Small Business Management - Essay Example

? Small business management College: Introduction Tyson and Schell p. 16) defined a small business as any business venture that has a 10 or less employees. Some small businesses are owned by business partners, others are family businesses while others are solely owned. In most cases, small businesses are referred to as entrepreneurial opportunities and small business owners are called entrepreneurs. A small business can be in auto repair, financial audits, hair styling, computer services, candy production, or clothe retailing among others. These businesses have an entrepreneurial tool that allows them to effectively compete with other small businesses and with the large corporations in the market. Integrity and responsibility plays a significant role in enabling small businesses to excel in customer service and in good product quality. Customers always respond to evidenced integrity by being aware of the business’ ethical issues. Innovation is also central to small businesses’ success. Small business entrepreneurs excel by seeing opportunities and business ideas differently through innovative approach to business (DTI, 2001). Innovation allows small businesses to compete with the large corporations, such innovations are not only reflected by the new products but are also reflected by the way business carries out business, the involved business processes, technology and leadership approaches. According to Gooderl et al (2005, p. 10), small businesses differ from other types of businesses in terms of potential for growth. Some of the small businesses have promising startups implying that they have potential to drastically attain significant profitability and size. Other small businesses have marginal startups implying that they lack such prospects. Small businesses offer great rewards to their owners, some of the small businesses rise to become multinationals. Small businesses compete with large firms by identifying a special niche, which may consist of uniquely specialized products and services, or may comprise of unique geographical area. Identifying a special niche enables the small business to eliminate or reduce intense competition that is posed by the large market players. The small business sector is vital to the health of U.K. economy; its future strength and growth potential. There are various scholars who have written about small businesses and their growth and have provided the various benefits related to small businesses in an economy. Small businesses in U.K. have played an important role in reducing unemployment, improving people’s living standards and improving performance of the economy (Moore 2008, p. 249). Small business sector is thus vital in boosting of the economy. It is the small businesses that are translated to the medium and the large businesses allowing for continued flow of new small businesses. Despite the importance of small business sector to the country’s economic growth, U.K. is still dominated by the large corporations, which on average prove more innovative than the small firms. However, the economy has shown increasing growth of small business companies in the various sectors and the government has been supportive to the sector. Besides the contribution made by the small businesses sector to the U.K. economy, there are various other factors that reflect people desire to invest in entrepreneurship. There are various reasons that facilitate growth of small businesses that emanate from the owners or the entrepreneurs. There are few studies that have been on done exploring the relationship between the theory and small business management and the management behaviours of these businesses. This study will explore the small business sector by identifying one small business in U.K and examining the various aspects of the firm and relating them to the existing theories and literature on small business management. This study will seek to answer some of the following questions: What are the reasons that influenced the entrepreneurs of the business to start up the business? What were some of the start up strategies employed by the entrepreneurs? How did the business acquire start up finance? How has the performance of the business been and how has that related to the behaviour of members? Who are the competitors and how does the business meet the competition? What are some of the risks faced in the start up and in the carrying out of the business? What are some of the D.B. Auto-Repairs Ltd D.B. Auto Repairs is located at Hampden Park in the U.K. and is one of the U.K companies in the small business sector. The company was established about thirty years ago and has had a strong reputation in the motor industry for its mechanical and bodyshop repairs. The company has about 40 employees who are committed to the repair service through superior service, quality workmanship and dedication to customers’ detail. The company began as a bodyshop and later on expanded establishing a mechanical centre and has expanded and improved its quality of service and seen increased customer base (D.B Auto Repairs ltd website). The company was started by two engineers who worked at the same company and chose to combine their efforts in terms of capital, skills and expertise in order to start their own company. Services provided by the company The unparallel service and the bodyshop form the heart of the business. The two are fundamental to the continued growth and success. Services offered by D.B. Auto-Repairs are to the highest quality and standard. The company uses high quality parts and provides his quality customer service, which has been central to the customer satisfaction and success of the company (D.B Auto Repairs ltd website). Some of the services offered to customers include air include air conditioning, four wheel adjustment and alignment, valeting, windscreen repair and replacement, Paintless dent removal, vehicle signage and livery, customized painting, polishing and flatting, engine and electrical diagnostics, plastic and dash repairs, tyre balancing, repairs and replacement, and wheel refurbishment among other services. The company also provides 24 hours recovery service across U.K. Business strategies applied A strategy is the action plan that is used in coordinating commitments and resources of a business so as to boost its performance. A strategy selection in the context of small businesses should be steered by the situation of the firm and not past choices or latest industry’s fad. In an industry where competition is stiff, small business firms opt to use broad-based strategy options. Other important strategies include cost-based leadership, focus strategy and differentiation strategy (Gooderl et al 2005, p. 63). In the context of D.B. the company uses differentiation strategy to build a competitive advantage. This approach emphasizes on providing customers with unique services and products. To ensure that the products and services offered to customers are perceived unique, D.B. ensures that different marketing and operational tactics are used, these tactics range from design of service to promotion and they distinctively present the product in the market. For instance, D.B ensures that it supplies are originally made in either U.K. or Germany and does not compromise on quality. This places their products high above most of their competitors’ products making them more preferred in the market. Management The management of the company comprise of 7 people who are also the company’s shareholders and business owners. The management team comprise of two directors, two assistant managers, one person in charge of transport and two people in charge of administration. Some of the reasons that led to the establishment of the business are the desire to grant oneself the satisfaction of creation. The business owners had the desire to experience the pride that come from creating something new or moulding something and this pushed them to the desire to use their creativity to solve customers’ problems. The owners were well trained mechanical engineers and after working for about five years they had the urge to do something far from employment. They had had a disturbing culture at their previous employers and they wanted to do their own business and create their own culture based on how they wanted business done. They realized that auto repairs sector was a sector that had not been fully exhausted in U.K. and given their experience in the previous workplaces they felt that starting the business would not cost them much in terms of labour cost since they would do some of the work involved. Such views confirms Tyson and Schell (2011, p. 22) who argued that the desire to satisfy one’s creativity, create the desired culture, acquire flexibility and increase income are some of the factors behind the rapid growth of small business sector in the market. Tyson and Schell (2011, p. 22) also added that working for others is often less-than-gratifying and as a result of such unsatisfying experience, some choose to discover opportunities that would enable them provide for their families and fro themselves. Some people prefer working at different schedules and this is not always possible in an employment where work schedules are determined and employees have to follow. This has seen many people chose to venture into business and acquire the desired flexibility. Starting up a business is a risky venture. However, where one starts up a business in which he/she has the specific expertise and skills required by the particular venture, the risk is not nearly huge. Some of the attitudes that those who venture into small businesses have is that risk is everywhere and even those who are employed risk in the sense that they hardly know the desires and the plans of the employer and cannot therefore project whether they shall remain in employment (Foss & Mahnke 2000, p. 66). In the context of D.B. Auto Repairs, the business leveraged the owners existing expertise and skills and this minimized the startup costs (Georgelli et al 2000, p. 13). Initially the company hired ten technicians to work on the fir and the two devoted ten hours each towards the business. This enabled them to have their regular pay check and as well drive the startup. After two years of ten hours in their business for each day, the entrepreneurs were able to sustainably pay the employees from the revenue generated from the business and get some profit. This way they realized that the business had potential to increasingly generate profit if they devoted all their time in the business. In its third year, both of the entrepreneurs resigned from their employment and started working in the new company. The company has since then marked high profitability growth making about $10 million profit annually. The two joined the company as directors and they have proved a great asset in the small business since they are able to identify changes in competition and provide customers with the highly valued services at reasonable and competitive price and at reasonable cost. Objectives and values of the firm The main objective of D.B. Auto-Repairs is to provide service and products that are desired by customers at the minimum cost and at reasonable price. The management team in the company believes that auto repairs is a business opportunity that any entrepreneur can reap the highest by devoting his efforts to provide customers with high quality service and auto parts. The auto repair industry being one of the industries that is highly compromised in terms of the auto parts provided to customers, any business entrepreneurs has to go an extra mile to ensure that he attracts customers by providing them with real and original spare parts and not refurbished parts, which dominate the market. Entrepreneurs at D.B. Auto Repairs exhibit high level of readiness to change, higher-order-need strength, self-efficacy, interest in innovation, need for achievement, competitive aggression and goal orientation. The management team has remained action oriented and they are risk taking in terms of their goal orientation and planning (Hyrsky 2000, p. 26). The two directors are articulate when it comes to business growth and ambition. Their values and attitudes to business compared to the rest of the management team shows the distinction between owner managers and entrepreneurs in small business. Owner managers’ main concern is to secure income so as to meet the business immediate needs while the entrepreneurs’ main concern is profitability and growth of the business. Other factors that distinguish the two categories of managers and leaders in small business are achievement motivation, preference for motivation and risk-taking propensity. Where small business is created by an entrepreneur, there is more growth and innovation orientation, which characterize entrepreneurial behaviour (Cohen & Musson 2000, p. 34). In the context of D.B. Auto Repairs, innovation and intention to grow characterize the two directors. The two directors at D.B. Auto Repairs exercise participative-collaborative management style. They seek input from employees and recognize their contribution to the business output. The company’s management employs participative leadership style, which enables the managers to identify the various talents from the staff and this enables them to ensure that rewards and recognition are merit based. The two directors have created a culture of risk taking and creativity at D.B. Auto Repairs and this has played an important role in driving the business by exploring innovative opportunities. The managers with the assistance of directors have formulated code of ethics that guides the employees in the firm by establishing business conduct (Premeaux & Mondy 1993, p. 354). Some the values stipulated by the code of ethics include providing superior service to customers, using challenges as learning opportunities to build experience, clear, cooperative and positive thinking loyalty, integrity and respect among other values (Gooderl et al 2005, p. 43). These values are exercised by the staff and the managers in carrying out business at D.B. Auto Repairs and they have played an important role in shaping workplace relations and promoting good understanding of the business objectives by the employees. The company’s management also invest in the staff through training and development activities such as workshops held at the mechanical centre and seminars that are industry-held. The company carries out employees’ need analysis that helps in identifying their training needs and providing them with relevant training programs. Some the values that are emphasized on at the initial orientation that is done to new employees include customer focus, integrity and respect, which form the key pillars of the company’s code of ethics. The leaders act as behavioural examples in influencing employees’ ethical performance. The management has created an organizational culture at D.B Auto Repairs that has promoted integrity and respect for work. Some of the challenges faced by the company is promoting good work ethics include lack of adequate resource that are devoted to promoting employees understanding of ethics through relevant programs (Gooderl et al 2005, p. 44). Most of the training programs are aimed at promoting employees skills and work performance by improving their expertise. General behaviour in the company Individuals at D.B. Auto Repair exhibit strong commitment to success and they have passion for the business. This is one of the attitudes that have seen tenacity among members even in the face of difficulties (Gooderl et al 2005, p. 16). The two directors are committed and determined, they are tenacious, persistent and decisive in problem solving. Being self starters, the directors are team builders and they focus on honesty in the workplace relationships. The employees and the management are opportunity obsessed, this character has particularly been built by the two directors who encourage people to continually examine and identify market needs as well as customer needs. The management encourage members to be risk takers and tolerate uncertainty in exploring business opportunities. This has enabled the employees to remain positive in business even during hard financial times like the recent period of financial crises that affected almost all businesses across globe. The company employees are also creative, self-reliant and adaptable. Being open minded and flexible has been one of the important factors enabling the company explore the 24 hours recovery service as part of their business opportunity. The members of the company are all motivated to excel, this behaviour is cultivated by ensuring that the company’s goals are well communicated and that all the members remain goal oriented. The company’s management emphasizes on creating awareness of people’s weaknesses and strengths so as to enable them work on their weaknesses and maximize their strengths. The company has seen increased staff motivation through the rewards and recognitions, which have seen improved desire of staff to maximize on their strengths and achieve higher levels of performance. Environmental concerns Car repair industry is one of the industries that have had poor reputation when it comes to environmental concerns professional bodyshops have had various issues that they fight to change following the government urge for them to be professionally responsible of the environment. In the context of D.B. Auto Repairs, the company uses licensed carriers who handle their waste. These are carriers that are governmentally regulated and they follow environmental policies on disposal. In addition, the purchasing policy of the company is environmentally driven and this enables the company to avoid going for environmentally unfriendly cheaper alternatives. The company is devoted to repair first followed by giving guarantee than just replacing since some of the repair parts cannot be recycled. The activities of D.B. Auto Repairs affirm the views of (Gooderl et al 2005, p. 44) where they argued that some small firms contribute largely in environmental protection and thus contribute positively to the environment. D.B. Auto Repairs are active in protecting the environment and the company is also looking forward to explore tire recycling business opportunity as a way of taking advantage of the opportunities that are created by the various environmental concerns. As mentioned by Gooderl et al (2005, p. 44), creating environmental friendly services and products requires firms to be innovative and flexible, this is not much of a challenge in the small businesses since they are characterized by creativity and flexibility. Competitors The auto repair industry in U.K. is not saturated and this implies that entry into the sector has few barriers and capital required is minimal particularly where the company has established workforce or the entrepreneurs have good skills and expertise, which implies reduced cost of doing business (Scarborough et al 2008, p. 735). The industry has few competitors and this implies less competition for the players. Some of the competitors to D.B. Auto Repairs Ltd include the Automotive Repair Company and OFT Group, which competes at the same level with D.B. However, D.B. has developed a stronger competitive advantage by delivering better quality service, which differentiates the company from its competitors. The company also provides high quality spare parts that are originally made in Germany or U.K. and this makes its products more preferred by customers that those of their competitors. D.B. also competes with the other players on human capital; the company has been devoted to promoting the skills and expertise of its employees through training and development. The company values its staff and thus communicates with them from a fair and truthful point. Part B Reflection This study has captured small business management subject and has provided various insights. The study has enabled me to identify small business sector as important to both entrepreneurs and the economic growth of a country. The study has explored the subject by examining one of the small businesses. The study has chosen to explore the D.B. Auto Repair Ltd in U.K., which is one of the small business firms in U.K. dealing with spare parts. This is one of the successful small businesses that demonstrate effective entrepreneurial management. Throughout the subject I have learnt the meaning and the importance of small businesses, the various ways of starting up a small business as well as the startup ideas and alternatives. The study has also enabled me to identify the distinction between owner managers and entrepreneur managers in small business and has shown that the two categories of managers determine the effectiveness of the small business through their behaviour, skills, and competences. Owner managers have been deemed focused on income while entrepreneur managers focus on profitability and growth. Entrepreneurs have also been deemed innovative and creative in running small businesses. The company examined showed that the two directors who were the core starters of the company were effective entrepreneurs and this played an important role in the success of the company. The study also identified the ethical performance of the company and recognized the role played by managers in establishing an ethics code to guide the staff in carrying out business activities. Ethics code has been identified as vital in directing members’ behaviour. The study has also helped me learn that the generic strategies are also applicable in the small businesses. In our case study, the company is identified to have been applying differentiation strategy in its business by presenting their products uniquely in the market. The study also identified the importance of leadership style in management of these firms. Participative management has been identified as core in enabling the company meet its goals. Commitment, determination, motivation, self-efficacy, adaptability and goal orientation are some of the key factors identified as vital in small businesses’ success. 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