, and often have a better working atmosphere as employees know each other.
3. [20] **Arguments against growth / challenges of growth:** Growth demands capital, new systems and procedures, recruitment, new premises, and potentially new management techniques which may not be present or developed within the business.
4. [20] Staying small is perceived as safe as long as market room and demand are consistent, and owners might find the implications of growth daunting.
5. [20] **Arguments against staying small / for growth:** Remaining small may not challenge ambitious entrepreneurs, leading to missed market growth opportunities and lost market share to competitors.
6. [20] Growth can boost profitability by taking greater advantage of reduced costs through economies of scale, increase sales by expanding product ranges or outlets, provide greater business focus, and motivate employees.
7. [20] Internal growth leverages existing strengths like products, quality, and specialisation, fostering customer loyalty, while external growth rapidly expands the business's presence to new locations.
8. [20] **Evaluation:** The decision depends on market conditions, the owner's profitability goals and desire to grow, the ambitions of family members involved in management, and the availability of skills and finance within the business, as well as the potential for market growth.
9. [20] Staying small might be advisable during a recession, but internal growth could be justified in a boom.