SMALL BUSINESS MANAGEMENT

Small Business Management

Small Business Management

Small and large businesses play vital role in the economic development of United Kingdom. The small businesses account for 99% of the business in United Kingdom. Collectively, SMEs in United Kingdom count for 65% of employment and 57% of GDP in United Kingdom. Small organizations comprise of bulk of organizations in every economy in the world. For prolonged time, it has been assumed that organizational theories and models that are developed in larger organizations can be applied to small firms as well. On the other hand, it has been greatly understood that SMEs vary considerably from the large organizations. It has been observed that creation, development and running of small organizations require different management skills and approaches (Wiedmann & Hennigs, 2013, pp. 322-325).

The approaches and management skills that are required to create establish and operate a SME are affected by internal and external environment. Therefore, we will talk about various aspects in which SMEs differ from larger organizations like political influence, power of market, human resource management, strategies, information technology and financial innovations (Stoner, 2003, pp. 237-247).

How Small Firms Are Different From Large Organizations

It has been studied that large and small organizations are fundamentally different from each other. There are various different factors in the organizational model of SMEs that make them different from larger organizations. These factors affect the management approach and styles as compared to large organizations (Nwankwo & Gbadamosi, 2010, pp. 13-30). There are three key aspects which make small originations different from larger ones and they are as follows:

Uncertainty

The primary factor is level of uncertainty. With respect to the level of uncertainty, there are three dimensions that have been recognized:

Uncertainty with respect to lack of market power

It is the significant dimensions to identify, therefore, the development and establishment of SME requires the owner to have a clear approach of lack of power in the market as it is an external uncertainty. This makes SMEs owner as price takers since they do not have any power for setting prices. Thus it is proposed that the SMEs owner should focus on niche market in the begging phase of creation (Cooper & Burke, 2011, pp. 183-185).

Uncertainty with respect to limited base of products and customers

Small firms act as subcontractors of large organizations. These firms are vulnerable to subcontractor's risk that is developed by the reliance on dominant customer base; however it is also sourced from the extent to which the results are specialized to a specific customer (Imai, 1997, pp. 19-25).

Uncertainty with respect to diverse objectives of SMEs

A large number of SMEs relies on the achievement of minimum level of sales instead of maximization of their sales or earnings. These firms are not concerned with the report of their actions to external stakeholders therefore; performance evaluation does not exist effectively. In these organizations there is a strong and close relationship between owner and business (Levy & Powell, 2004, pp.87-90). Therefore, the motivation level of the owner is the lay ...