HRM and leadership 2.2 - Essay Example

Small businesses are an integral part of the economic growth and creation of job opportunities and that it is important that governments tap on it in order to promote growth (United States Office of International Information Programs 2004). The contribution of small businesses to economies is important in terms of the output and the input as well as the creation of jobs as one of the major aims of governments. In the United States, small businesses currently represent 98 per cent of all business enterprises and generate about 64 per cent of all new employment opportunities, and are the first line of employment providing training to many workers (SBA Office of Advocacy n.d.).

Almost all nations in the world have the small businesses as the primary creator of jobs for all nations and therefore play an important role in enhancing the economy of a country. In the United Kingdom, there are about 4.4 million small and medium enterprises with almost all of them being made up of small and medium enterprises, and further about half of the work force in the United Kingdom is employed in the small and medium enterprises generating a turnover of 48.7 per cent. Small businesses often referred to as small and medium enterprises (SMEs) play a critical role in the global economy creating jobs across international borders.

In high-income countries, the formal small businesses with less than two hundred and fifty employees contribute about 50 per cent of the GDP globally and creates employment opportunities to about 70 per cent of the working population while in countries that are not members of the OECD the figures are higher. In countries that are classified as developing, the private sector comprises of micro, small and medium enterprises that employs millions of people. Recent research by International Finance Corporation (IFC) that covered 132 economies estimated that around 500 million people comprising about 97 per cent of the businesses in the world can be deemed as small business.

Importance of Small Businesses to Economies Small businesses and entrepreneurs create job opportunities in any economy with statistics pointing that at least three out of every four persons that are employed work in a small business enterprise. Therefore, governments have found it important to develop these business enterprises in that they ensure that the growth of an economy is broad based, gender inclusive and sustainable in nature. In the United States, The Bureau of Labour Statistics shows that firms that have fewer than 500 employees employ about 55 percentage of employees in the private sector alone.

The small businesses also fuel the growth of businesses with data from the Bureau of Labor Statistics indicating that from the year 1992 to 2007, small businesses with fewer than 500 employees created 64 per cent of the new employment opportunities. The small businesses also play an important role in driving the economies of nations, for example in the United States, the small businesses constitute more than half of the nonfarm private Gross Domestic Product and about 97.3 per cent of all U.S.

exporters (McCracken and Danner 2011). According to