Final answer:
Specialization is very effective in smaller firms, especially in single-business firms where key activities revolve around well-defined skills and areas of specialization.
Step-by-step explanation:
In smaller firms, specialization is very effective, especially in "single-business firms where key activities revolve around well-defined skills and areas of specialization." When a firm focuses on a narrow range of products or services, it can develop expertise and competitive advantage in that specific area.
For example, a small firm that specializes in making high-quality handmade chocolates may be more successful than a larger firm that produces a wide range of confectionery products. The smaller firm can focus their resources and skills on perfecting the art of chocolate making, leading to a superior product and a loyal customer base.
Similarly, a single-business firm that specializes in a particular service, such as web design or accounting, can become highly skilled and efficient in delivering that service, attracting clients who value their expertise.