Unit 15. Advantages and disadvantages

OF RUNNING A SMALL FIRM

 

Small firms actually have advantages over large firms in many cases. One advantage of small firms is that they often grow into large firms. Many of today's small firms will become giants in tomorrow's business world. Some ofthe situations in which small firms have distinct advantages are the following:

1. When new products or ideas are being tried. Small firms have much flexibility. Decisions can be made and implemented quickiy.

2. When the personal attention ofthe owner is essential to daily operations. If the owners presence is important to the growth of the business, it will be more successful if the business is small enough for one person to supervise

3. Where personal services, either professional or skilled, are dominant. Examples of this include beauty parlors, real estate offices, interior- decorating firms, TV repair shops. Medical and dental services are also usually rendered by small firms. Any possible advantages of large size in these areas are usually offset by greatly enlarged overheads less efficiency on the job, and the loss of the personal touch of the smaller firm.

When the market for the product or service is mainly local. In some types of firms, it just is not economical to attempt a scale of operations that exceeds the local market demand. The making of bricks or concrete blocks for the construction industry is an example. Transportation costs are prohibitive for moving such products.

When the industry is characterized by wide variations in demand or in styles. Examples of these include ladies' dress line, ornamental candles, and custom-made chandeliers and lamp shades. These types of products just do not invite large firm development in most cases. The small, flexible firm usually can adjust to the necessary variations of specialized products more easily.

When close rapport with personnel is essential. Small firm owners usually have the advantage of being close to employees. They know problems from daily conversations and can adjust employment to a person's abilities better because of this close association. As a result, they are usually able to maintain better morale and efficiency in the firm, which is important in any business.

Disadvantages of small firms:

Small firms are often said to labor under such disadvantages as the inability to secure competent employees, the inability to cope with monopolistic practices, the inability to finance expansion when it has been proved to be practicable, tax burdens, limited vendor goodwill, discriminatory practices by large shopping-center developers, lack of time for the small proprietor to handle multiple assignment, lack of research facilities, and the problems of making a new firm or product known in its market.

Many of the disadvantages of small firms could be overcome with positive planning. An ill-conceived business, whether large or small, has little chance of success if its operation has not been properly planned. Good research in

the planning stage can reveal opportunities for success. It can also indicate when a business that is contemplated should not be undertaken.

The rewards for successful small firm ownership can be significant. The personal satisfaction will vary with the individual owner. Good profits, satisfying employment, being one's own boss, community status, family pride and tradition, and having an outlet for one's creativity are some of them.

But these rewards are never automatic or guaranteed. Success makes many demands upon the operator of the firm. The requirements for successful ownership of small business firms can be summarized as follows: personal characteristics, good customer relations and knowledge of consumerism, good community relations, business ethics and social responsibility, compliance with government regulations. But sound business knowledge and willingness to work hard stand at the head of any list. Knowing the causes of failure can protect the owner against them.

The individual firm has benefited from having these and other advantages. In addition to the types of firms cited, small firms in such fields as construction, wholesaling, retailing and the service industries have faced up well to their larger firm competition. Insurance and small finance firms have also been very successful. The profitable firms have not relied on the inherent advantages of small firms as such, but have combined these advantages with alert and competent management to achieve their success.

EXERCISES

Exercise 1. Match the English words with their Russian equivalents.

1. consumerism А. ежедневное ведение хозяйственной

3. vendor goodwill

4. real estate

5. transportation costs

6. to supervise

7. research facilities

8. to cope with

9. offset

10. to handle

11. rewards

12. adjust

13. tax burdens

2. daily operations

деятельности

B. контролировать, наблюдать; инспектировать

C. недвижимость

D. оказывать (помощь)

E. возмещать, компенсировать

F. накладные расходы

G. эффективность; производительность

H. превышать; превосходить

I. спрос

J. транспортные расходы К. приспосабливать L. поддерживать М.справиться

14. rendered

15.exceeds 16 lack

N. расширение, рост О. бремя налогового обложения Р. гудвилл фирмы

Q. недостаток, нехватка, отсутствие R. управлять, осуществлять контроль S. средства на исследование Т. поощрение, вознаграждение U. консюмеризм

17. overheads

18. to maintain

19. efficiency

20. demand

21. expansion

Exercise 2. Answer the following questions.

1. Why are small firms more preferable when new products or ideas are being used?

2. Why do small firms have advantages when the personal attention of the owner is essential to daily operations?

3. Why are large firms less efficient where personal professional services are dominated?

4. What are the advantages of small firms when the market for the product is local and there are wide variations in demand and styles?

5. What advantages do small firm owners have?

6. What disadvantages of small firms do you know?

7. How can owners of small firms overcome disadvantages?

8. In what way can owners of small firms be rewarded?

9. What requirements for successful ownership of small business firms are mentioned in the passage? Which are the most important?

Exercise 3. In each of the following select the word or phrase that best completes the statement or answers the question.

1. An advantage of small businesses over big businesses is that small businesses

a. are more flexible c. are less regulated

b. have fewer problems d. are all ofthe above

2. Which ofthe following would be classified as working for some one else?

a. physician in private practice с retail sales clerk

b. dairy farmer d. attorney

3. Big business, some people believe

a. is unethical c. has more political power

b. strangles small business d. does all ofthe above

4. A list of skills in order of difficulty or rank is called

a. a rank list c. a hierarchy

b. a guild record d. a table of skills

5. Small businesses when compared to big businesses

a. are more likely to succeed c. are a greater risk

b, employ more workers d. usually require less capital to start

6. Future innovations in technology will

a. create opportunities for small businesses

b. put small businesses out of business

c. decrease employment in some industries

d. all ofthe above

7. Which of the following products can be sold in vending machines?

a. hot soup and sandwiches c. insurance policies

b. stockings d. all of these

8. Which ofthe following is a performance test?

a. driving (road) test c. blood test

b. IQ test d. written driver's test

9. Which ofthe following is a repair business that services businesses?

a. watchmaker c. office machine repair

b. TV repair shop d. dentist

10. Which of the following is not a financial business?

a. credit union c. investment banker

b. insurance company d. company that prints paper money

11. If you opened a hamburger stand, you would probably need a

a. license c. variance or permit

b. lemonade stand d. all of these

12. What businesses are most people likely to have been involved with while still in school?

a. paper route c. babysitting

b. lemonade stand d. all of these

13. Which ofthe following statements is true?

a. Small businesses can be very small

b. Small businesses must be run on a full time basis to be profitable

c. Small businesses are not found in the production area

d. All distribution businesses are small

Exercise 4. Match the words with their definitions.

efficiency, facilities, demand, costs, expansion, overheads, consumerism, reward, goodwill, tax

1. A need for or a desire for a commodity, together with the ability to pay for it, as in the law of supply and demand.

2. A consumer protest against the perceived injustices in exchange relationships and efforts to remedy those injustices.

3. The expenses incurred in producing goods or services during the period.

4. Regular and essential expenses such as rent and the cost of telephones, stationery, etc.

5. The quality of being able to do a task successfully and without wasting time or energy.

6. The process of becoming greater in size, number, or amount.

7. An amount of money that you have to pay to the government so that it can pay for public services.

8. The popularity and good reputation of a successful business that forms part of its financial worth.

9. Something that you are given, for example because you have behaved well, worked hard, or provided a service to the community.

10. The equipment, buildings, services, etc that are provided for a particular activity or purpose.

Exercise 5. Supply the sentences with the missing words.

render, lack, facility, offset, estate, maintain, cope with, adjust, handle, vendor, exceed

1. He divided his... among his four brothers.

2. We would never have secured our independence without the aid you....

3. They argued thattheirwage increases would be... by higher prices.

4. Sales... all expectations.

5. We should... our approach.

6.1 need the money to... me for at least the next month until I startajob.

7. We must try to our own failure.

8 The streets were crowded with... and buyers.

9.... of proper funding is making our job more difficult.

10. He... all the major accounts.

11. They ask for a 6 million pound loan... as working capital.

Exercise 6. Complete each sentence with the correct form of make or do.

1. There's a rumor going round that Peily's are going to... a bid for Squash International.

2. Please... your best to get these typed documents before 5 o'clock.

3. Who shall I... the cheque out to?

4. If we don't get some orders soon we'll have to... some of our workers

redundant.

5. I'm afraid you'li have to... without the other photocopier until we can get the part we need from the suppliers.

6. We've been... business with them for over thirty years now.

7. Considerable progress has been... and we hope to put some con­crete proposals to our members tomorrow afternoon.

8. The bank has decided to... extra provision against bad debts this year.

9. They've been... a roaring trade since they decided to advertise on local television.

10. We have..a considerable profit on the sale of that land.

11. I've got all these invoices to... before I can go home.

12. The business was so run down when she took it over that no body expected her to... such a success of it.

13. Something as simple as changing the size of the lettering on the packet cans... all the difference to your sales

14. Increasing production Will... even more demands on machinery which is already breaking down at an alarming rate.

15. They could... with some computer paper in the wages office.

16. We've... away with the old system of clocking in.

17. A customer has... a complaint about one of our salespeople.

18. In fact Gravers have... us a favor by launching their product first.

When you have checked your answers, write down each expression with do or make to help you to remember them.

Exercise 7. Complete each sentence by using the correct form of one of the following verbs. Use each verb once only.

build make overcome say

sell spend take over win

1. More than 6 million tins of beans are... every week.

2. They were... by an American company last year.

3. No attempt was... to explain the inconsistency in the figures.

4. Kent Industries are... to be thinking of expanding overseas.

5. Once initial problems had been... the re-organization went like clockwork.

6. Their new factory will be... on the outskirts of the town.

7. The contract was... in the face of strong competition.

8. Over$3 million was... on advertising last year.

Exercise 8. Combine an adjective from the list on the left with a preposition from the list on the right to complete each sentence. You must use each adjective once only, but each preposition can be used more than once.

relevant proud aware acceptable

well-known

accustomed

dependent

capable

of

on to for

1. I'm not... any regulations that should prevent us from exporting to those countries.

2. We need somebody who... understands German.

3. That's an interesting point but it isn't really... our discussion.

4. It took me some time to become... using the new system.

5. They will only sign if the terms are fully... them.

6. It's risky to be... only one supplier.

7. He was so... his firm's achievements that he talked about them to everyone he met.

8. This company is... the high quality of its products.

Exercise 9. Complete the sentences by inserting one of the following.

all any each every

1. We sell... type you like.

2. We are involved in... the stages of wine production and distribution.

3. We have studied... step in the distribution process.

4. We studied... of the major wine producers.... of them has some advantages.

5. You asked me if we can supply... retailer in the north of England. In fact, we can reach... one within a thirty mile radius of Newcastle.

6. We are involved in... aspect of wine distribution.

7. major wine producers have suffered from the recession.

Exercise 10. Answer the questions.

1. Do you know of a business firm where the personal attention of the owner is important to the firm's success?

2. Do you think that small firms can keep competent employees? How?

3. Why is it that not all Americans believe they would be successful owners and managers of their own.business?

4. Which two rewards of success would you place first if you had your own small business?

5. Would you include preownership experience in your list of requirements for successful management?