THE STRENGTHS OF SMALL BUSINESS
Any entrepreneur
who is contemplating a new venture should examine the strengths of small
businesses as compared to large ones and make the most of those competitive advantages.
With careful planning, an entrepreneur can lessen the advantages of the large
business vis-à-vis his operation and thereby increase his chances for success.
The
strengths of large businesses are well documented. They have greater financial
resources than small firms and therefore can offer a full product line and
invest in product development and marketing. They benefit from economies of
scale because they manufacture large quantities of products, resulting in lower
costs and potentially lower prices. Many large firms have the credibility that
a well-known name provides and the support of a large organization.
How
can a small firm possibly compete?
In
general, small start-up firms have greater flexibility than larger firms and
the capacity to respond promptly to industry or community developments. They
are able to innovate and create new products and services more rapidly and
creatively than larger companies that are mired in bureaucracy. Whether
reacting to changes in fashion, demographics, or a competitor’s advertising, a
small firm usually can make decisions in days - not months or years.
A
small firm has the ability to modify its products or services in response to
unique customer needs. The average entrepreneur or manager of a small business
knows his customer base far better than one in a large company. If a
modification in the products or services offered — or even the business’s hours
of operation — would better serve the customers, it is possible for a small
firm to make changes. Customers can even have a role in product development.
Another
strength comes from the involvement of highly skilled personnel in all aspects
of a start-up business. In particular, start-ups benefit from having senior
partners or managers working on tasks below their highest skill level. For
example, when entrepreneur William J. Stolze helped start RF Communications in
1961 in Rochester, New York, three of the founders came from the huge
corporation General Dynamics, where they held senior marketing and engineering
positions. In the new venture, the marketing expert had the title “president”
but actually worked to get orders. The senior engineers were no longer
supervisors; instead, they were designing products. As Stolze said in his book Start
Up, “In most start-ups that I know of, the key managers have stepped back
from much more responsible positions in larger companies, and this gives the
new company an immense competitive advantage.”
Another
strength of a start-up is that the people involved — the entrepreneur, any
partners, advisers, employees, or even family members — have a passionate,
almost compulsive, desire to succeed. This makes them work harder and better.
Finally, many small businesses and start-up
ventures have an intangible quality that comes from people who are fully
engaged and doing what they want to do. This is “the entrepreneurial spirit,”
the atmosphere of fun and excitement that is generated when people work
together to create an opportunity for greater success than is otherwise
available. This can attract workers and inspire them to do their best.
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