Advantages and Disadvantages of a Small Business - Pembroke Tourist and Leisure Park - Assignment Example

Advantages and Disadvantages of a Small Business Author’s Name Institutional Affiliation Abstract Small Businesses continue to play an important role in the improvement of lives and livelihoods of many families in different countries across the world. An example of such small business is Pembroke Tourist and Leisure Park in Armidable, New South Wales, Australia. Pembroke Tourist and Leisure Park is located near the national parks of New England and offers different tourism services. The scope of this report is therefore designed in such a way that it attempts to provide a working definition of a small business and some of the characteristics a small business as well some of the examples of a small business. The report also explores various ways through which a small business can contribute to the economic development of a country such as Australia. Moreover, the report also examines the advantages and disadvantages that are associated with a small business. The survey commenced with the review of the available data on small business. The literature reviews provided an insight on the nature and characteristics of small business as well as the role they play in a country’s economic development. Key Word: Small Business Introduction Small Businesses continue to play an important role in the improvement of lives and livelihoods of many families in different countries across the world. An example of such small business is Pembroke Tourist and Leisure Park, located on a 14 acre of landscape, a few kilometers from the Parks of New England. The business has been in operation for over thirty years. The park provides different accommodation services to suit every traveler. It consists of a swimming pool, recreation room, camp kitchen, play grounds, as well as covered BBQ area. With a work force of 13 employees, Pembroke Tourist and Leisure Park has remained under the watch of Mr. Cris, who serves as the owner and director of the business. The business is one of successful small business that has continued to do well in the country over the years. This report identified the Pembroke Tourist and Leisure Park as the best choice to use in exploring the advantages and disadvantages of small businesses. The scope of this report is therefore designed in such a way that it attempts to provide a working definition of a small business and some of the characteristics a small business as well some of the examples of a small business. The report also explores various ways through which a small business can contribute to the economic development of a country such as Australia. Moreover, the report also examines the advantages and disadvantages that are associated with a small business. Significance of the Study The study topic is important as it helps to explore the merits and demerits of a small business thus providing a vital data base for decision making for those who wish to venture in small business enterprises. By highlighting the economic contributions of a small business, the report provides an important insight to the policy-making process for small businesses. It also presents information on best management practices for successful small businesses. The report is therefore seen an import tool in the improvement of small business sector in Australia and other countries across the world. Survey Design and Methodology The survey commenced with the review of the available data on small business. The literature reviews provided an insight on the nature and characteristics of small business as well as the role they play in a country’s economic development. To be able to get primary information to justify the review exercise, the survey was directed at one of the small businesses in Australia to collect information on the advantages and disadvantages of such businesses. The survey adopted a procedure that involved designing of open ended questionnaires, booking an appointment with the business owner, actual administration of the questionnaires, and analysis of collected data and the compiling of a report. The use of open-ended questionnaires was considered as an appropriate instrument because it gave the respondent an opportunity to provide a full account of the information sought by the survey. Data Analysis, Discussion and Presentation of Findings Available literature on small business indicates that there is no universally accepted definition of a small business. The definition of a small business is normally done in accordance with the industry and the country the industry is situated. In the United States for example, the Small Business Administration defines a small business as that that has a workforce of less than 500 employees and whose annual turnover does not exceed $7 million for a manufacturing business. (Deakins & Freel, 2009). The definition of small business in the European Union is different from the United States’ definition. In the EU, a small business is defined as that business enterprise that is characterized by a workforce that is not more than 50 employees. However, in Australia, the definition of a small business is derived from the Fair Work Act of the year 2009. In this regard, the Australian definition of a small business is that that comprises a workforce of less than or equal to fifteen (ABS, 2003). Despite all these varied definitions of a small business, many agree that a small business is privately owned and operate with a minimal number of employees and also registers quite a small volume of sales. From the definitions of a small business, a number of characteristics can be derived. One of the characteristics of a small business therefore is that it comprises very few numbers of employees who are normally employed by the owner of the business. The employees are either paid on a monthly, weekly or daily basis depending on the agreement that exist between the employer and the employee. Due to the few numbers of employees that characterize a small business, the volumes of output for the small business are normally a small one. The small output volumes are also reflected on the sales volumes which are also normally small. Another characteristic of a small business is that of decision making. Decision making is one of the key factors that determine the success for any business outfit. Normally for large business organizations, the decision making process is normally decentralized to the various departments that constitute the business organization. However, for the case of a small business, the decision making process is a centralized one as the business owner is normally the sole decision maker on all matters that pertain the day-to-day running of the business (Longenecker et al, 2008). Small businesses also do not have access to larger amounts of loans since they lack collateral security required for securing such loans. This characteristic is viewed by small business owners as a constraint to the expansion and growth to their businesses. In the case of Pembroke Tourist and Leisure Park limited access to larger loans has been one of the biggest challenges the business has been faced with over the years. It therefore follows from this characteristic that a small business is not associated with larger assets compared to those of a large business organization (MacMahon & Murphy, 2009). During the interview, with Mr.Cris the sole owner of, Pembroke Tourist and Leisure Park, the survey found out that another characteristic of a small business is the ease with which such businesses can respond to customers’ tastes and preferences. Being a business that deals in confectionaries, Mr. Cris explained that his business has to respond in a timely manner to accommodation needs of travelers who visit the park to meet their satisfactions. Small Businesses play important role in the growth and development of economies of different countries. In Australia for example, small businesses are considered as sources of employment. A small business provides both direct and indirect employment. In the case of Pembroke Tourist and Leisure Park, a total of 13 people have been employed directly in the business to provide the necessary services required to run the business. In addition to the 13 employees employed directly in the business, the survey learnt that approximately 100 people have been employed indirectly in the business (Cris, 2006). Small businesses also contribute immensely to the improvement of lives and livelihoods of most households in Australia. Such businesses remain major sources from where most households derive their livelihoods. Through the taxes that such businesses remit to the local and/or national government, they help promote the country’s GDP. Another way in which a small business contributes to the economic development of a country is that of expanding the space within which economic activities can take place. This involves bringing goods and services to the people. There are a several advantages that are associated with a small business. The first advantage is that starting a small business is normally easier compared to large business organizations. Normally a start up capital foe a small business can be derived from personal savings, loans and grants from friends and relatives. One can also obtain loans from microfinance institutions. Unlike for the large business organizations where collateral securities are required to obtain loans, only a detailed business plan is required to obtain loans for the case of a small business. Second, a small business is advantageous as it provides a lot of independence to the owner. This independence is seen in the manner in which the business owner remains his/her own boss who remains the sole decision maker on matters that relate to the running of the business. This contributes to faster decisions compared to large business organizations (English, 2006). The management structure of a small business is also a simple one as opposed to that of a large business organization. A small business does not require high level of expertise in its management. It also requires only a minimal workforce for its operations. A successful small business goes along way in raising the economic status of its owner and associates. Such successful businesses also improve the owner’s status in the society. This happens since all the proceeds from the business are directed to the owner in the event that the business is dissolved or has collapsed. With a small business, the owner is able to get access to information and other development opportunities. It is this exposure that makes it easy for the business owners to diversify their activities when thy realize a change in demand or supply in the goods and services they deal in. an advantage in this context therefore is that with a small business, diversification is normally much easier compared to large business organizations (Kotey, 2005). The advantage of acquisition of labor is also worth mentioning in this report. Normally, the owners of small businesses get labor from their businesses from their family members. Two of the employees of Pembroke Tourist and Leisure Park are members of the owner’s family. The rate of payment for the two members is quite different from that of the other three employees. The survey found out that the remunerations that the two employees get from the business can only be described as a token of appreciation. Getting labor for the running of the activities of a small business is therefore cheaper compared to that of running a large business organization (Hodgetts & Kuratko, 2002). Despite the advantages associated with a small business enterprise, the option of settling for a business of this nature also comes with a number of disadvantages. Firstly, operating a small business is riskier in terms of increasing awareness and demand especially for new goods or services in the market. This is attributed to the fact that most of the small businesses are not as influential as large ones. Secondly, employees in a small business enterprise are vulnerable to longer working hours that are at times tiring and lead to boredom (Jenning and Beaver, 2007). Workings for long hours are due to the fact that small businesses have minimal workforces. The concept of working in shift as practiced in large business organizations does not therefore exist in a small business environment. Nonetheless, the employees are subjected to minimal wages despite working for such long hours. Thirdly, the end of a small business enterprise is normally an abrupt one. A small business “dies” in the event that the owner dies. Such cases are normally common where there is no capable family member to manage the business after the death of the owner. Fourthly, a small business also has limited access to large capitals. Normally the attainments of such large capitals require specific collateral securities that the small business enterprises seem not to have in many occasions. They are thus deprived of the opportunities of obtaining the capital. Fifthly, even though the owner of a small business is his or her own boss and always at liberty to make decisions on matters of running the business, most of these decisions that the owners make often lack the requisite skills and expertise. Despite the disadvantages highlighted above, there are a number of best practices that if adopted and a adapted by small business enterprises may contribute immensely to the success of the small businesses. For a successful small business, understanding the market structure for its product is very important. In this since, the business is able to respond to the changes in demand and tastes of the customers. A small business should also embrace a culture for planning and developing objectives and strategies to be adhered to while running the business. Continuous monitoring and evaluation of the business is also important for a successful small business enterprise. Specialization among the employees of a small business should also be encouraged so as to improve the quality of service delivery as well as production of goods. The business owners should also encourage cordial working relationships among the employees to promote efficiency and effectiveness. Finally, the business should collect and collate internal and external experiences with regard to successful small business organizations (Kotey, 2005). Conclusion A small business therefore has enormous potential for improving the livelihoods of households across Australia and the world at large. Its advantages outweigh its disadvantages. Considering the problem of raising large start up capital for large business organizations, a small business provides a viable option for individuals who cannot afford such large start up capitals. Small business enterprises also present an opportunity to invest in those area where large businesses shows no interest due to the costs involved in doing business. In this regard, a small business plays a key role in expanding the economic space of Australia and other countries across the world. References Australian Bureau of Statistics (ABS). (2003). Small Business in Australia, Cat. No. 1321.0. Commonwealth of Australia: ABS. Deakins, D. & Freel, M. (2009). Entrepreneurship and Small Firms. 5th Edition. New York: McGraw Hill. English, J. (2006). How to Organize and Operate a Small Business. 10th edn. Sydney: Allen & Unwin. Hodgetts, R. & Kuratko, D. (2002). Effective Small Business Management. 7th edn. Sydney: The Dryden Press. Jennings, P. & Beaver, G. (2007). 'The Performance and Competitive Advantage of Small Firms: A Management Perspective', International Small Business Journal, 15, (2): 63- 75. Kotey, B. (2005). 'Planning, enterprise performance and owner/manager personal values', Journal of Enterprising Culture, 3, (4): 409-426. Longenecker, J. et al. (2008). Small business management: launching and growing entrepreneurial ventures. (14th Ed.). New York: Cengage Learning. MacMahon, J. & Murphy, E. (2009). ‘Managerial Effectiveness in Small Enterprises: Implications for HRD', Journal of European Industrial Training, 23, (1): 25–35. Meredith, G. (2006). Small Business Management in Australia. 4th edn. Sydney: McGraw Hill Book Company, Sydney. Small Business and Independent Contractors Fact Sheet. (2010). retrieve 14 October 2010. http://www.innovation.gov.au/Section/AboutDIISR/FactSheets/Pages/SmallBu sin essFactSheet.aspx. Appendix UNIVERSITY OF NEW ENGLAND FUCULTY OF THE PROFESSIONS SCHOOL OF BUSINESS, ECONOMICS AND PUBLIC POLICY SMALL BUSSINESS’S OWNERS QUESTIONNAIRE I am a student from the University of New England. I am conducting a survey on the topic: “The advantages and disadvantages of Small Business.” As an important player in this survey, you have been selected to contribute to this exercise by answering a few questions. You responses will be treated as confidential and used only for purposes of this survey. Thank you. 1. Question: What do you understand by the term Small Business? Answer: A small business is a business enterprise that employs very few people (less than 50) to provide the required services need to run the business. 2. Question: What are the characteristics of a Small? Business? Answer: a) employs a few employees b) Small volumes of outputs c) Have limited access to large loans d) Fast decision making process e) Ease of change from one product to another 3. Question: Give an examples of a Small Businesses you know Answer: Pembroke Tourist and Leisure Park 4. Question: How does a Small Business contribute to the economic development of a country like Australia? Answer: a) Provide employment to citizens b) is a source of income to the owner and his/her family c) Help expand the space for distribution of goods and services 5. Question: What are the advantages of a Small Business? Answer: a) Easy to start b) Requires limited labor c) Easy to manage d) The business owner is his/her own boss e) Faster decision making process f) Exposes the owner to information on how best to run the business. 6. Question: What are the disadvantages of a Small Business? Answer: a) The business collapses when the owner dies b) Small volumes of outputs c) Requires the owners and employees to work for long hours d) Limited access to large loans e) Limited market influence especially for new products 7. Question: What are the best practices that contribute to a successful Small Business? Answer: a) the owner should understand the market b) The business owner should develop a culture of planning c) There is need to develop strategies that are achievable for the business e) Need to encourage cordial working relationship among employees. Read More