1. Small business management and Entrepreneurship
David Stokes
Nicholas Wilson
Small Business Management and Entrepreneurship
Fifth Edition

2. Lecture outline Internal and external influences
When and where to setup
Which industry or market to choose
Sink or swim?
Porter’s five force analysis
Why will small businesses excel?
Critical survival factors

3. Internal influences Owner-manager motives Personal attributes
Technical skills
Management competencies
Marketing, finance, human resource management
Entrepreneurial management behaviors
Opportunity identification and exploitation, resource coordination, networking, entrepreneurial decision making

4. External influences Macro Micro Political Economic Social
Technological
International
Micro
Local economy
Market
Competitors
Customers

5. When to set up Levels of unemployment Government policies
Profitability
Interest rates
Personal savings and assets
Consumer expenditure
Structural change

6. Where to set up Geographic areas with: Population growth Unemployment
Wealth
Workforce qualification
Business size
House prices
Local government spending
Government policy

7. Which industry and market to choose?
Lets first differentiate between market and industry.

8. Economies of scale
Product differentiation
Switching costs
Access to distribution channels
Government policy

9. Impact of internet
What can a business do to give it the best possible chance of success on the internet?
Niche or specialized product
Flexible payment methods
Secure electronic payments
Minimum capital investment
Stock control
Quick and reliable logistics
High visibility on the internet
Provide a comprehensive web site

10. Types of business closures
Most common types of business closures are:
Financial failures
Not meeting owner’s objectives
Technical closures
Sold on

11. Adjusting to uncertainty
Why are small firms more likely to face uncertainty compared to large firms?
Inability to control prices
Lack of market power
Dependency on a small customer base

12. Small firms can face three types of uncertainty:
Technical uncertainty
Unsure of the success of the product or service and the costs
Market uncertainty
Entrepreneur does not know if the demand of the product will exist
Competitive uncertainty
How will entrepreneurs handle and deal with competition

13. Some problems
Problems that the small business owners are likely to face with respect to uncertainty:
Interest rates
Cash flow and payments
Low turnover
Lack of skilled employees
Tax burden
Premises, rent and rates
Inflation
Government regulations and paperwork
Access to finance
Competition from big business
High rates of pay

14. Porter’s five force analysis
Potential for Entry (barriers to entry)
Power of Buyers
Power of suppliers
Potential for substitutes
Rivalry

15. In some industries large firms will have advantage over small firms but in some industries it is the other way.
Some industries may be fragmented into large number of smaller firms for the following reasons:
Low entry barriers
Diseconomies of scale
High creative content
Personal service
Close local control
Newness

16. Assignment
Identify some critical survival factors in the small business environment which help to determine whether a new venture will sink or swim.