Small Business Management: Challenges, Strategies, and Growth

Posted on Nov 2, 2024 in Economy

Small Business Management

Driving Forces and Challenges

Driving Forces

  • Expanding Markets: Extending product life cycles and finding buyers for specialized products.
  • Cutting Costs: Reducing labor and transportation costs, and obtaining tariff reductions.
  • Accessing Resources: Finding raw materials and human resources.
  • Capitalizing on Location: Profiting from unique local features and following large client firms abroad.

Challenges

  • Political Risk: Addressing this by avoiding high-risk countries or using insurance.
  • Economic Risk: Managing currency exchange rate fluctuations through US dollar contracts or financial instruments.
  • Managerial Limitations: Overcoming limitations in various areas by learning through experience or seeking external assistance.

Distinctive Characteristics of Small Firm Management

From Founder to Professional Manager

A professional manager uses systematic, analytical methods.

Expanding Beyond the Comfort Zone

Small businesses can be vulnerable to poor management, especially as they grow.

Managing Constraints

Limited resources, such as small bank accounts and limited staff, can hinder growth. Difficulty employing enough and specialized staff is common.

Firm Growth and Managerial Practices

  1. Stage 1: One-person startup.
  2. Stage 2: Entrepreneur as player-coach.
  3. Stage 3: Intermediate level of supervision added.
  4. Stage 4: Formal managerial practices implemented for greater structure.

Managerial Tasks of Entrepreneurs

Planning Activities

  • Long-range (strategic) plan.
  • Short-range plan.
  • Budget.

Creating an Organizational Structure

  • Unplanned Structure: Evolves with little conscious planning.
  • Chain of Command:
    • Line organization (each person reports to one supervisor).
    • Line-and-staff organization.
  • Span of Control: Number of employees supervised by a manager.

Delegating Authority

Failure to delegate is a common problem for entrepreneurs and can hinder growth.

Controlling Operations

Monitoring operations to identify deviations from plans and ensure proper function.

  • Preventive Control: Input stage.
  • Concurrent Control: Process stage.
  • Corrective Control: Output stage.

Communicating

Open communication between managers and employees is crucial.

  • Inform employees about their performance, the business’s performance, and future plans.
  • Use tools like performance reviews, bulletin boards, micro-blogging, and suggestion boxes.

The Need for Outside Assistance

Sources of Management Assistance

§ U.S. Small Business Administration (SBA) · 3 C’s of service ¨ Capital ¨ Contracts ¨ Counseling § Service Corps of Retired Executives (SCORE) § Small Business Development Centers (SBDCs) § Educational Institutions § Business Incubators · Exhibit 19-5 Services Provided by Business Incubators to New Firms § Management Consultants § Small Business Networks § Other Business and Professional Services