20140829084053_Topic 1 Distinctive Characteristics of Small Business Management

7/23/2019 20140829084053_Topic 1 Distinctive Characteristics of Small Business Management

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STUDY GUIDE BMSB5103 Small Business Management

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Topic 1: Distinctive Characteristics of Small BusinessManagement

Learning Outcomes

By the end of this topic, you should be able to:

1. State the importance of competitive advantage in small business;

2. Explain why and how a small business must create competitive advantagein the market;

3. Develop a strategic plan for small business success;

4. Describe the three general approaches entrepreneurs use to identifyopportunities;

5. Identify the four environmental trends that are most instrumental in creatingbusiness opportunities; and

6. Define what constitutes a “small business” and identify key characteristicsthat make small businesses different from other types of businessorganisations.

Topic Overview

Developing a strategy for success is essential for entrepreneurs, both in smalland big businesses. Businesses that are strategically prepared can gain andestablish a competitive edge, sustain and further develop as well as make theirpresence felt. Strategic management allows small businesses to createinnovative products or services with a competitive edge. Small businesseslacking clear strategies may achieve some success but as competition increases,they usually “hit the wall” and fold. Without a basis for differentiating itself, thebest a company can hope for is mediocrity but it might not last long. The fourcomponents of a favourable opportunity (attractive, durable, timely and anchoredin a product, service or business that adds value) to sustain small businesses arediscussed. In addition, three primary ways that entrepreneurs discoveropportunities – by studying environmental trends, solving a problem or findinggaps – are examined. These are ideally essential for a small business tocompete, sustain and grow in the marketplace. The topic ends by highlighting thepresence of small businesses, their characteristics and contributions that theymake to the economy as a whole.




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Focus Areas and Assigned Readings

Focus Areas Assigned Readings

1.1 Competitive Edge of Small BusinessManagement

1.2 Distinctive Characteristics of SmallBusiness Management

1.3 Identifying and RecognisingOpportunities

1.4 Success in Small Business andSuccess in Entrepreneurial Life

1.6 Small Business and Entrepreneurship

Moore et al. (2010). Chapter 1, pp 17-20.

Extra Readings:

Scarborough (2012). Chapter 2, pp 53-54;

Moore et. Al (2010). Chapter 19, pp 500-503

Moore et al. (2010). Chapter 1, pp 6-8

Extra Readings:

Barringer and Ireland (2010), Chapter 2, pp 65-68; Scarborough (2012), Chapter 1, pp 25-27.

Moore et.al (2010) Chapter 1 pp23-25.

Moore et al. (2010). Chapter 1, pp 1-9 &20-26

Extra Readings:

Scarborough (2012), Chapter 1, pp 43-45.

Other Sources1. Strategic management: New ventures

and small businesshttp://www.sciencedirect.com/science /article/pii/0024630181900066

2. Empirical strategic managementmodel for small businesses in theTurkish Republic of Northern Cyprushttp://fbe.emu.edu.tr/journal/doc/34/34Article08.pdf




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3. Small business strategies: refiningstrategic management theory for theentrepreneurial and small businesscontextsHTTP://PAPERS.SSRN.COM/SOL3/ PAPERS.CFM?ABSTRACT_ID=1348632

4. Strategic management andentrepreneurship: Friends or foes?http://www.business-and-

management.org/library/2009/4_1--37-50-Kraus,Kauranen.pdf

5. Looking ahead: Opportunities andchallenges for entrepreneurship andsmall business ownershttp://archive.sba.gov/advo/research /rs332tot.pdf

6. Focus on small business:Opportunities abound for “Engines ofInnovation”http://www.dhs.gov/xlibrary/assets/st

_focus_on_small_business.pdf




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Content Summary

1.1 Building a Competitive Edge for Small Business

The goal of developing a strategic plan is to create a competitiveadvantage for a small company.

The key to business success is to develop a unique competitiveadvantage and to create value for customers in a way that is difficultfor competitors to duplicate.

Entrepreneurs need to use creativity to win over competitors.

1.2 Distinctive Characteristics of Small Business

Professional-Level Management

(a) Extremes of very unskilled and highly professional types ofmanagement.

(b) Professionals are analytical and systematic in dealing withproblems and issues.

(c) Challenge is to develop professionalism while retaining the

entrepreneurial spirit of the enterprise. Limitations of Founders as Managers

(a) Founders are not always good organisation membersbecause they are creative, innovative and risk-taking people.

(b) Entrepreneurs must recognise their limitations andcompensate for them.

Managerial Weakness in Small Business

(a) Small enterprises seem vulnerable to poor management.

(b) Problems may occur as the business begins to grow and

good management is more difficult for the entrepreneur.

Constraints that Hamper Management

(a) Small bank accounts and limited staff.

(b) Difficult to employ an adequate number of employees.

(c) Typically lack adequate specialised professional staff.




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Firm Growth and Managerial Practices

(a) Stage 1 – One-person startup

(b) Stage 2 – Entrepreneur a player-coach

(c) Stage 3 – Intermediate level of supervision added

(d) Stage 4 – Formal managerial practices as growth requiresgreater formality in planning and control

1.3 Identifying and Recognising Opportunities

An opportunity is a favourable set of circumstances that creates aneed for a new product, service or business. An opportunity has fouressential qualities:

(a) Attractive;

(b) Durable;

(c) Timely, and;

(d) Anchored in a product, service or business that creates value forits buyer or end user.

1.4 Success in Small Business and Success in Life

Explain the concept of an entrepreneurial legacy and the challengesinvolved in crafting a worthy legacy

Beginning with the end in mind

(a) Establish goals for business

(b) Evaluating accomplishments – set criteria for assessment ofprogress

(c) Crafting a worthy legacy for business entity

1.5 Small Business and Entrepreneurship

What is a small business?

What is entrepreneurship?

Characteristics and contributions of small business

Discuss differences between a small business manager and anentrepreneur of small business




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Definition of small business in selected countries

Source: Schaper et al. (2012), Chapter 4




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Study Questions

1. What is competitive advantage? Why is it important for a small business?

2. What are business strategies? Explain the three basic strategies whichsmall business entrepreneurs can use. Give an example of each strategy.

3. How is the controlling process related to the planning process?

4. What four environmental trends are most instrumental in creating businessopportunities? Provide an example of each environmental trend and thetype of business opportunity that it might help create.

5. What is an opportunity? What are the qualities of an opportunity and why iseach quality important?

6. Explain how solving a problem can create a business opportunity. Providean example not mentioned in the chapter of a business opportunity createdthis way.

7. Make a list of the three to five more compelling technological advances thathave occurred in Malaysia or the world since you entered college. Think ofat least two new product ideas that have emerged from each of theseadvances. To what extent do you believe each of these advances willcontinue to spawn new product ideas?

8. How does a small business differ from a large one? Is there any meaningfuldifference in the definitions of small business and entrepreneurship?

9. Discuss the differences between a small business manager and anentrepreneur of small business.

10. Based on this case study, answer the questions that follow.

(a) List the social trends that might help Hasan choose items to add to hismenu.

(b) Given the trends you listed, what items do you suggest Hasan add?Justify your answer to him.

HASAN AND STEAK GRILL

Hasan, the founder of Steak Grill, a chain of nine steak restaurants in

Malaysia, is considering expanding his menu, which is currentlyrestricted to steak, hamburger, potatoes, and fries. He has just read abook about entrepreneurship and learned that entrepreneurs shouldstudy social trends to help identify new product opportunities.




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11. Based on this case study application, write a short description of the ideaand your assessment of its potential.

APPLICATION/DEMO ON PITCHING PRODUCT IDEAS

Go to DEMO’s website at www.demo.com. Watch several “AlumniVideos”, which are short videos of start-ups pitching their product ideasto investors and other DEMO participants. Identify a start-up that ispitching a business idea that “solves a problem”.

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20140829084053_Topic 1 Distinctive Characteristics of Small Business Management