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UNIT 2.  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 of the 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 quickly.

2. When the personal attention of the owner is essential to daily operations¹. If the owner's presence is important to the growth of the business, it will be more successful if the business is small enough for one person to supervise².

3. Where personal services, either professional or skilled, are dominant. Examples of this include beauty parlors, real estate³ offices, interior-decorating firms, TV repair shops. Medical and dental services are also usually rendered⁴ by small firms. Any possible advantages of large size in these areas are usually offset⁵ by greatly enlarged over­heads⁶ less efficiency⁷ on the job, and the loss of the personal touch of the smaller firm.

4. 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 exceeds⁸ the local market demand⁹. The making of bricks or concrete blocks for the construction industry is an example. Transportation costs¹⁰ are prohibitive for moving such products.

5. 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 adjust¹¹ to the necessary variations of specialized products more easily.

6. 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 maintain¹² 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 with¹³ monopolistic practices, the inability to finance expansion¹⁴ when it has been proved to be practicable, tax burdens¹⁵, limited vendor goodwill¹⁶, discriminatory pratices by large shopping-center developers, lack¹⁷ of time for the small proprietor to handle¹⁸ multiple assignment, lack of research facilities¹⁹, 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 rewards²⁰ 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 consumerism²¹, 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.

Notes: 1. ежедневное ведение хозяйственной деятельности; 2. кон­тролировать, наблюдать; инспектировать; 3. недвижимость; 4. оказывать (помощь); 5. возмещать, компенсировать; 6. на­кладные расходы; 7. эффективность; производительность; 8. превышать; превосходить; 9. спрос; 10. расходы на транс­портировку; 11. приспосабливать; 12. поддерживать; 13. спра­виться; 14. расширение, рост; 15. бремя налогового обложе­ния; 16. гудвилл фирмы; 17. недостаток, нехватка, отсутст­вие; 18. управлять, осуществлять контроль; 19. средства на исследование; 20. поощрение, вознаграждение; 21. консью­меризм.

COMPREHENSION

1. 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?

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 of the above

2) Which of the following would be classified as working for some­one else?

a. physician in private practice c. 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 of the 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 of the above.

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

a. hot soup and sandwiches c. insuarance policies

b. stockings d. all of these

8) Which of the following is a performance test?

a. driving (road) test c. blood test

b. IQ test d. written driver's test

9) Which of the 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. insuarance 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 of the 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.

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.

4. 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 that their wage increases would be ... by higher prices.

4) Sales ... all expectations.

5) We should ... our approach.

6) I need the money to ... me for at least the next month until I start a job.

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.

1) There's a rumour going round that Pelly'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'll 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 no­body expected her to ... such a success of it.

13) Something as simple as changing the size of the lettering on the packet can ... 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 favour 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.

GRAMMAR FOCUS

6. As you read about business in newspapers and magazines, no­tice how often the passive form is used in sentences such as:

Grove Developments have been chosen to build the new sports center.

It is important that you know the past participle form of every verb you learn as this will help you understand and make sen­tences in which the passive is used. In this exercise you have to complete each sentence by using the correct form of one of the following verbs. Use each verb once only.

build	sell
make	spend
overcome	take over
say	win

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-organisation went like clock work.

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.

relevant	capable	of
proud	well-known	on
aware	accustomed	to
acceptable	dependent	for

2) We need somebody who is ... ... understanding 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.

all

any

each

every

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.

DISCUSSION

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?

1. Write a description of a small firm with which you are familiar where the personal attention of the owner is considered important by its customers. Explain why this is important.