Managing Small Business - Literature review Example

Running head: Assessment of Managing Small Business 25th April Introduction With the increased competition in the local and international markets, business communities have adopted various strategies in order to remain competitive. While some individuals have embarked on forming companies, others have established partnerships with various outlets to address the needs of the customers locally and globally. One of the major aspects that determine the size of the business is the amount of funds needed at the start of the business. For example, if an individual want to start his or her own business, he or she may require getting funds from friends or parents and not necessarily from banks. However, Stokes and Wilson (2006) indicates that if a group of people decide on forming a company, they may be required to contact banks and other financial institutions in order to get substantial amount of funds. In order for a business to be successful, it is essential to have a skilled and motivated workforce. This implies that managers must have adequate management skills that include the way to motivate employees, effective communication and creation of strong communication among the stakeholders. The aim of this paper is to analyze Business Post, a small business which was a family business where I worked as a sales representative. Family business Business Post was established in 1994 by Alex’s father, the pioneer owner. After 10 years, Alex took over the management of the business and one year later he included the wife as a partner. Being under the management of Alex, the business established various marketing posts which were mostly filled by close relatives who had marketing skills. The business met the criteria for family business. First, it has undergone inter-generational transition. This is based on the fact that the pioneer was the father who became unable to manage it due to old age. This made him to transfer the management responsibilities to the son. Secondly, approximately 95% of the shareholding is owned by the family (Whitmyer and Rasberry, 1994). Thirdly, almost all the management responsibilities are under the hands of Alex, who was the managing editor and the wife. This implied that even if the employees could make a decision or come up with an idea, they had to seek the approval of the managing editor and the wife. As a family business, Business Post was based on the bases of four objectives. First, it had family objectives which included protecting and accumulating the wealth. This was to ensure that the next generations in the family remains financially stable and members of the family do not depend on other people in the society. Additionally, the business aimed at building the reputation of the family within the community. Secondly, the business had the parental objectives (Buckley, 2009). The pioneer, who was Alex’s father, was focused at creating employment opportunities for the family members. Wilson and Bates (2003) noted that as more people become trained in management and marketing skills, some may not get employment opportunities. Thus, Alex father started the business to guarantee his dependants are employed and their income is able to sustain them and their children. In addition, he wanted to create an avenue through which the next generations could improve their career. Alex on his part has introduced a program where employees are trained on marketing skills as well as leadership. Thirdly, Business Post is focused at attaining management objectives. As the major managers, Alex and the wife aims at maintaining effective management including increasing profitability, increasing the value of the business, growing and developing the business and ensuring independence. Fourthly, Business Post had social objectives. In order to ensure that the workforce remained motivated and the level of turnover is reduced, the managing director introduced employees’ welfare where the workers were provided with financial assistance in case their families were faced with a health problem or death. The business also allowed employees to make monthly contributions where the accountant was responsible for keeping the funds which were later shared among the employees at the end of the year. As the business expanded, it introduced social responsibilities where it focused at assisting the disabled persons within the neighboring communities. As a result, Alex family improved it image on the eyes of the public and the demand of our Business Post magazine, the core brand greatly improved. Alex, the business owner It was during my marketing research where I found Alex who became interested in my marketing skills and later offered me an opportunity to head his team of marketers. Through the qualitative type of research methodology, Alex informed me that he was motivated to take over the business from the father due to his strong desire to create wealth and make his family comfortable. The business owner indicated that while Business Post faces stiff competition from the rivals such as Business Today and Entrepreneurship, he was enjoying strengths. First, he felt the sense of belonging and loyalty, these made him to adopt various strategic plan in order to make the business sustainable. Secondly, the business was flexible. This made it possible to adopt strategies that were unique in the business without making consultations from other people. The business was people focused. While the competitors were aiming at facing off Business Post in the market due to its stability and strong corporate culture, Alex business aimed at creating strong positive relationship with the people (Stokes and Wilson, 2010). The business noted that people are potential customers and if cared for and linked with the business, the image of Business Post will be enhanced and the sales level will significantly increase. Another strength of the business was that it arraigned its activities in line with the culture of the customers. With the growing demand for advertising spaces, Business Post diversified its brands to include advertising spaces where and global companies could place their adverts in order to create strong customers awareness. Business post also had a long term view. According to Alex, his son daughter Ann, who is undergoing training in Business Administration, will take over as the managing director in future. In this way, the business will remain a family matter where its objectives will remain unchanged. Despite the strengths that Business Post faced in the market, it had weaknesses that are common with family businesses. First, since the wife had not management skills, there was lack of professionalism and ability while dealing with the workers. Notably, she indicated a kind of ruthless behavior while dealing with female workers. In turn, the workers were mostly emotional and some experienced lack of objectivity due to improper directions given by the wife who held the position of office administrator. With the expanding brand portfolio and business activities, Business Post was slowly being controlled by other people outside the family. This was based on the fact that Alex family was small and could not entirely manage all the business activities in the information technology, accounting, procurement, cleaning and maintenance departments. Branding Mathieson (2005) depicts that the major aspects that made Business Post to remain competitive in the advertising and business magazine sector was effective branding. As indicated by Shaw (2012), a brand entails a design that is intended to identify the goods or services of one seller or group of buyers in order to differentiate them from those of the competitors. Business Post, adopted red and white colours on its cover page and it mostly targeted individuals holding corporate positions and entrepreneurs. Alex was responsible for designing the cover page while other designers were responsible for making the adverts inside the magazine to meet the needs of our customers. During its start-up, Business Post adopted a slogan which was ‘We transform your business’. One of the benefits of effective branding during the start-up of business as noted by Stokes and Wilson (2010) is that it makes the customers to remember the business thus resulting to a strong loyalty leading to higher sales. Additionally, a strong brand indicates the level of business establishment. This has a major role in the manner that customers perceive the business and how effective it is in meeting their needs. In this regard, Business Post aimed at assuring our clients that we were not focused at making money or generating high profits, but the magazine was focused at transforming their business (Mathieson, 2005). The business became quite effective in meeting the needs of our customers to a level that we were nicknamed ‘the transformers’. Based on the need to increase its revenue, Business Post designers were involved in designing corporate magazine for other companies though it was under the direction of the managing editor. In this way, the brand name of the business improved. According to Shaw (2012), businesses with multiple products and services, need to have strong brand in order to allow them to link together several different products or ranges. In order to ensure that Business Post magazine as a brand is known by all our customers, all the products and items produced by the business had the name Business Post with the business slogan. In this way, customers could easily identify the products that the business was producing and differentiate it from those of the competitors. Business plan One of the major factors that small businesses should not overlook is coming up with a business plan. As noted by Stokes and Wilson (2010), plan should be done during the business start-up, when purchasing a business, while making business review and major decisions. Once the plan is made, the stakeholders including the owners, managers and investors have the opportunity to benefit and contribute to the improvement or implementation of the plans. Alex indicated that his business success was not only based on the initial plan as made by his father but also by the adjustments he made on the business plan. The major advantages of producing the plan for Business Post included assessing feasibility, setting objectives and budgets, and calculating financial requirements. Being a skilled businessman, Alex was in a position to make a plan that covered major areas as outlined by Stokes and Wilson (2010. These included the way to motivate the employees including the annual benefits that the business will initiate, market overview, management of the people, financial summary, the SWOT analysis of the business, objectives and the mission statement. Business Post mission was ‘To engage, inform and entertain our readers while taking their business to the next level’ Weaknesses of business plan While coming up with business plans, small businesses such as Business Post are faced with a number of weaknesses. First, it takes more time and money. This is due to the professionalism that is required where business have to hire a planner from well established companies or consultation firms. Secondly, it becomes an avenue through which the competitors are informed about the company strategies. For example, during the planning process, Alex hired a technician who upgraded the QuickBooks accounting package. Later the competitors, who were not using the package started to use it thus creating a strong competition. Thirdly, planning limits innovation. With the limited number of managers in small businesses, owners strictly flow the plans thus making it difficult for other stakeholders to contribute to the plan leading to lack of new ways of doing things. During the planning process, Stokes and Wilson (2010) argue that business owners may create a conflict with their firms. This is based on the fact that they may establish strategies that are not in line with the government policies or employees requirements. On its part, Business Post hired legal personnel in order to ensure that all the areas within its plan were compatible with the government requirement in addition to meeting the needs of the employees. This was also done by the use of feedbacks that were provided by the employees once Alex took over the management of the business. Franchising While it was passed from the pioneer to his generation, Business Post also engaged in some franchise with the major telephone companies where it provided advertising and marketing services. Additionally, the business provided general advice and support in the matters of product designing based on the expertise that Alex and other designers possessed. As noted by Stanworth and Purdy (2006), by becoming a franchisor, small businesses such as Business Post benefit in various way. First, they increase their outlets and attain a wider coverage with limited capital investment. Secondly, it improved the image of the business locally since it is seen to have ability to deal with other big companies. Thirdly, the businesses incur limited overheads since the franchisees are responsible to cater for the costs. However, Business Post franchise generated more disadvantages that the benefits. For example, the employees became demotivated since much of the revenue generated ended in the owners pockets. Secondly, the actual income provided by the franchisees was only known by the owner, thus the designers could not get the right compensation. Thirdly, there emerged regular conflicts between Business Post and other companies due to failure to meet the deadlines. Fourthly, Business Post was faced with scarcity of marketers and designers since it engaged with big contracts from established companies. This made it to recruit more employees leading to increases costs for the business. Sources of funds For any business to achieve its objectives, it must have adequate finance to cater for the operations. Lack of adequate finance and inadequate cash flow is one of the factors that lead to failure of small businesses. This implies that businesses should embark on researching on the sources of funds that are not expensive. According to Reed (2009) there are various sources of finance for small businesses during their start-up. These include internal sources for example retained profits, and personal sources. Externally, businesses can use equity, debt finance or alternative sources. Examples of equity include venture finance and equity markets. Debt finance examples include HP leasing, trade credit and bank finance. On their part, Rouse and Jayawarna (2006) indicates that with the increasing financial challenges for small businesses, banks have embarked on creating strong relationship with the business owners by providing them with affordable sources of funds. Examples of bank finance are credit cards, which have good deals and can pay off, overdrafts, and loans. Networking Small businesses require the support of other firms in order for them to become competitive. This entails forming a series of networks especially in the local markets. Networking refers to the process of building and maintaining relationships with other people. Another advantage of networking as indicated by Swan (2012) is that businesses can be promoted while at the same time creating favorable images of the businesses. For Business Post, social networking was a major aspect that led to its success when Alex took over the management of the business. The positive impact includes development of innovative servicers, acquisition of information and advice, effective competing, supplementing of resources, accessing opportunities, and expediting the solving of problems among others. With the growing use of social media by firms, small businesses have emulated this as an avenue to network with other small firms. For small businesses, social media create certain advantages. First, they are free to access and post information. Secondly, the firms are able to reach the targeted market with the use of little investment thus reducing the cost of marketing. Thirdly, Tucker and Lean (2003) indicates that the information regarding the products and services provided by small businesses can reach large number of people within a short duration. Fourthly, small businesses such as Business Post can establish reputation and demonstrate expertise to established companies thus getting an opportunity of engaging with them. However, with the increased use of the social media, Business Post just like other small businesses is faced with a number of demerits. These include high cost while updating the information, social media keep on changing, different networks apply different input, bad timing, threat of viruses and quick spreading of a bad reputation among others. Business Post adopted various social media tools to create a strong positive relationship among the employees and the customers. These included Facebook, Twitter, Google and LinkedIn. In his effort to create an effective communication with the employees, the managing editor establish a policy whereby each employee was to open a face book account but it was strictly for official duties only. As a result, the employees could timely undertake a task without necessarily meeting the manager (Borgeon and Cellich, 2013). While networking is an important strategy for small businesses, they should adopt effective policies to avoid negative repercussions. For example, when it looks as if business owners are giving up, they should try and get something out of it. Owners should also be at the right state of their minds before using a particular network. Additionally, the business owners should approach the groups that they feel there are comfortable with. Failure of small businesses According to by Paul Burns on his studies on Entrepreneurship and Small Business, more than half of the small businesses stop to operate within 3 years of start. While not all small business fail, others cease to operate when their products become obsolete, bankruptcy, being purchased, and voluntary liquidation. Additionally Stokes and Wilson (2006) argues that when a business fail, banks and other investors may be dissuaded from investing in the business an aspect that may result to financial problems. For small businesses, studies done in Ulster University indicates that lack of identifying customers and poor pricing, inappropriate managing of short term cash flow, and poor delegating as the major causes of failure for small businesses (Borgeon and Cellich, 2012). In order to ensure that Business Post remains sustainable, the business owner applies the influence of small size on management. For instance, the management ensures closeness of the working groups thus ensuring that vital information regarding the business can be noted in a timely manner. In addition, the managing editor ensures small management team with clear duties to avoid conflicting roles that could lead to the business failure. On their part, the employees are provided with an opportunity to provide feedback on the leadership style of the business (Wilson and Bates, 2003). In this way, they are able to indicate any deviation in terms of managing either on the side of Alex or the wife. Conclusion Based on the above discussion, it is clear that small business require to be closely managed to avoid their failure. Family businesses are mostly affected by failure especially due to the need of members to hold senior positions. Business Post was effectively managed by the pioneer and once it was taken over by Alex family, it adopted strategic plans that made it to be successful. Even though Business Post was faced with the problem of lack of professionalism and lack of objectivity for some workers, it has strong branding and properly made business plan under the democratic leadership of Alex. The company engagement with other firms, banks and investors was positive an aspect that made it to have strong capital bases in addition to continuity of its operations. References Borgeon, M., & Cellich, C. 2012. Trade promotion strategies best practices. New York, N.Y. New York, NY 10017): Business Expert Press. Borgeon, M., & Cellich, C. 2013. Trade promotion strategies best practices. New York, N.Y. Street, New York, NY 10017): Business Expert Press. Reed, M. 2009. An investigation of practices in first grade admission and promotion, New York City: Teachers College, Columbia University. Rouse, J. and Jayawarna, D. 2006. The financing of disadvantaged entrepreneurs. Are enterprise programmes overcoming the finance gap? International Journal of Entrepreneurial Behaviour & Research. Vol. 12 No. 6, pp. 388-400 Stokes D. and Wilson, N. 2006. Small Business Management and Entrepreneurship. Thomson, London. Stokes, D. and Wilson, N. 2006. Small Business Management & Entrepreneurship, London, Thomson Learning. Stokes, D. and Wilson, N. 2010. Small Business Management & Entrepreneurship. London, Cengage. 459-461 Stokes, D. and Wilson, N. 2010. Small Business Management & Entrepreneurship. London, Cengage. Swan, K. 2012. Interdisciplinary approaches to product design, innovation, & branding in international marketing. Bingley, U.K.: Emerald. Tucker, J. and Lean, J. 2003, Small firm finance and public policy. Journal of Small Business and Enterprise Development. Vol. 10 No. 1, pp. 50-61 Whitmyer, C. and Rasberry, S. 1994. Running a One-Person Business Berkeley: Ten Speed Press Wilson, P., & Bates, S. 2003. The essential guide to managing small business growth. Chichester: Wiley. Bibliography Buckley, G. 2009. 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Appendix Reflection on Learning List of relevant reading Family business Objectives of family enterprises Social enterprises Small business failure Networking Branding Business plans Legal issues when starting a business Sources of funds Start-up strategies Reflection My learning of this module has exposed me to various issues related to managing small businesses. While studying the PowerPoint that covers on family business, I noted that if they are not properly managed, they can fail. In my efforts to understand the readings, I was able to engage in discussion with my course mates an aspect that my skills of identifying the causes of small business failure. Another important issue that we covered in the module was networking. As one of the emerging avenue of marketing, I noted that even though it has advantages, it has negative implications which can make the business to be outshined by the competitors. Other learners in the class significantly contributed to various topics while other guided me in identifying various sources of funds for small businesses. Additionally, I have learned on the importance of branding for businesses during their start-up and during their activities. Additionally, I during their start-up, small businesses need to adopt the best strategy affordable Read More