Lect.

(4)

Small Businesses and the Economy

Benefits of Small Businesses to the economy

In general the benefit of SMEs can be summarized as follows:

- Contributes significantly to the economy in terms of output of goods and

services;

- Account for upwards of one half of paid employment with a capacity to

employ even more in large economies.

- Creates jobs at relatively low capital cost, especially in the fast growing
service sector:

- Provide a vehicle for reducing income disparities;

- Develop a pool of skilled and semi-skilled workers as a basis for future

industrial expansion

- Provide opportunities for local development.

- Implementing industrialization policies favoring decentralization and rural

development4

- Increase savings and investment by local sources with more effective use of
scarce capital

- Increase mobility for the improved development of natural resources.

The role of Government in Developing Small Businesses

- Government should simplify procedures related to licensing, location lease etc..
of small enterprises

- It should make reduction for fees and taxes paid by individuals or groups so
that small business can smoothly start.

- It should pursue an economic policy that is conducive to small business.

- Finance : it i[=s the backbone for small business to take off. Government
should encourage local banks to work with small businesses by providing
easy loans for small businesses.

- Education and training programs for new business beginners is an incentive

to develop the tend.

- Provide free advice

- - Find a new market for products and services of small businesses.

- Small Business Environment

- Small business Environment are the internal and external factors that affect
small business and can not be avoided and should be addressed.

- Environmental factors that affect small businesses fall into four categories -
- social, legal, political and economic. These factors affect small businesses
in different ways than larger competitors.

- Social factor

- Social environmental factors include societal movements, preferences,

changes in public values and attitudes of people and all these affect business.
If you operate a small casual dining restaurant, you must recognize societal
 trends toward healthy lifestyles and food consumption habits. Doing so
allows you either to promote alternative values to fit your current offering or
to adjust your operation to compensate for the trend. Maintaining a positive
public image improves your ability to attract local workers as well

- Political factor

- Local politics is related to local government in provinces and districts.

Local administrative officers, municipalities, mayors or popular leaders
affect local business and they lead a trend of politics to organize, license or
close businesses that are not in line with local ordinances or local
preferences. Maintaining good relation with local government bodies is
crucial to success of small businesses.

- Legal Factor

- The legal environment is similar to the political landscape in the way it

affects small business. Changes in laws, regulations or city ordinances may
affect business directly. If target market is teens, for instance, a new curfew
that requires people under 18 to be home by 11 p.m. may affect hours of
operation. New health and safety regulations affect restaurants and food
vendors.

- Economic Factor

- In general, shifts in the nature of the local economy can help or hinder a
business. If you sell lower-priced or value-priced goods, buying activity may
pick up when economic conditions are weak and unemployment is high.
People have more budget concerns during poor economies. On the contrary,
luxury goods and services businesses thrive more when the economy is good
and people have stable employment. Changes in loan interest rates and
banking regulations are also economic factors that affect small businesses.