There is a common stereotypes about the nature of small business, its developed from experienced with the corner shop, the hairdresser, the local garage proprietor, the jobbing firm of builders and decorators people call in to refurbish the guttering or patch-up the plumbing. Ten years ago, small businesses were very much sighted as "country cousins" and were significantly supported by their generous proportioned counterparts in large business. The small business owner was considered rather peculiar, and was indeed feeling sense of loss of the modern techniques and skills obsessed by the larger business manager. Sue Birley and David Norburn (2007) commented in journal of business strategy as "Organizations were established, serviced by retired large company executives, in order to pass on their administrative pearls of wisdom to these ignorant embryos". But, today large businesses are continuously debating in a ways that smaller companies assume planning procedures of larger companies. Some 2000 years ago, Roman general would transmit their army officer away to distant colonies for boosting confidents in their assistant's initiatives, training, and flexibility. One century ago, the European Merchant Banks would give their managers with saddlebags filled of gold and would caution them to go multiply and fourth by financing potential wealth-creating ventures. However, these two traits of confidence considered in risk-taking and subordinate management are essential conditions. Question is, is it reasonable to imagine that large businesses can abruptly become entrepreneurial without a transition or conversion of painful readjustment? Can large business managers move from a training of pro-action, to one reaction? Formation of corporate strategy is the basic responsibility of the top executive management and boardroom; it is not astonishingly that the designations of this role rooted so many commercial errors? If no how many businesses forecast factors linked with OPEC; the enormous currency fluctuations; the flow in pacific-rim countries involving attempt to win; out of control inflation; and the record "actual" cost of capital?. Moreover, whether it is small business or large to creating (pre start-up), establishing (start-up), and running (post-start-up) requires different skills, approaches and management styles.
Get your grade
or your money back
using our Essay Writing Service!
However, it is aim this easy to identify and critically discuss the skills, approaches and management styles required to create, establish and running a small business with compare to large business in a nutshell of stimulus of both internal and external environment. Furthermore, it will cover different aspects with following contextual framework:
Definition of Small Business:
The owner of small business is normally someone who is concerned and operates a business as an extension of the individual's personality to further personal goals and to produce family income ( WAYNE, H. Stewart, JR. et al 1998). A small business owner is an individual who create, establish and manage a business for the main purpose of enlarging personal goals. The condition behind is, the business must be the primary source of income and get through the mainstream of his/her resources and time. The owner recognized the business as a enlargement of his or her traits, intricately obliged with family needs and desires. An different but admiring view is provided by Stanworth and Curran (1990) who differentiated small business in three types of activist:
"The artisan who seeks intrinsic satisfaction from business activity.
The manager who seeks recognition for managerial excellence in business.
The classic entrepreneur who seeks to maximise profits"
Dunkelberg and Cooper (1982) differentiated on the base of motivation as "the growth orientated, the independence-orientated and the craftsman-orientated small business owner". Furthermore, in statistical point of view the UK Department of Trade and Industry (DTI) European Commission (EC) works with following definition:
Figure : Definition of Small Business according to size and numbers according to UK DTI and EC. (Culkin, 1998)
However, in way the DTI products and services targeted at the division adopt a overabundance of working definitions relaying on their own specific aims and objectives. In other way the European Commission sought to be appropriates and additionally included nonbinding recommendation to member's states, investment bank and European investment funds; also allowed member to use lessen threshold figures, if they so wished.
Management Styles (Creating, Establishing and Running) of small Business Compare to Large Ones:
Always on Time
Marked to Standard
Business owner is one of the issues at the very centre of what characteristics and distinguish a small business and is most likely the key future of differences (apart from size) between large and small business and their management styles and process. The major differences have been described by among others (Stanworth and Curran, et al 1973) as relating to business objectives, operational practice, marketing and management styles. A model of small business management process is shown in figure 2.
Figure : A model of Small Business Management Process (Beaven and Jenning- 1995)
Skills required to Creating, Establishing and Running a Small Business:
Researchers into small Businesses have made the indication that "a small business is not just a little big one" (welsh, J. and White, J - 1981). Small business frequently suffers from poverty of resource and more in danger to mistakes and differences in their economic feat than large ones. Also, small businesses are more seems to busy in informal management practices than to take up sophisticated planning and control techniques for good rational, usually involved in short time horizons, are irregular, informal and un-comprehensive which alike mistaken policy recommendations. Goss, D. (1991) argues that there are mainly four suppositions homogeneity frequently leads to serious lack of skills about small firms:
The idea that all small firms are personify by common harmony and interest between workers and owners.
The propensity to examine small firms lacking of regard to inter-industrial dissimilarity and their wider social and economic context.
The attribution of consistent organizational structures to small business.
The particular qualities assign to all small business like innovation, harmony and entrepreneurship.
Business planning can take a different kind of forms the informal to formalized and cautiously prepared plans. Rue and Ibrahim (2001) describe as "first, and most important, effective business planning is frequently seen as one of the important factors in business success". But some others said (Bridge et al. 1998) preparation of business plan may be unsuitable for small businesses. In another's points of view (Rue and Ibrahim, 2001) is to plan for small business emphasized in the many booklets and already guided produced by local and national business advice agencies, so doesn't need to own plan. Kuratko and Hodgetss (2004) demonstrate that "the business plan is the minimum document required by any financial sources".
However, though it has been realized that the owner of small business tend not to have business plan but does not necessarily mean that those firms are poorly managed. It does, but those small firms surviving without business plan for creating, establishing and running they miss out from the opportunity to consider on the whole direction of underling the business and start-up considerations. Furthermore, the planning skills require the owner of small business to have tangible outputs, documents that first and foremost produced for the investor, bank manager or venture capital fund manager for raise money, and also it helps organization wide approach ongoing review, assessing feasibility and viability, setting and monitoring objectives and targets. Paul D. Hannon and Andrew Atherton (1997) developed a model of planning in the journal of small firm success and the art of orienteering as there is critical relationship between planning in small business and strategic awareness capability lead to small business success include:
A more considered and hence more effectual, positioning of the business in its environment
Detection and management of wider scope of chance and challenges from which approach can be selected
An improvement podium for initiating successful planning process.
THE VISIONARY UNDER-ACHIEVER
Envisages affective responses
Difficulty converting opportunities to responses
THE SUCCESSFUL ORRIENTEER
Aware of external environment
Convert opportunities in business
Learn how to build on &generate new success
THE UN-NAVIGATED SHIP
Unaware of opportunities &threats
Controlled by unanticipated events and influences
Unable to manage the future
THE MYOPIC INNOVATOR
Remain on own ideas &convections
Able to convert ideas into practice
May not satisfy market needs
Figure : typology of the effects of planning effectiveness and strategic awareness capability on business management and development
This Essay is
a Student's Work
This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.Examples of our work
The development of planning skills of the individual small business owner-manager to be more strategically aware of their respond and environment appropriately recognized proceedings is likely settle on the effectiveness of the planning process in creating, establishing and running a competitive small firm that can survive and succeed. Therefore, buying an existing business that does not cancel out the need for and primary business plan. A detail planning skills in small business tests the compassion of changes to key business inconsistence (what if sales drop 50%..... or what if overheads increase by 30%....?) for creating, establishing and running. Nayak and Greenfield (1994) noted that those small business who has less than ten employees only 33% able to regularly calculate profits to examine their firms performance due to lack of planning whether it is creating, establishing or running a small business.
In the other hand, the large businesses is not about the seat-of-the-pants opportunism and risk taking, though it is the situation that large businesses may have to make decision in different way to others relying on heuristics and biases in the deficiency of any market data or new and innovative products and services. Indeed, in large business they have formal and informal strategic plan to reach their target.
The greatest strengths of a small firm, surely in the establishment lies within the owner him/herself. It is from owner of small business that product market knowledge, strategy emanate, or evaluation. Without his/her personal skills and knowledge the firm would have little chance of triumph off the ground. Laura Phelan (2007) in the journal of a competency model of small business manager identified almost 60% of small business owner managers think their management potential sufficient.
Credibility is fundamental, and small business owner fail at the outset because they cannot pace off the credibility merry-go-round. They need money to lease space, buy equipment, hire people etc. but the bank will not lend without and instruct, the customer will not put order without confirmation of that the product can be supplied, the suppliers will not give praise, the landlord need guarantee and deposit and skill workers unwilling to leave guaranteed employment (figure: 3)
Figure : The Credibility Merry-Go-Round (Sue birley and David Norburn, 1976)
However, the only way to fracture the circle is to create personal skills in the eyes of at least one of these groups.
Therefore, the initial skills and ingenuity of the small business owner to create, establish and running a business which potency operating skills, stubbornness, determination, comprehensive product knowledge.
People orientation (the people orientation capability is concerned with how small business owner or managers networks to the people, and in particular the variety of internal and external customers significant to the business. With this circumstances four skills can be developed: tow way communication, resource organization recognition, building and maintaining relationship skills, and persuasion influencing, motivating or impressing others in a way that outcomes in acceptance).
Analytical capability (analytical skills centres on the small business owner or managers thinking styles and their approaches of handling and dealing out the range of information needed to ensure the smooth in a row of an small business. It encompass six distinct skills are: information sourcing up-to date, information processing, analytical decision making, problem solving, commercial appreciation awareness and operational specialization).
Strategic vision (strategic vision competency is concerned with the owner managers intelligence that identical where the business is onward in the short-term and long-term, which also make sure business owners working level at conceptual than operational, and it composed of three main skills are; future orientation expect, commitment to self-development consciously, and negotiating of distribution channel and spreading of material, developing company image recognition).
Energy for enterprise (its reference to competency middle on the degree to which the owner of the small business is committed to, determined on and enthusiastic about the business; include five core skills are: strength of mind to achieve commitment to and conceit in personal and business success, initiative courage to influence and make the most opportunity, personal honesty consistency, adaptability, and creative style barging) are indispensable ingredients. Thus the owner with expansion in mind also needs the aptitude to his/her own weaknesses, listen to others and to be supple.
By the contrast in the large organization management already in exists as a function; the skills are numerous and wide-ranging and human resources may need only to be ties together, not created. The manger is crucial as an administrator of the specified, not an innovator.
For creating, establishing and running a small business another most important skill that small business owner have to control over is the financial skill. The small business are the apparatus of global economy and it has been familiar that financial plays a important task in their growth. Making skilful of small business owner or managers about the value of them of budget, cash flow forecast, understanding terms of debtors and creditors collection periods and profit and loss account knowledge needed financial handling training. Jonathan Tucker and Jonathan Lean (2003) found that in the journal of small firm finance and public policy that a numbers of financial difficulty face a small business owner are in numerical values are:
Figure : Financial Skills difficulty face Small Business Owners (Jonathan Tucker and Jonathan Lean -2003)
Furthermore, owner of small business most face decision problems about financing is the capital structure decision that whether to finance with equity or debt. In the contrary to large business as they have special financial analysis to handling the financial activity in proper and manner way and also get numerous helps from high street banks and building society, whereas small business owner relying on 'hand-on' skills and funded primarily owners preserve profits and savings. Though commercial and high street banks provide short term loans but with high interest rate. Moreover, small business financing is unlike from large business financing in more than a operation point of view. However, in regard debt financing and financial skills transaction small business owner relay more on relationship with lenders than on the monitoring, signalling and bonding used by large businesses.
Decision Making Skills (Purchasing and Business Overlap):
Creating, establishing and running the large organization there are numerous ranges of individuals involved in decision (Hague, 1993). This could be range from main influencer to gate keepers, of information, to purchasing expert and so on up to last decision maker who will be permitted to sign off a purchase. In this race by contrary to large business the small business decision making unit is fundamentally owner/manager, and it's contain just several layers of difficulty. As business grows, normally the first step will be directors of the business to step up for first decision making, also may guide to increasing size of business. Specialist managers then come in engage adequate level of size and complexity as shown in figure-5. However, the key term for successful decision making depends on personality driven and skill of owner of small business. Decision making in large organization is not often as small business does, if not usually the small business owner or manager making the business is extremely complex and tied up with their identity and life.
Figure : Layer of the decision making process in small firms (Nigel Culkin and David Smith, 2000)
For the small business owner, the works survive at the boundary between their personal life and business. All financing activity in the business belongs to them, and it does manipulate in many cases, a stable income. And also income is extremely complex related to the outgoing tied and flows of business. However, the skill require for owner of small business is to identify with in way that is not true in a large organization which aware of between what compose their job and lives in decision making.
Figure : The Business/Personal Overlap
Problem Solving Skill:
The problem solving is one of the key skills of an owner of small business (Isabelle Giroux- 2009). But how small businesses actually differ from large organization in their problem solving style process? O'Gorman et al (2005) tried to find differences between by observation and describe that the growth oriented small business owner centrally change their role and purposes on any given day and dependence on informal communication practice than the large business, indeed management process and problem solving in small firms is highly self-motivated and its effectiveness is basically linked to the expertise and management capability of owner/ manager.
Basically the influence behind capacity to problem solving the owner of small business by emotions, desire for self-efficacy, intuition, determination, attribution of coincidence, luck and destiny then action taken as a result of persuade on problem solver which makes them to survive and potential to grow and take as a learning.
Figure : A model of Problem solving in Small Business (Giroux, I. 2009)
Strategic Choice of small business owner:
For larger companies, the strategic choices selected and made from the range of product and market alternatives, each of which has its own risk and put back outline for develop a stability product and business portfolio which will progress financial, R&D, production and personnel strategy. And yet small business in the start-up phase, most firms begin with own product and one customer. As a result based on his knowledge of seeking future trend the owner may remark a very small range of choices open to him/her or indeed, no particular ones at all. Thus the scanning procedure is probably to be comparatively random and the variety process opportunistic. However, strategic choice will be determined on way to harass but one market. For small business penalty of failure can be disastrous because it has far a smaller amount of currency with which to acquire time than the large company (the idea must effort and have to work quickly). For large company the idea must be fit in the boxes (models and matrix) of a product/market portfolio in place. But small business even fitting the one or two products two by two matrix seems like ridiculous. For the reason behind that the aim of small business owner might not be identified rationally in marketing gist, but rather family coherence.
Environmental Scanning, Marketing and IT Skills:
To observe the environment requires an inspired and wide ranging scan of market trends, legislation, technological development, social attitudes and competitive action. To perform this, the manager required time, data and evolution skills. In the large organization, this position is taken by the specific specialist department using set up data base or by hugely use of computers. But the small firms has neither the moment in time nor the skills to gather and process the data, nor the financial support to afford the software.
In the market place, the small business most likely started with one customer and no proper marketing resource. If flourishing resource will have decisive upon adapting to and make happy to customer's demands; data compilation will have concerned in formal monitoring of the instant environment and the consequences strategy will be response to perceived prospects in small market niches.
Structure, Monitoring, Controlling and Reporting:
Large company have developed their organizational structure over a extended period of time in a reaction to implementing their chosen strategy more efficiently. As companies develop, so too does the difficulty of the organizational chart. On the other hand the owner is producing the structure in the early stage of the business. All the managerial and directorial responsibility are surrounded by himself, his only problem is the separating his own time.
As the business grows and owners become less able of controlling all roles, in this circumstance he/she must decide what accountability to develop and in what categorize. Owners choices are much more seems like to be a functions of own preference or skills than ones of harsh in market criteria. Thus he may hire a book-keeper because he/she has lack of mechanics of accounting.
A small business has very little need for complete reporting systems, conversely, large organizational it is mandatory to publish in reporting in public, it could cause of frequently resultants reduce in managerial motivation and absorption time require for newly established companies Birley, S. (1976) found that to be an minimum three years. However, the owner of small business survives because he/she observes to be in control, not controlled.
As a small business grows it must begin to enlarge their staff and become skill at how to develop and apply human resource management policy. The faster growth practiced by the small business the more liable it will experience HR struggles. Managing such issues for example recruitment and selection, wages and salary negotiation, staff promotion and retention, training and development, compliance with government employment, tax and insurance can harshly tax the usual small business owners.
For most small business owners the preliminary years of company establishment need them to be act as a micro manager, and usually involved increase when business going to go expand multiple sites, different product lines, and increasing multifaceted marketing environment forced to develop HR practice and policy. However, question can be developing HRM practice in small business does it work successfully compare to large one?
Rowden (1995) experimented in three successful manufacturers with fewer than 200 employees' use of both informal and formal HRM practices had a straight impact on the overall success of the firms. Hornsby and Kuratko (1990) surveyed 247 firms with less than 150 employees had direct impact on size and payroll. Found that HR policy practisers as they grow and success than average personnel-related problems. Oliver, (1997) and Caudron, (1993) found that in a research that with less than 100 employees the firm can may manage and operate successfully without HRM department, and when it become over 200 a committed HR department become necessary. A model of HR practices in small business and its effectiveness shown in figure 8.
Figure : Model of HRM Practices and Challenges in Small Business (Cardon, M.S and Steven, B.C. 2004)
Approaches to Owner for creating, establishing and running of Small Business:
Characteristics and Motivation Approach:
When formulating corporate goals, the primary reason for dissimilarities in strategy between small and large business lies in the relationship between control and ownership. The large business has to consider the needs of his stakeholders that contain customers, employees or shareholders and suppliers. The small business is the owner, the interest of who draw out beyond the commercial to the individual needs of him/herself and family. Thus, the major direction or goal of the business, which may comprised financial aim as well as wider declaration of mission. However, in order to understand the goals of a small business it is essential to understand motivation behind their business start up.
There is a huge number of reasons why people start their own business; for example individuals since birth, mixture lifetime background, and experience is categorized by Cooper (1981) like genetic, environmental influence and antecedent, including factors like; education, parental education, previous work experience, or entrepreneurial characteristic model reasons why individuals move towards employment to self-employment. Some of them are positive pull influence such as; desire for independence, turning a hobby or previous work experience into a business. Some of them are negative push influenced; for example redundancy, unemployment, disagreement with previous employer.
All these issues will come to meld together as a goal of the developing organization. They will be replicated, in particular, in approach toward the product, company expansion and one's lifestyle. Some are classical business owner who not interested in forming a business which will employee others rather make sufficient income to continue in a self-employed eminence. Some indeed approach to start their own firm not only to make money but also to have control and power of their own destiny. Retaining having power of the business while growing in up to a point where the likelihood of survival is high and credibility and decency in the community have achieved.
There is also important to understand the attitude approaches of owner of small business to identify toward the relationship between lifestyle and business. Is the business paying for a lifestyle? This may comprise status in the community, good standard of living, political activity and charity work. Is this lifestyle the business? Owner may spend long, hours at work, sometimes unnecessary, believe crucial, and make all the decisions.
Whichever these case but goals are not set in stone. Attitudes change with experience and age with success and failure. When business begin and start to survival the direction of the firm may well be malformed to incorporate the apparent needs of the next generation. Very unusual in some cases this can signify a change in approach towards growth either by pick up the pace of it or by making a purposeful decision to mark time until daughters or sons ready to take over.
Training and Learning Approaches:
When a business fails, it can make hurt and upset the owner, family, company employees and also the community. To the degree that business failures consequence form the owner's lack of skills or knowledge in management, their nasty consequences can be evade by helping owners change the way they manage their business throughout training and education.
Unfortunately, the evidence advice that most small business owners are not conscious of the management practices (Pelham and clyson, et al 1988). Some expert found that traditional and individual characteristics owners of small business do not prefer traditional lecture methods of teaching (Ulrich and Cole, 1987). Some other suggests that business owners need training that highlights personal involvement and direct application. Sexton and Upton (1987) suggest that the training program should be from their future professional managerial in pedagogy and substances ways.
However, owner's expedience in requiring that their contribution have some immediate benefits the purpose of the training is to get better the owners aptitude to interact efficiently with subordinates in the job, and high performance by an efficient training method which will convey participant's skills. Kirkpatrick, (1983); Tosi et al., (1986) reviewed the eight training methods with high, average low or variable is shown in Figure 8.
Figure : Evaluation of Training Methods for Small Business owner
Lecture method is very oldest, straightforward most formal. The value of the lecture method varies extensible and effective lecture as one who acquires skills would rate high on measures such as face validity and time competence but who are repetitious and boring would not. However, enthusiastic and time competence lecture methods training are require for developing small business owner creating, establishing and running a business.
Programme Instruction is based on the standard of reinforcement (Silverman, 1960) the material is presented for addition and trainees test their attainment of each latest piece of information. It dose works in theory basis and low in skill develop also face valid are very high. However, program instruction method should be ranked in first for ability to produce knowledge rather than skill development.
Business Games Methods are related to systematic representation of a department or any business basis on rules, relationship and principles. This kind of game practice develops cognitive skills, but does not smooth the progress of knowledge attainment and preservation.
Case Studies are written images of companies facing particular business problems which facilitate trainee to review the company's internal and external environment, recognize its main problems, and provide investigation and advice concerning the best decisions for the company in the given situation.
Role Play method is for taking part on identified personal especially feedback session, leadership, disciplining employees, conflict resolved and effective listening. Sensitivity Training method are developed related to psychotherapy which facilitate to trainee participate and encourage to honesty associated attitudes, perception and emotions towards others.
Conference Method highlights group discussion as a means for contributing useful information which gives trainee to high financial efficiency and face value. Behaviour Role Modelling used in industrial based of having trainees experimental models, practice reproduce those models, and then replicate behaviours that receive optimistic reinforcement.
Furthermore owner of small business can develop their skills and knowledge form diverse social influence, multiple organizational memberships and external structures (Whittington 1992).
Figure : Concept of Learning Context for Owner/manager of small business
However, compare to large business, there is a special human resource department for facilitating different motivation and training approach in specific purpose for people manage products, market and strategic decision making.
In creating, formulating his/her strategy, running his/her business, the small business owner is operating from a totally different like chalk and cheese base from the large business. The owner of small business has different goals, plan, personal skills (people orientation, analytical capability, strategic vision, energy for business, decision making, finance, problem solving, and resources), Approach such as (Characteristics, motivation, training and learning) organizing such as (co-ordaining, formal communication, monitoring and controlling, strategic choice, environmental scanning, marketing, HRM practice and IT skills) .
But, the large business manager work within a limited and relatively unknown (to him/her) environment; and generate structure as well as manages it. Clearly the possibility of failure is high, but the rewards and ownership also high. And yet the major difficulty is in making sure that the large business does it for the health of the corporation rather than for her/himself. Hence, many small firms owner started their own business experience and occurred to be lucky in their commercial alternatives.
We found strong differences between small and large business that the owner of small business develops control systems to fit both his/her own skills which based on need for business and the market in which he/she is operating. But controlling and reporting systems of large business seems like wearing a uniform and also it's de-motivating to the managers. Norburn and Grinyer (1974) found that 36% of the information items dispersed to the British Board of Directors was totally ignored. Nurburn, D. and Birley Sue (2007) found that a constant High Performing U.S. Companies a serious stress on keeping reporting systems straightforwardly.
Furthermore, we also found very strong logic that lying success behind the time scale of large business. Success is often a long time in inward bound; a project may take many years to come decent. Whereas small business owner understand that he/she prepared to spend and invest lifetime into his/her business. However, it is known that almost every large business most current evaluation and reward system review annually; is not it often inappropriate? Biggadike, R. (1979) found that in his analysis of Fortune 200 companies effective and diversification, the average period for negative profit was seven years.
However, small business will remain country cousins, no more will not be debating that small businesses planning procedure assumes from large business, will not be any more stereotyping that refurbish the guttering or patch-up the plumbing, and new small business owner will prove to be the spearhead for success; with following selected skills, approaches and management styles for creating, establishing and running a small business.