Understanding Small Business
Understanding Small Business
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Rolffe Peacock, Understanding Small Business: Practice, Theory and Research(Adelaide: Scarman Publishing 2004)Test your understanding with discussion questions from each chapter Chapter 1: Definitions and contributions of small business 1.1 In attempting to design a qualitative definition of small business what items could be focussed upon ? Provide reasons and examples. 1.2 Explain and evaluate the usefulness of the qualitative definition of small business adopted in the Beddall Report (1990). 1.3 Which criterion for identifying small business is found in each of the reports from the Wiltshire, Bolton and Beddall Inquiries? Explain its importance. 1.4 Explain the ‘20/100 rule’ as a definition of small business. Refer to question 1.1. Which ‘items’ does the definition possibly take account of ? 1.5 A friend from Canada is staying with you on holidays. Outline to her the small business sector in Australia in terms of the number of firms, employment and industries. 1.6 Compare the proportion of men and women in the Australian small business sector. Explain likely reasons for the difference. 1.7 Evaluate the statement that ‘small business growth has been static in Australia for many years.’ 1.8 You have been asked to present a paper to your local Service Club outlining the economic contribution of small business in Australia. Make your brief notes under the headings of number of firms, creation of value, job generation, and exports. 1.9 Small business has an important economic role to play in relation to competition and efficiency. Explain and discuss. 1.10 Use the analogy of elephants, mice and gazelles to explain the dynamic contribution of small business to the economy. 1.11 ‘Small businesses are too small to have any impact on the global economy.’ True or false ? Explain. 1.12 You have been asked to present a paper to your local council in a rural area outlining the social contributions of small business. Make your brief notes under the headings of freedom of opportunity, consumer choice, and decentralisation. Use some personal examples to illustrate your points. 1.13 Refer to the case study of Siva Selva. What are the factors which may be responsible for Siva’s success? Is it likely that small firms owned by business migrants are more likely to be family businesses than those owned by Australians? Explain. 1.14 It is important to have a balanced view of small businesses. Explain their possible downsides in terms of volatility and quality. 1.15 Is it important to debate whether or not ‘small is beautiful’ ? Explain.
Chapter 2: Enterprise, entrepreneurs and small business owner-managers 2.1 Use a diagram to explain enterprise characteristics and entrepreneurial characteristics and their link with small business. 2.2 Refer to appendix A. List what you consider to be the most negative aspects of the image that our community has regarding small business. 2.3 Outline reasons for the poor small business image in Australia – see appendix A. 2.4 How could the image of small business be improved? Refer to appendix A. 2.5 Evaluate the state of small business and entrepreneurship studies in Australian universities – refer to appendix B. Does this matter? Explain. 2.6 Compare and contrast the economic roles of entrepreneurs according to J. Say, F. H. Knight and J. Schumpeter. 2.7 Explain how you might attempt to ascertain whether a person’s personal traits indicate a high nAch and an internal locus of control. 2.8 According to P. R. Liles, how does a marginal firm differ from an attractive small company and a high potential venture? Is Innovative Engineering (Bob Ganley) an attractive small company? Explain. 2.9 What are the factors that can lead to a free choice period (window of opportunity) for a person to start a business? 2.10 There are many people who reach the window of opportunity, but do not start a business because they need a precipitating event to overcome their inertia. Describe likely precipitating events. 2.11 Evaluate the proposition that entrepreneurs are risk-takers. 2.12 Which of the three definitions of entrepreneurship in the chapter do you prefer? Explain why. 2.13 Is it possible to distinguish between traditional and entrepreneurial small businesses? Explain. 2.14 Consider the brief profiles of the seven outstanding Australian entrepreneurs in the chapter and list any characteristics that they have in common. Name some other outstanding entrepreneurs. 2.15 Compare and contrast the profiles of Bob Ganley, Wayne Portelli and Barbara de Corti and their businesses. List any common characteristics. 2.16 Study Dr. Brodribb’s portrait study of successful owner-managers and compare it to the information from the three more recent small business surveys in the chapter. Draw up a list of similarities and differences. 2.17 Refer to the case study of Gregory Matthews (Green Landscaping). What are Gregory’s business motivations? In your opinion, does Green Landscaping contribute to the economy and the community? 2.18 ‘Because entrepreneurial small businesses are the growth generators in Australia, government policy should be directed at them and not at the traditional small businesses.’ Do you agree or not? Discuss.
Chapter 3: Frameworks for understanding small business 3.1 Refer to a dictionary and explain the meaning of the word ‘framework.’ Why are frameworks needed in order to understand small businesses? 3.2 Who needs to understand small businesses and why? 3.3 Nine general aspects have been suggested as possible considerations in Framework 1. Assume that you are to study each of the following types of small business: · ethnic small business, · home business and · family business. In what way might you vary the aspects of Framework 1? Remember not to overlap unduly with the other three frameworks. 3.4 What additional information can be learned about a business by applying a Framework 2 analysis? 3.5 Explain the rationale behind using Framework 3 (Social action approach). 3.6 Provide two examples for each of C. McDowell’s classes of business objectives. 3.7 Refer to the three case studies in Chapters 1 and 2 (Siva Selva, Bob Ganley, Gregory Matthews). Which of the three latent identities may be held by these people? Explain with reasons. 3.8 Explain the rationale behind using Framework 4 (Stages approach). How does it differ from Framework 3? 3.9 Design a figure to explain the ‘career-long learning path’ of small business owner-managers. What are the obstacle for owner-managers who pursue this path in a growing firm? 3.10 Explain the primary functional emphasis needed for each of the five stages of Kroeger’s model in Framework 4. Why are these important for the continued growth of a business? 3.11 Compare and contrast Kroeger’s model and Buchele’s model and explain their similarities and differences. 3.12 Buchele suggests how KC1 and KC2 can be avoided by the proprietor. Explain the suggestions. Explore any difficulties which business starters may have in carrying these out. 3.13 Describe any limitations of Framework 4. Are these so severe that we should steer clear of it? Explain. 3.14 Refer to the case study of Peter Simson. Explain why small business operators ‘… need to have a sound grasp of where you are in the business cycle ...’
Chapter 4: Starting up 4.1 Does it matter that people who start a business self-select themselves? Explain. 4.2 Outline what is required in each of the six stages of the process of starting a business. 4.3 Explain the four key factors which are most likely to lead to success or otherwise in starting up, and indicate why each is important. 4.4 Do you believe that the learning process in starting a business can be totally learned in advance? Explain. 4.5 Using research findings, outline the factors that tend to prevent people who intend to start a business actually proceeding to do so. Is there a rational explanation for each factor? Explain. 4.6 Does the prior education of a person matter if they intend to start a business? Explain. 4.7 Why, in your opinion, did 40% of South Australian starters do so at or from home? 4.8 Should people who want to start a business receive assistance? If so, what and by whom? 4.9 a How do intender courses assist participants in awareness, motivation and instruction? b What tend to be the limitations of such courses? 4.10 Should all small business starters in Australia be licensed? Examine the pros and cons, and give your personal opinion. 4.11 a Outline the concept steps for starting a business using sequence planning. b Why is step 8 (complete a preliminary profit plan) important? c In your opinion, which is the most important step?
Chapter 5: Managing the small business 5.1 Explain what is meant by the ‘general management’ of an organisation. Why is it important that it be done well? 5.2 Outline the stakeholder web of a small business known to you. Explain the tasks and the likely rewards of each stakeholder. Explain whether any stakeholders are more important than others to the survival and success of the business. 5.3 Compare and contrast who typically carries out the general management of the small and the large business. Explain the strengths and weaknesses associated with who does this. 5.4 If a small business is to grow into a large business there are some personal hurdles for the owner-manager. Explain these. 5.5 Refer to the Case Study of GEM Group Holdings. Although GEM was ‘only a few hours from being closed by the bank’ were finances the real problem? How was the company restored to its real potential? What lesson is implied for small business proprietors? 5.6 Explain and link the five traditional principles of general management. 5.7 How is the general management of the small business affected by smallness? 5.8 For learning to occur, often under pressure, a number of techniques of ‘smallness’ tend to be used in the small business. Explain and discuss these. 5.9 If the transition from informal small business management to formal big business management is essentially a learning process what types of support would seem to be useful for the small business? Who should provide these? 5.10 Explain the general state of Australian small business management according to the Karpin Inquiry. Why was this the situation? 5.11 Explain and evaluate the Karpin report’s framework for improving the management skills of SME managers. 5.12 Obtain the annual report of an Australian industrial company which is listed on the sharemarket and explain its management structure, separating out functional and general management. What evidence is there of formality and the five traditional principles of general management? 5.13 Select a business (with less than 20 full-time employees) that you know well. Outline the stakeholders and explain how the business is managed. Alternatively, interview the owner-manager to obtain the necessary information. 5.14 If you undertake both assignments 5.12 and 5.13, compare and contrast your findings.
Chapter 6: Planning the small business
6.1 Carefully explain the ‘management process’ using Figure 6.1. Use an example from your personal or family financial situation to demonstrate the model. 6.2 Compare the advantages to the pitfalls of planning. 6.3 Prepare a list of all the differences between operational planning and strategic planning. 6.4 What is ‘budgeting’? Explain its relationship to operational and strategic planning. · Why is the cash budget critical to the small business? · How could a pro forma balance sheet be of use to a small business? 6.5 Refer to Figure 6.2. Explain how the model could vary for a small business which manufactures a product and sells to wholesalers. 6.6 Evaluate the Australian small business research findings regarding operational planning and strategic planning. What gaps need to be filled in such research. If you have time, refer to the original references. 6.7 Use Figure 6.3 to carefully explain the process of strategic planning. How should the business objectives be achieved? 6.8 Explain how a business can control both its operational and strategic planning. 6.9 Should small businesses undertake formal planning? Explain. 6.10 How could the quality and usefulness of planning in small businesses be improved? 6.11 Explain and evaluate Golde’s suggestions for overcoming barriers to small business planning. 6.12 What is ‘strategic awareness’? What is its relationship to operational and strategic planning? 6.13 What is a business plan and what are its purposes in a small business? 6.14 How could the business plan prepared by a new starter differ from that prepared by a continuing small business manager? Could the purposes of the two types of plans be the same? Explain.
Chapter 7: Employment in the small business 7.1 Explain the major findings for small business employment arising from the Bureau of Industry Economics 1994 study of employment changes in Australia. Have these trends continued? Explain. 7.2 Explain employment changes by size of business from June 1984 to June 2001 according to the ABS. 7.3 What is meant by the term ‘workplace relations’? Are they the same as ‘industrial relations’? 7.4 Explain and contrast the ‘industrial harmony’ and ‘exploitative’ views of workplace relations in small business. Do such cases exist today in Australia? Discuss. 7.5 Outline the main changes in industrial relations from the late 1980s and discuss their affect (if any) on small businesses. 7.6 Should small business owner-managers complete enterprise agreements with employees? Explain the pros and cons. 7.7 Describe the key characteristics of small business work practices. Are these affected by any external influences? Explain. 7.8 To the extent that small firms tend to avoid employing young people, what do you feel are the reasons? 7.9 Why could women be the ‘hidden investment’ in small business? 7.10 What are some of the possible consequences of an enterprise as a ‘family’ business? Explain. 7.11 Do small business owner-managers have a high degree of job satisfaction? Use the role accumulation model. 7.12 On balance, do small business employees achieve a higher degree of job satisfaction than wage and salary earners? To what extent might job discretion be important? Does the age of the employee matter? 7.13 Compare and contrast Goss’s typology of managerial control and the Atkinson and Meager model as social action approaches to investigating SWP workplace relations. 7.14 Conduct a survey of people known to you who are employees in a small business (say less than 20 employees), and some who are wage or salary earners in large firms or the public sector. Evaluate the pros and cons of their jobs and whether on balance one group or the other is more satisfied with their work situations. 7.15 Assume that you are to undertake research into workplace relations in small businesses by interviewing employees. Outline the questions you would ask and explain how these would assist your research. Chapter 8: Financing the small business (1) 8.1 Explain the three areas of decision making in business financial management. What else should a business finance function be concerned with? 8.2 Compare the objective of modern finance theory with the financial objectives of small business. 8.3 Explain why the financial decision making of the small business is likely to be quite different from that of large companies. 8.4 Explain the financial reasons for the failure of small businesses. 8.5 How can the finance function of a small business be managed successfully by a new small business proprietor who has no background in financial matters? 8.6 What are the five main purposes of providing finance to start a business? To what extent will these same purposes remain as the business develops and grows? 8.7 Compare and contrast the concepts of the matching of sources and uses of funds, and of financial leverage. Could they be of more importance for the small business than the large publicly listed company? Explain. 8.8 Use a simplified business life cycle diagram to illustrate when finance is needed by a small business. Explain the three trouble spots that are likely to arise for the proprietor. 8.9 What are the predominant sources of finance for Australian small businesses? Explain the major reasons why small businesses could suffer funding constraints. 8.10 Outline the relevance of the four ‘Ps’ in presenting a case for a loan to a banker. 8.11 Refer to Table 8.3 (‘Lenders’ requirements checklist’). Which specific items in the listing relate to the four ‘Ps’? Explain, from the listing, other concerns that lenders apparently have in lending to small businesses. 8.12 Explain and evaluate the seven guides to sound financing for small businesses. 8.13 Alice plans to start her own quite small business with business equity of $5,000 provided from $3,500 of savings and $1,500 from her credit card ($5,000 limit). Having considered matters for several hours, she believes that sales for the first year should be $30,000 and that EBIT will be about 7% of sales. Long term assets of $11,500 and current assets of $3,500 will be needed. She has been told by her friend, Neville, that she should be able to obtain a North West Bank loan of $7,000 for three years, secured by a floating charge on all the assets of the business and a personal guarantee. Current liabilities, mainly trade credit, should be only $3,000. Based upon the current variable interest rate for her loan, interest payments for the first year would total $1,000. a Test Alice’s estimates against sound financing guidelines 2, 3 and 4. What reasons would you give for recommending that she proceed or otherwise? b Explain to Alice how and why she should attempt to follow the other four financing guidelines in her planning. 8.14 Conduct an interview with a small business proprietor known to you. Ascertain to what extent the five characteristics explained in the chapter, which lead to financial decision making that differs from that in large companies, relate to the proprietor and his/her business. Chapter 9: Financing the small business (2) 9.1 Explain how it seems likely that bank lending policies towards small business have developed from agency theory and the concepts of risk and return. 9.2 What are the specific reasons suggested for banks to require collateral security when lending to small business? Explain whether you agree with the reasons. 9.3 Explain the gaps in Australia in the availability of debt finance for small business. What are the likely consequences of the debt shortages? 9.4 Explain the changes required if banks and other financial institutions are to provide lending packages to small business other than traditional secured medium-term loans. 9.5 Summarise what we know about the latent demand for risk capital by small business. 9.6 Explain our knowledge about the supply of equity for SMEs, according to the Financing Growth (1995) and IRS (1997) reports. 9.7 What is venture capital? How does it differ from traditional debt and equity? 9.8 Name and explain the providers of venture capital in Australia. Which are the major suppliers? 9.9 Explain the characteristics of business angels. 9.10 Explain the investment readiness matrices that have been developed. How can this information be communicated and used by growth small businesses? 9.11 Explain the Federal Government’s COMETprogram. How could it assist in the provision of venture capital for SME managers? Chapter 10: Failure, assistance and small business 10.1 Explain the various meanings of ‘failure’ of small businesses. 10.2 Compare and contrast the high small business failure rates found by Williams and Pinfold with the low rates found by Watson and Everett, and Bickerdyke et al. What could explain the differences between them? 10.3 Summarise the basic problems of smallness. To what extent do they explain the high rate of return required by equity investors in unlisted small companies? 10.4 What are the root causes of small business failures in Australia? How do we know? 10.5 What qualifications are needed by ‘small business doctors’? 10.6 Explain the relevance of poor accounting to small business failures and problems. 10.7 Explain the four main areas of small business assistance needed to prevent failures. Do small business owner-managers avail themselves of the assistance that is available? Explain with reasons. 10.8 What is a small business ‘multiplier’ agency? Which are the main ones in Australia? 10.9 Explain the statement that ‘the small business - accountant interface presents an anomaly.’ 10.10 Summarise research findings regarding the activities of public accountants in relation to small business. 10.11 What could public accountants provide for small business? 10.12 A number of writers have used unusual terms to describe the actual or potential characteristics of public accountants and their skills: history maker, recorder and doom-sayer, dream accountant, counsellor, father-confessor, bully, provider of emotional support and often, scapegoat, small business doctor What were the writers suggesting? 10.13 Refer to Figure 10.1 and explain its relevance to the small business - accountant interface. 10.14 Why is it that a substantial proportion of public accountants are not acting as ‘dream accountants’ in relation to small businesses? What solutions are required? Chapter 11: Growth of small business 11.1 Describe the growth characteristics of the small business sector discussed in this book prior to this chapter. 11.2 Explain the contribution of David Birch to the small business discipline. 11.3 How is a job generation study carried out and what information can be gained as a result which is not available from annual ABS-type surveys? 11.4 Writers have used the following unusual terms for small business: gazelles flyers mice sinkers trundlers elephants picking the winners
What characteristics are the terms intended to convey? 11.5 Do you believe that the owner-managers of gazelles are always entrepreneurs? As well as referring to the information in this chapter also refer to Chapter 3 (Enterprise, entrepreneurs and small business owner-managers). 11.6 Why is it relevant to be able to identify high growth small business and better still, to be able to predict them at start up? Can we do either of these two things? 11.7 Explain Kirchoff’s ‘innovation-growth’ framework. · Explain its relevance for identifying the resource requirements of small business. · How else could the framework be used? 11.8 Describe the brief profile of Australian gazelles according to Yellow Pages Australia Small Business Index (September 1995). 11.9 Explain the significance of Figure 11.2 ‘Components of the growth small business ‘ for understanding gazelles. 11.10 Compare and contrast five important high growth small business strategies summarised by Storey (1994) from his analysis of quantitative research studies. 11.11 How are growth small businesses identified in the case study ‘Fastest growing private companies’? Outline any characteristics of the businesses which appear to be in line with the success factors referred to in question 11.10. 11.12 Explain how the findings of the mature firm study (Smallbone et al 1992) could lead to a conclusion that the concept of strategic awareness may be critical to the success of high growth small business. 11.13 ‘The National Investment Council (1995) in its report to Federal Government regarding the financing of growth SMEs said that there were four key elements critical to SME growth ..... ‘ Explain the elements. Are all necessary?
Chapter 12: Franchising 12.1 Outline the basic elements of a franchise, including the human parties. 12.2 Explain the different forms of franchising and provide examples. 12.3 Refer to the Case Study Franchising with Coffee. Explain how the 5 franchise systems targetted different market niches. 12.4 How important is franchising in Australia according to official and research sources? 12.5 Why do franchisees wish to manage franchise outlets rather than their own independent small businesses? 12.6 To what extent are franchisees similar to managers of the branches of large companies? To what extent are they similar to small business owner-managers? 12.7 Explain the franchisee life cycle. 12.8 Why should a company choose to expand using franchise outlets rather than simply increasing its branch offices? First, use the resource scarcity viewpoint. Then use agency theory. Explain any other reasons. 12.9 How can franchisees be best satisfied? To what extent could franchising advisory councils assist? 12.10 Evaluate the statement that ‘statistically, franchising is the least risky way of getting into your own business.’ Outline studies that support or disagree with the statement. 12.11 Outline the ‘dark side’ of franchising in Australia in terms of disputes and litigation. What are the reasons for the situation? Why does it seem necessary for Government to intervene in the franchising sector? Are there alternatives? 12.12 Outline the key aspects of the Franchising Code of Conduct. Chapter 13: Home business 13.1 In your opinion why has the ‘wave’ of telecommuters and teleworkers been evolutionary rather than revolutionary, whilst there has been a strong growth in home-based business? 13.2 Why could HBs be called the ‘hidden economy’? 13.3 What aspects of earlier ABS surveys hindered a fuller disclosure of the HB sector in Australia? Despite this, summarise the key findings of the ABS surveys mentioned in the chapter. 13.4 How might we classify individual HBs and on what bases? Give examples. 13.5 Refer to the Case Study ‘Home Businesses in Action’. List any common characteristics and differences in the businesses and owners. 13.6 Compare and contrast the pros and cons of running a home-based business. 13.7 Outline the main characteristics of HBs in relation to owner-managers and starting resources, and the firm. 13.8 Outline what we know about HB business strategies. 13.9 Are HBs marginal? Complete two lists - one outlining the positives and the other the negatives. On balance what is your finding? 13.10 What are the main economic contributions of HBs? 13.11 What are the main social contributions of HBs? 13.12 Explain five important findings from the two large research studies published in 1999 regarding Australian HBs. 13.13 Writers have used the following terms with regard to HBBs. What were they attempting to portray?
tip of the iceberg shades of economic
activity
13.14 Outline the main needs of HBs. What assistance could be provided and how? 13.15 Explain the relationship between local councils and HBs. What improvements could be made and how?
Chapter 14: Small business –government interface
14.1 Explain the significance of four major government Inquiries from 1974 to 1995 for small business policy and programs in Australia. 14.2 Outline Meredith’s rational policy-setting process. 14.3 Compare and contrast the three policy stances that can be adopted by central governments towards small business. Which ones apply now in Australia? Has this always been the case? 14.4 Should Australia include in its strategic small business policies those that contribute to social equity? Explain with examples. 14.5 Should Australia adopt a policy of ‘picking winners’ with regard to high growth firms? Discuss the pros and cons. 14.6 Following are sections of a press item (Luff December 31 1997). The Federal Government yesterday promised to make extra cuts to business red tape after fixing a goal for 40,000 new small businesses to be established next year ... But the small business sector immediately launched a fierce criticism of Mr. Reith’s buoyant projections, urging the Government to come up with initiatives to encourage existing and potential businesses ... the Small Business Association of Australia said the Government had not provided any incentives to start or expand small businesses. ‘Where are the incentives? We want things on the table to encourage the 625,000 small businesses across the country - let alone incentives for an extra 40,000 next year,’ a SBAA spokesman said. · Should the Government provide incentives to small business? · If so, what sort of incentives should be provided? 14.7 How should a central government ideally go about identifying the needs, opportunities and challenges of the small business sector which should become the subject of policy? 14.8 ‘Although the activities of many government departments impinge upon small firms there needs to be a focus of attention if small business interests are to become the object of specific policies.’ Outline the personnel and the structures within the Federal Government which have provided the ‘focus of attention.’ 14.9 How in practice do you believe the Federal Government has set small business policy in Australia? 14.10 What is the ‘policy community’ and what is its role in policy-setting? How does it resemble ‘an extended family or tribe’? 14.11 What evidence is there that there has never been an overall evaluation of small business policy and programs in Australia? 14.12 Outline Gomolka’s model of small business development. 14.13 Classify the small business programs and measures outlined in the chapter within the 9 elements of Gomolka’s model of small business development. Evaluate the result - do all the ‘items’ fit the model? Explain. 14.14 Explain the apparent key objectives of the impediment-removing programs and measures listed in the chapter. 14.15 Explain the apparent key objectives of the strategic policies listed in the chapter. 14.16 How is the delivery of small business programs and measures handled in Australia? Explain the role of AusIndustry. |
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