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There are many differences between small and medium enterprise and larger scale enterprise. The small and medium enterprise consists less than 200 people in the business included the owner of the enterprise. However, the larger scale business employs more than 200 people. Most of the utilization of the larger scale businesses are in large quantity as the small and medium enterprise only needs a small amount of utilization to run the business. The owner of the small and medium enterprise can keep track of progression in the business closely, however the owner of larger scale businesses are unable to do so due to many branches in the market. The larger scales businesses needs managerial expertise to handle business. The small and medium enterprise has to be competitive, as there are many others with the same business as they fight to get the buyers. The small and medium enterprise does not have any impact in the market as the customer can choose other product to replace their product and there are many enterprise in the market selling the same product too. The larger scale businesses has a stable position in the market, it is not afraid of other competitors, as company has its own reputation in the market for example, Louis Vuitton Malaysia private limited company.
There are many difficulties in a sole trader's business. In this case, I have interviewed a sole trader named Darlene. Darlene runs a business of video compact disc in a shop lot in Menglembu, Ipoh. Darlene faces varies difficulties, such as bearing consequences in own risk. For example, when business is slow Darlene has to bear the loss of the business herself. Darlene also has to face the competitors selling digital video disc around her shop lots area. Darlene has to make her shop as attractive as possible to attract customers. Darlene also has to negotiate the price of the video compact disc with the suppliers herself, however the deduction of price is limited because Darlene only purchase the video compact disc in small quantities as she only has a small range of customers . Darlene has to handle the goods in the shop all by herself for she can't afford to employ more workers as the profit of the shop is just enough to pay the expenses and her own living expenses. Darlene can't expand her business as she is unable to fulfill the requirement of government laws.
The small and medium enterprise is known as a sole trader or partnership in a business. The small and medium enterprise has small contribution to the whole market. However it does not affect the overall market. We are actually surrounded by small and medium enterprise in our daily activities. It is such as the noodle stall that we had for breakfast or the sundry shops around our house area, and also the night markets that all of us Malaysians loves to go.
The large scale businesses refer to private limited company and limited company. The larger scale organization has larger contribution towards the market. Examples of larger scale businesses are Air Asia Berhad, KPJ Healthcare Berhad, Sime Darby Berhad and Securiforce Sendirian Berhad. The larger scales of businesses have a wider range of customers compared to the small and medium enterprise.
There are many differences between small and medium enterprise and the larger scale businesses. The small and medium enterprise consists less than 200 people included the owner of the enterprise as he/she is also the employee of the enterprise, while the larger scale businesses employs more than 200 people as the owner of the business is not the employee of the business, he/she employs managerial expertise to handle and make decisions in the business. The small and medium enterprises do not have any headquarters or branches in the business. It has only one shop lot to run its business with small range of customers. It is because of insufficient capital and inability to follow the requirement of government legislation and bureaucracy to apply for loan causing result in unable to expand the business. However, the larger scale businesses has headquarters and also has many branches in the business, the larger scale businesses has a stable financial account and also has return of income tax to the government, as result the organization is able to successfully apply for loan to expand business and cope for large quantity of customers in the market.
There are also advantages in small and medium enterprise. As the owner and the employee of the enterprise, the owner of the enterprise has flexibility to run the business at the time of his/her liking, as he/she is also the leader in the enterprise. The owner of the small and medium enterprise can choose to close his/her shop any time he/she feels tired or he/she feels that he/she has enough profit for the day. The small and medium enterprise is able to work more efficiently as the employees works directly under the owner of the enterprise compared to the large scale businesses for the larger scale businesses has complexity in the organization structure, not all works work directly under the management department causing confusion in working task given at times. The larger scale businesses can't choose to run the business at the owners liking of time, the working hours are set in order to acknowledge customers of the operation time of services provide to the customers. If the larger scale business do not have a fix operation time, it will cause complexity in the acknowledging the customers operation hours and the working hours of the employees, as there are more than 200 employees in the business, the business will also lose customers for customers will choose other companies to go to. For small and medium enterprise, because the range of the customer is small therefore there is personal recognition towards most customers. At most times the owner of the enterprise inform the customers personally about the operation time of business for the enterprise sell and deliver the goods personally to customers. The small and medium enterprise is able to fulfill each customer's needs individually. The larger scale businesses cannot do so because of wide range of customers, there are too many customers to cope with, with cause inability to have personal recognition towards each customer. However the management department provides a customer service department in the company to improve relation towards customers and understand the needs of the customers. Example of customer services professionals is VADS Berhad. VAD Berhad represents ones company to understand customers' demands more professionally and efficiently.
The small and medium enterprise can also adjust to change in the market condition quickly. If the product of the business does not meet the demand of the customers as expected, the enterprise can change to another product attract customers. This process can be done in a short time, as the enterprise is small and the owner of the enterprise works together with the employees. For example the enterprise could start selling flowers and chocolates when it is Valentine's Day to earn more profit, after the occasion the sales of flowers and chocolates are less in demand, the enterprise could change to selling fruits and snacks to satisfy customer's needs .The owner of the enterprise can always come out with new ideas and new products to the business according to occasions and the trend in the market to earn more profit. The owner of the enterprise is the source of competition. It is because he/she creates a new idea that has yet to appear in the market. Therefore he/she can sell the product in a higher price. It will cause other enterprises to sell the same product too. However, in the larger scale businesses, it is not able to do so, for it has many branches in the business, the managerial expertise must analyze the risk of each decision made. The capital needed to change the product is too big, as the entire current product will be wasted. The larger scale businesses stay with the same product permanently.
The disadvantage of small and medium enterprise is lack in managerial expertise in the business, the owner of the enterprise makes decisions by his/hers perception of view, there is no analysis in the market of producing each product, resulting no acknowledgement in risk with decisions made. The owner cannot afford to employ any managerial expertise, such as accountant because the profit earned in the business is small which is not enough to pay the salaries of the managerial expertise. Besides, the small and medium enterprise has a high level of competition because there are so many other enterprises selling the same product in the market. The enterprise has to package the product as attractive as possible to attract customers to purchase the product. The small and medium enterprise also cannot achieve the "Economics of Scale". The reduction of price in cost of product is limited, because the enterprise only buys products in small quantity for it only has a small range of customers resulting enterprises urge to expand business into a bigger scale business.
To overcome for small firms, the government has imposed VAT Value Added Tax. It is stated from the government that when a company is having loss, the company is allowed to transfer the loss to the next year and postpone the payment of the business tax only in the coming year. As for the enterprise initiatives, there is 'Business Expansion Scheme' which is an organization who lends capital to enterprise that needed. Besides, there is also a 'Loan Guarantee Scheme' which is provided by the government. Small and medium enterprise can approach the bank to apply for the loan. However a certain percentage of interest is charged from the loan. Lastly, the government helps the small and medium enterprise by reducing the rate of the corporation's tax. As business tax has a higher rate, therefore the government reduces the rate of the corporation tax when an enterprise is facing difficulties in their business.
The larger scale businesses has dominance in the market, it has a strong position in the market, for example Tiger Beer, Coca-Cola and Pepsi. The smaller enterprise has no impact towards the business of the larger scale businesses. The larger scale businesses are defensive and strong in the market. The company has good reputation in the market and its presence is always there in the market.
Besides, the larger scale businesses is able to achieve the economics of scale, for the business is big the larger scale businesses purchases it goods in bulk (large quantity), in this way the company is able to reduce cost. The economics of scale broads into 5 categories. It is technical, marketing, financial economies, managerial economies and risk beginning economies. In technical, it refers to the equipment in the company's factory, the equipment must be able to run at high speed and cater for all purpose to be more productive. The multipurpose equipment should last for a long time even though it is expensive. Therefore the company also manufactures and exports the product in the business to earn more profit. In marketing, the company will have to purchase in large quantity to lower the cost of expenses in production. The larger scale businesses also do not hire advertising company to advertise its product. The company sells and advertises their product by themselves. The company owns their own transport to deliver the product. Therefore the company will promote their product through big pictures of their product on the transport (lorries) to advertise to the public. In financial economies, the big scale businesses has stable financial status, therefore it is easy to apply for loan from the bank to expand business. There are managerial expertists in the business where the company employs specialist in marketing, admin, human resource and sales department. In this way the company can be more productive. The specialization in each department will research and enable the company fight for risk in the company, therefore standby to face consequences in the company, controllable or not controllable. Through diversification, the specialization will think of a product that can divert into many products in future to maximize the profit in the business.
The advantages of achieving economies of scale enable the well-developed company to be the concentration in the market. As it is well known all over the world, it is easy to attract customer to purchase their product. The employees of the larger scale businesses also feel proud to work for with them for the status. For example, being a manager in Genting Berhad, the manager has confidence and status rather than being a manager in a small enterprise where no one knows them even for the hard work they contribute. Since the company is big, the company also has its own journal to advertise its product to the customers.
The disadvantages of a bigger scale businesses is when the company become big yet weak when the arrangements within the company is complicated. For example, when the organization structure is too complex, some employees work overtime while some employees work less, causing complication within the employee system of the company. Besides, there is a lack of recognition between those with the lower position in the company toward those with higher position when the employees do not know their director of the company because of big amount of employees in the company.
In the methods of growth, all small and medium enterprise is a traditional-ground for new industries. For the enterprise start small in order to expand into a bigger business and achieve the economics of scale. In the larger scale of businesses, there is internal expansion and amalgamation to expand the business. By internal expansion, the company expands its business by profit plough back which is using the profit to roll into another bigger production and not enjoying the profit first. In external expansion, it is applying loan from banks to expand business. In amalgamation, it happens only when a small company is taken over by a bigger company. The bigger company will take over all the capital of the small company and remove all employees of the small company in replacement of its own employees to become a part of the bigger company. However, the problems of the larger scale businesses can be overcome through strategic management and business policy to be more efficiently productive.
Direction of growth is only applicable in larger scale businesses, the small and medium enterprise do not have direction of growth. The larger scale businesses grow in three directions, horizontal integration, vertical integration, and lateral integration. The horizontal integration represents different companies that produce the same kind of product and services together in a market, for example, Coca-Cola, Milo and Nescafe (drinks). In vertical integration, it is when a company which bring together different stages in its production process, for example, cinema. Lastly, the larger scale businesses grow by lateral integration (Conglo merates). It refers to little relationship between two companies which have to combine product together in order to produce a complete product, for example the relationship between Proton Car Company and Bridgestone Tire company. The Proton cars need Bridgestone tires in order to complete a product.