What are the Opportunities for the Establishment of Small Businesses in Australia - Case Study Example

 Table of Contents Abstract 3 Justification 3 1. Introduction 4 2. Small Businesses in Australia 5 2.1 The position of small businesses in the Australian market 5 2.2 Small businesses in Australia, operational needs and challenges 5 2.3 Opportunities for the establishment of small businesses in Australia 6 3. Conclusions 9 4. Recommendations 9 Bibliography 10 Abstract The structure and characteristics of markets worldwide are usually differentiated in accordance with the local culture and ethics; moreover, the political and economic trends developed in each country internationally are likely to influence its market’s performance in all industrial sectors. Current paper focuses on the identification and the evaluation of opportunities of small businesses in Australia; the various aspects of the above issue have been explored by referring to relevant empirical studies and appropriate literature. Moreover, statistics referring to small businesses’ performance have been also used – as possible – in order to offer a clearer view of the position, challenges and opportunities of small businesses in the specific country. It has been proved that small businesses have a key role in the Australian market; despite their value for the development of national economy small businesses in Australia are not given the necessary support – at least compared to medium and large firms operating across the country. It is suggested that existing governmental policies on small businesses in Australia should be changed – referring not only to the rules regulated the various activities of small businesses but also to the incentives offered to the owners of small firms in order to keep and further expand their businesses. Justification The issues examined in this report are related with my area of study; through this report I am giving the chance to explore certain aspects of business framework in Australia – referring especially to the activities and the opportunities of the small firms operating across the country. Therefore, this report serves as a tool for achieving the following two targets: for earning substantial knowledge on a well-developed market and for acquiring experience on business studies. 1. Introduction Small businesses have a key position in the Australian market; in accordance with a series of statistics presented in the study of Kloosterman et al. (2003, 67) ‘in the years 1994/1995 the number of non-rural small businesses in Australia has been estimated to 887,000’. In accordance with the above figure, the role of small businesses in the development of Australian economy is decisive; therefore, the opportunities available to these firms should be identified and evaluated; the needs and the structure of small firms should be also discussed – at the level that they could influence these firms’ prospects in the short or the long term. The concept of ‘small business’ as set under examination – at least regarding one of its aspects – includes the businesses that are established by an individual either for the first time or those that are acquired from another person – purchase of a small business that already operates in the market (Christensen et al., 2009, 66); through another approach, it is noted by English (2006) that in Australia ‘a business is classified as a small business if it has fewer than 20 employees or fewer than 100 employees if it is a manufacturer’ (English, 2006, 3). The opportunities of small firms in Australia are being explored by making appropriate referencing to their needs and challenges but also to the existing governmental policies related with small businesses across the country. 2. Small Businesses in Australia 2.1 The position of small businesses in the Australian market Australian market is offered for the development of business activities; the appropriateness of the particular market in regard to various business initiatives can be justified by referring to the study of Narayan (2008); in accordance with the above researcher Australia’s business cycle is strongly depended on the level of investment made on businesses in all industrial sectors; through this point of view, the development of small businesses in Australia could benefit the national economy by supporting the stability of the country’s business cycle. Moreover, Davenport (2003) refers to a statement of Joe Hockey, the Australian Federal Minister of Small Business and Tourism, who noted that ‘small businesses are an essential part of the Australian economy producing around 30 percent of GDP’ (Davenport, 2003, 25). In accordance with the above, small businesses in Australia have an important role – as also the medium and large firms – in the stabilization and the development of the economy. In this context, their needs and opportunities should be further explored by referring to findings of relevant empirical and theoretical studies. 2.2 Small businesses in Australia, operational needs and challenges As noted above, small firms have an important position in the Australian market; one of their key differentiations compared to the medium and large firms is the fact that the achievement of the business goals set by their owners is of critical importance for the strategic plans in which these businesses are engaged; the above fact was revealed through a survey conducted by Getz et al. (2000) among small firms operating in Western Australian; in the above survey, the profitability of the business has been also characterized as of high importance when decisive business plans have to be developed. Under these terms, the needs of small firms in Australia can be considered to be similar with those of medium and large firms: a) existence of adequate capital for the funding of the businesses’ daily operations and its obligations towards its creditors, b) continuous promotion of business products and services into the local market – also in the international market if a scheme of e-commerce has been adopted and c) update of the business policies in order to effectively compete the rivals. The only differentiation of small businesses – compared to the medium and large firms – would be their dependency on the owner’s perceptions and goals; any key strategic plan and initiative should be aligned with the owner’s view on the issue addressed. Because of their structure and hierarchy of needs, small firms are more likely to face severe pressures in cases of market turbulences or in cases of events that can affect the business cycle within a specific industry; an indicative example is mentioned by Cioccio et al. (2007) who noted that the ‘2003 bushfires in northeast Victoria (Australia) devastated over 1.1 million hectares’ (Cioccio et al., 2007, 1); the small firms operating in the region’s tourism industry had suffered severe losses; for medium and large firms the effects of the above event could be effectively controlled. 2.3 Opportunities for the establishment of small businesses in Australia The opportunities for small businesses in the Australian market would be depended on a series of factors, including the willingness of the government to change the rules regulating the various activities of small firms across the country; the financial support of schemes related with the development of small firms would be another requirement for the increase of these businesses’ performance; such practices would attract foreign investors – native investors could be also benefited as they were given more incentives in order to be engaged in such business forms. If the Australian government does not support more actively small firms then their stability will be set under risk – taking into consideration also the turbulences in the international market as a result of the global financial crisis. The above issue is explored in the study of Manley (2008) where it is made clear that the increase of innovation in small firms across Australia is strongly depended on the relevant governmental support – being expressed not only as appropriate funding schemes but also as legislative texts that support the development of initiatives by small firms in all the country’s industries. In any case, the size of small firms would be of critical importance for the identification of opportunities within the local market; different approaches could be used – compared to the medium and large firms – based on the fact that small firms can have different needs and potentials compared to the medium and large enterprises; for instance, the ownership structure in small firms could lead to increased equity agency costs – as proved through the research developed by Fleming et al. (2005) among 3800 small and medium businesses across Australia. From a similar point of view, King et al. (2010) noted that the written budges of businesses can be influenced by ‘the businesses’ size and structure but also by its environment’ (King et al., 2010, 40). It should be also noted that the support available to small businesses in Australia can be differentiated in accordance with their location; rural areas are still under developed – compared to the urban areas of the country – a fact that has been also identified by Davenport (2003) who noted that ‘the dispersion of small business activities create challenges to policy makers’ (Davenport, 2003, 26); it is mentioned by the above researcher that the total number of small business operating across the country reaches the 1 million (Davenport, 2003, 26) – increased compared to the 887,000 small businesses operating in Australia in 1994/95 as mentioned by Kloosterman (2003) – see introductory section of the paper. The above issues should be taken into consideration by individuals who are interested in establishing a small firm in Australia; the fact that small businesses constitute a decisive part of the market – having a crucial role in the development of the national economy, as proved through the statistics presented above – should be also taken into consideration before entering the specific business sector. On the other hand, existing business trends would be taken into consideration by those who are interested in establishing a small firm; reference is made especially to the technology advances available to small businesses – as in other firms also – in the international market; electronic commerce is a business tool quite valuable for the increase of business profitability – under the terms that it will be appropriately aligned with the existing business strategies. Mustaffa et al. (2004) have explored the potential involvement of e-commerce in the development of the performance of small businesses in Australia; it has been proved that e-commerce schemes could help towards the improvement of profitability of small firms – especially by decreasing the cost for reaching new customers and promoting the products/ services offered to the public; on the other hand, it is noted that e-commerce could also result to the increase of competition within the Australian firm by allowing foreign firms to enter the market and compete with the existing businesses (Mustaffa et al., 2004, 85). 3. Conclusions The opportunities for small businesses in Australia are many; however, it is not clear whether all of their owners are aware of the relevant prospects; the fact that business growth in Australia is not equal – mostly due to the different level of each area’s industrialization – has resulted to the above outcome; in rural areas, the ability of small businesses to achieve a stable growth has been proved to be limited – compared to the country’s urban areas; on the other hand, existing taxation schemes does not particularly favour small business activities – even if the specific sector produces approximately the 30% of the country’s GDP – see the paper’s introductory section. Moreover, the empirical studies presented in this paper proved that small businesses in Australia are exposed to a series of risks, which can limit their potentials for growth. The cooperation between the authorities and the small business owners is necessary in order for small businesses in Australia to stabilize their position in the local market. Foreign investment could also have a crucial role in the development of small businesses across Australia but it should be based on specific rules and be closely monitored – ensuring that small businesses are actually benefited by the relevant schemes of business cooperation. 4. Recommendations The current position of small firms in the Australian market can be characterized as satisfactory; however, the challenges that these firms face could cause delays to the realization of their plans and set limits to their potentials for further growth. The following measures should be developed by Australian policy makers in order to face the above problems: a) adjustment of existing policies referring to small businesses making sure that the support provided to the small firms operating across the country is equal, b) increase of the funding available to the individuals who are interested in establishing a small business – incentives of other types, like less strict taxation, could be also provided to small business owners, c) foreign investors should be given appropriate incentives in order to invest on the country’s small businesses – referring especially to the taxation imposed on foreign capitals invested on such business activities but also to the taxation imposed on the profits retrieved through the operations of small businesses in various industrial sectors. Bibliography Al-Qirim, N. (2004). Electronic commerce in small to medium-sized enterprises: frameworks, issues, and implications. SAGE Publications (IGI) Christensen, S., Duncan, W. (2009). Sale of Businesses in Australia. Federation Press Cioccio, L., and Ewen, M. (2007). Hazard or disaster: Tourism management for the inevitable in Northeast Victoria. Tourism Management, 28(1), 1-11 Davenport, M. (2003). Investment incentives in commonwealth developed countries and the WTO investment negotiations. Commonwealth Secretariat English, J. (2006). How to organise and operate a small business in Australia. Allen & Unwin Fleming, G., Heaney, R., and McCosker, R. (2005). Agency costs and ownership structure in Australia. Pacific-Basin Finance Journal, 13(1), 29-52 Getz. D., and Carlsen, J. (2000). Characteristics and goals of family and owner-operated businesses in the rural tourism and hospitality sectors. Tourism Management, 21 (6), 547-560 King, R., Clarkson, P. and Wallace, S. (2010). Budgeting practices and performance in small healthcare businesses. 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