Governing Business Activity - Essay Example

Small businesses could not exist without big businesses’ Introduction “There’s a lot more business out there in small town America than I ever dreamed of.” (Thinkexist, 2010) These are words by Sam Walton about the Small Businesses in US. So, as per his opinion there are huge number of small businesses in US. But it has now become imperative to analyse whether these small businesses can exist without bigger players. The topic says ‘small businesses cannot exist without big businesses.’ Well, that is a conclusion which can be arrived at only after thorough discussions and analysis. There are much divided opinions about this statement of the problem. Some argue that small businesses cannot exist without the help of big companies. Some others argue that small businesses can exist without any support from the big businesses. This topic throws out several issues. The main issue here is the relationship between small and big businesses. The core issue is the extent of dependence of small business on a big business. This essay makes an analysis of the given statement. For the purpose of arriving at a conclusion the given issues are concerned in detail. The main body of the essay will begin with an explanation of what a small business is. Further, an analysis is done about small businesses in terms of the range of industries where they operate. The next part will enumerate the extent of dependence of small businesses on the bigger ones. By detailed analysis of all these information in the main body, a conclusion is arrived at about the given topic. Main body Small Business: There are several definitions for a small business. Small business is defined on the basis of ownership, nature of business and also the type of business that it performs. Some definitions state that small business is a privately owned business that operates in a very small market area. A small business contains relatively small number of employees. The sales volume of the business is usually small compared to that of the bigger counterparts. The mandatory requirements for a small business to be classified them as so, differs from one country to the other. The capital requirements for a small business in India will be completely different from that of China. Similarly, the employee requirements for a small business in US will be different from that of in US. Factors like quantum of sales, profit for a year, ownership, etc are other factors that define a small business. Small business contribute a large extend to the economy of a country. In some countries small businesses are backbones of the economy. Small businesses are always found in close association with entrepreneurship for the very reason that many aspiring entrepreneurs begin their business as a small enterprise. What it means is that a small business today will be a big enterprise tomorrow. Over time, small business grow themselves in terms of sales, assets and profits and also diversify into new business areas, thereby transforming themselves to be a big business in future. Range of industries being operated in by Small businesses: Most of the small business in a country operates in a hidden environment. Only very few small business is being known by the public. The number of small business in a country is mostly higher than the number of big business that operates in that country. It is very difficult to count the range of industries in which the small business operate because if there is an industry there is also a small business operating in that arena. But in most of the case a small business cannot be tracked in all those industries. The main reason is that most of those businesses are back end players. This means that they operate mostly in component market than the final product. Most of the small businesses thus operate in a business to business manner that business to customer. For example in the case of an Automobile industry there are a large number of small business that are involved in making small components like screws, rubber mats, etc. Thus the marketing expenses of small businesses are relatively lower as they mostly operate in B to B manner. Their customers will be major Automobile companies in a country or sometimes outside a country. Another reason for non detection of small business is that they are mostly located in the non urban parts of a country. Small business in major economies: Small businesses contribute a major chunk in almost all the major economies of the world. In United States, small business accounts for more than 50 percent of the worker population. They are also number one job creators in the country. Small business accounts for 99.7 percent of all firms. Small business contributes a major chunk of the tax payers of the country. Many large scale companies are being supported by these small businesses. In the case of US there are many small companies that serve the customers directly. Small businesses play a big role in the Indian economy too. In India, most of the small businesses are located in the rural areas. Therefore, most of the population residing in these areas are employed in such small industries. Small industries generate jobs and improve the standard of living of the people living in the rural areas. The Indian government has introduced several plans to motivate people to set up small business. In India, small business operates mainly in industries like food, paper, rubber, leather, textile, gold, etc. In China too small businesses play an important role in the economy. One of the most important features of Chinese economy is the low cost of production due to low labour cost. Therefore, China is a very attractive location for small businesses. Nowadays, China is developing itself to become an IT hub in future. Once they develop the necessary quality resources, China might develop itself as an IT hub. Major companies across the world have their support services set up in countries like India. There are many small scales IT companies in India that provides support services to IT giants across the world. During the recent recession when major companies in the world were affected by the crisis the small business in India were affected. Some of these small businesses have to close down as a result of this. As the economy recovered some of these businesses also came to track. Textile and gold industry of India were heavily affected by recession and it resulted in the close down of many gold and textile manufacturing units. Relationship of small businesses with the bigger ones: The relationship of small business with that of the bigger ones is discussed in the previous part of the essay. The relationship of small business with that of the bigger ones was clearly identified during the recent recession that hit the world. During the time of recession many big businesses faced problems in their order books. When they lost business, small businesses that provided ancillary products to these big businesses also faced problems. There are also another side of the coin. Many small businesses will have to close their business due to the big ones. For example, if Wal Mart opens their store in a locality the small businesses that operate in the area will have to either close down their stores or shift it to some other locality. (Morebusiness, 2010) Conclusion The above part of the essay has given a clear idea about small business and its existence in the society. The above discussions help us to reach a conclusion on the give topic. As far as an economy is concerned, small businesses are extremely important. But the case here is whether they are dependent on big businesses. The above discussions give clear evidence that most of the small businesses cannot exist without big businesses. The otherwise can also be stated, that is, big business cannot operate efficiently without small business. A big company cannot produce all the components that are required for the product they manufacture. If Mercedes Benz decide to produce every single component that are used in their cars by themselves, they will have to invest heavily, and also their attention will thus be diverted heavily in the component manufacturing. They might also lack expertise in manufacturing of certain components. Thus both small and big businesses are interdependent. But as the purpose of the essay is to analyse the dependence of small business on the big ones, it can be concluded that most of the small business cannot exist without big businesses. Works Cited Thinkexist, 2010. Small Business Quotes. [Online] Available at: http://thinkexist.com/quotes/with/keyword/small_business/ [Accessed 26 April 2010] Morebusiness, 2010. Small Business Advantages in the Big Vs. Small Business Battle. [Online] Available at: http://www.morebusiness.com/small-business-advantages [Accessed 26 April 2010] Read More