Small Versus Big Business
|← Goldman Sachs||Industrial Competition →|
Difference between how small businesses versus big businesses operate:
One of the greatest differences between small and large companies has to do with the variety and the mix of people working in them. In small companies you will find people with all sort of behaviors, a range of people that include ‘parrots’, talkative individuals, and those who talk when it is strictly necessary. Small companies are also synonymous with twenty-something unattached people, middle-aged person with children, divorced grand parents – all with special needs, special motivation and person personal life that literary spill-over to work (Longenecker, et al, 2005).
As the firm grows there a number of things that changes in a small firm. For instance, employees start shedding out any untoward ‘personality’ that might have existed while the firm was small (Longenecker, et al, 2005). Cultural expectations are eventually set, group within the staff start forming, while those employees who find themselves no longer fitting in the so-called company’s mould finds themselves forced out of the firm (Longenecker, et, al, 2009). In fact, the reason why it is almost impossible to tell apart employees the moment a company they are working with break a billion mark is because at that point individuality get substituted with company-enforced conformity (Longenecker, et, al, 2009). This company-enforced conformity is best manifested in employees’ habits of buying identical clothes in same stores, watching same TV shows, and playing similar company-sponsored sport leagues with their colleagues in their work places.
To majority of the people the word “big company” as everything to do with the structure, where structure entails the presence of policy manual, HR handbook, huge meeting schedules, management hierarchies, and comprehensive job description (Longenecker, et, al, 2009). The word “small company” on the other invoked the feeling of the absence of structure and therefore lack of this instrument of structure that I have enumerates. In this case, a small company will almost always lack an accurate job description, in which case if it is there it is outdated just after the first of an employee’s reporting. Also absent is a formal work instruction and policy manuals, while formal meeting are held only in emergency cases or when long-term planning is required to be undertaken as a matter of emergency (Longenecker, et, al, 2009). In fact, in order that an employee can be effective in a small company he/she ought to circumvent management hierarchy in fulfilling his/her responsibilities, while in a larger firm a employee only need to stick to the rules and avoid exposing the firm to avoidable risk for him/her to be effective.
Money is another major factor that set apart a small and a large company, where money in this case boils down to spending. Big companies will almost always have shareholder which might not be the case with small one which instead will most likely have owners (Kusluvan, 2003). With small companies you can expect owners to be upset by extra expenses that can be avoided. In fact money matter are always treated with a lot of caution by the owners of the company that employees are likely to be upset and disappointed by finances more than in a large company. It is only in a small company where you can witness a salary freeze that is followed by the purchases of a new Mercedes by the company ‘owner’.
In big companies the fear of working for several bosses or married couple is not there in the first place. You do not have to deal with family members of the CEO, childhood friends of owners, or even executives and spouses who ask for your hand in a side business. These are some of the things that that you can be sure to find at a small company since social circles, histories, and relationships have made it impossible to navigate them politically, something that make even the life the best manager a nightmare that can last five year at best (Kusluvan, 2003).
Advantages of small companies over large ones:
Due to a comparably small chain of command a small company responds to a problem faster than a large one (Kusluvan, 2003). The top management is always there to address a problem in good time within the shortest time possible, which is in contrast with large companies which are normally slow in responding to problems because of their long and complex chain of command. The flexibility inherent in the running of a small company allows a manager a chance to change, manipulate, or even bend rules whenever situation demand it (Kusluvan, 2003). A large company on the hand is always in a quagmire of legalities and policies every single day (Kusluvan, 2003). There might be no exceptions to the rules for a large company while in a small company there might not even be so many rules to talk of. This offer the managers of a small company the flexibility to formulate decisions instead of being slowed down by the long chain of command that has to make arrangement to get to the person designated to act on the same. The faster decision making process that is found in a small company might translate to increased productivity at times while the inflexibility in big companies might bleed incompetence and losses at times (Kusluvan, 2003).
Unlike in large companies where they follow standardized approach in dealing with their customer, the flexibility in small companies extends to the employees dealing with the customers through giving them enough attentions (Kusluvan, 2003). Majority of small companies are specialized which therefore affords them a chance to compete effectively in their line of business more than large ones which have to contend with creating a competitive advantage from a wide range of products.
Small businesses are mostly synonymous with flat structure which on its part enhances communication (Gitman, & McDaniel, 2008). A flat structure enables a person to know of the personal histories of the customers, thereby enabling the company to make judgment call and be well versed with each and every section of the company (Gitman, & McDaniel, 2008). Lastly, a small size of a small company enables it to change with the times, a large company on the other hand require a great deal of money, lot and lots of time, and effort for it to effect even the slightest change due to its large size and complex structure (Gitman, & McDaniel, 2008).
How small and large companies can raise money to fund themselves:
A common source of funding for both small and large companies is the so-called angel investors (Gitman, & McDaniel, 2008). Angel investors normally provide smaller amount funding, that mostly range between $ 100,000 and $500,000. The good thing with source of funding is that they do not discriminate on the stage that a business is in. For instance, they are known to provide seed money to companies, those in their infancy, or even those which are fully established (Gitman, & McDaniel, 2008). Generally, angel investors accept all sorts of risks in exchange of the possibility of an outstanding return.
Small businesses can also access funding from financial programs that are provided by Small Business Administration (SBA) (Gitman, & McDaniel, 2008). SBA do not necessarily providing funding directly rather they guarantee loans to small business from other financial institutions (bank) (Gitman, & McDaniel, 2008). This not only lowers the risk but also makes it possible for small companies that might not be able to access loans or any funding to access the same. Another source of equity capital to both small and large companies is venture capital (Gitman, & McDaniel, 2008). Venture capitals generally like working with companies that are in their infancy in providing the initial capital that the company might require for product development (Gitman, & McDaniel, 2008). There is also another group of venture capital firms that provides the next round of financing for businesses and especially small ones. Mostly this group of lenders provides financing ranging from $1 million and $5 million that small companies mostly prefer using in their marketing endeavors.
Large business has access to capital market which therefore makes its easy to finance (Hill, & Demand Media, 2006). Small companies on their part do not have that access to capital market which therefore makes them economical in their use of capital. Other than the capital market large companies’ appetite for large amount of funds is also quenched by funds from private equity firms that they can easily access (Hill, & Demand Media, 2006). Other than financing private equity firms are also involved in leveraged buyout, or the buying controlling interest of a company with a combination of debt capital and equity investment that the firm gets from lenders (Hill, & Demand Media, 2006).
Managing their employees:
Large companies are normally flexible in their management of their employees. In this regard they bank on the traditions and the rules, policies and regulations that have been put in place to guide employees in their day to day activities (Moore, 2008). Due to the lack of traditions or strict policies large companies bank on pragmatism and common sense of the management and the employees respective to govern the activities of employees in the company (Moore, 2008).
Knowing the customers:
One of the disadvantages of a large company is that it denies it a chance to connect with the customers (Moore, 2008). This has been occasioned by sheer size which makes it almost impossible to know the company’s regular customers. This at times makes customers feels like they are being taken for granted. Small companies mostly strive to create a good rapport with their customers, something that is made possible by their small size (Moore, 2008).
Keeping of record of large companies is normally complex and time-consuming (Moore, 2008). This complexity is normally occasioned by the large amount of transactions that might not be present in a small company. With a large inventory and attendant transactions there is need for a watertight control and monitoring system which in majority of the cases is availed by a computerized system (Moore, 2008). Small companies on the other hand do not have such large inventories to permit a complex inventory monitoring system. With large size comes great deal of expenses and salaries entries that have to be recorded as properly as possible. This also requires a watertight system that is able to capture and record all entries in an appropriate.