Small Business Management

9/3/2020

Concept Questions

Concept Check Questions 1-1

1-1: A business is generally considered small if it is independently owned, operated, and finances; has
fewer than 100 employees; and has relatively little impact on its industry. It can also take into account
sales revenue, the total value of assets, and the value of owners’ equity. Small business size standards
also vary by industry.

1-2: Yahoo had annual revenue of just over 5 billion while Google had annual revenue of over 160
billion. In comparison, Yahoo could be considered a small business as it has little impact on the industry.

Concept Check Questions 1-2

2-1: Corporate profits declined while costs increased. This was when people, such as Steve Jobs, started
small businesses which created entirely new industries. Managers began to realize that bigger isn’t
always better and that the economy of scale doesn’t guarantee lower costs. Instead, people could focus
on what their specialty is or what is in highest demand. They could be more flexible to change their
products and respond to the customer.

2-2: Outsourcing is when in any segment of a business, its owner does not have special skills, the job can
be put up for sale, eliminated, or sent out for someone else to do. Many people who lose their jobs go
on to start small businesses of their own. Additionally, these new businesses often do the work that the
large businesses no longer do themselves. Outsourcing typically enhances the productivity and
competitiveness of the companies.

2-3: I think you could show based off the increased small businesses opening and the additional
information and courses being provided at colleges that small businesses definitely have an impact on
the economy. I think that the data relating to the growth rate of small businesses, combined with the
additional course availability and graduates starting new businesses upon completion of their degree, it
should be fairly easy to demonstrate why small businesses are impacting the economy.

Concept Check Questions 1-3

3-1: Yes, diversity is just as important in small businesses as it is large. In the example, the more diverse
teams produced the broadest solutions. A varied workforce is needed at every level of an organization
and can be applied to businesses of any size.

3-2: Everyone has their own ideas and opinions on things, much of which comes from your background,
whether it’s educational, economic, social, etc. A small business should value diversity as it is trying to
appeal to the masses and having an accurate representation of the diversity in the real world should be
helpful when making business decisions. The widest range of experience and education from people of
different backgrounds should deliver the best results.

Concept Check Questions 1-4

4-1: Small businesses are more likely to be innovative because large businesses have their R&D team
focusing on improving existing products instead of developing new ones. Large businesses are trying to
profit from their existing products which makes sense. However, it tends to discourage the development
of new ideas and products. Small businesses are more innovative trying to introduce new technology
and markets.

4-2: Creative destruction is the replacement of existing products, processes, ideas, and businesses with
new and better ones. It is necessary in a capitalist system. Small businesses are leading this change,
especially with the development of new technology. A small business owner who does not keep up with
market innovation risks being left behind.

4-3: Being close to customers allows a business to provided individualized services and gives them
firsthand knowledge of what the customer wants and needs. Small businesses can build a competitive
advantage based on specialty products, specialized service, and quality.

4-4: I do think it represents the capitalist system. As said before, creative destruction is necessary in a
capitalist system. All businesses are looking for profits and in order to increase profits, the business has
to be competitive and find a competitive advantage. Being innovative is going to be a competitive
advantage – whether it’s through products, services, processes, etc.

4-5: The internet has definitely recreated the way business is done. Everything is different than pre-
Internet. I think it is way more than a tool. I know how many actual physical stores have closed or lost
substantial business because of the increase in online sales. Especially now more than ever with Covid,
online shopping is higher than ever and window shopping or actually going to stores/malls has declined
drastically. I think it is will undoubtedly continue to change the way business is done. I could see all
shopping moving to virtual at some point in the future.

4-6: I think that personal computers would have eventually been created by someone at some point but
I think it would have been very different if small businesses didn’t exist. It said that Steve Jobs and Bill
Gates started small businesses to create entirely different industries. If it weren’t for companies like
Apple and Microsoft, many of the products and services we have now might not exist or would be
extremely different from what they are.

Concept Check Questions 1-5

5-1: I think it’s a fair comparison. A small business is a risk, while getting married or going to college is a
risk as well. The text mentions the possible causes of failure for small businesses and they really don’t
sound too far off from common divorce reasons. The mistakes leading to failure are neglecting planning
for the future, failing to understand the commitment and hard work that must go into it, not getting
help, financial problems, etc. All of these could be considered similar reasons for divorce.

5-2:

Inadequate management: this relates directly to poor management and is one of the biggest failures.
The manager has to be a leader, a planner, and a worker.

Inadequate financing: this can be caused by improper managerial control as well as shortage of capital.
The manager has to be able to manage resources, credit, investments and properly plan for the future.
Lack of business plan: planning your business and its future is crucial to the success of the business.
Management needs to have a roadmap planned out for the business and a plan in place in case of any
issues that arise.

Lack of understanding of the time/commitment: a business is going to take a lot of time and energy,
especially in the earlier phases. Management needs to be prepared to work long hours with little reward
in the beginning.

5-3: I think that all businesses experience some failures in the beginning, even if it’s on the smallest
scale. This is how they learn to readjust and make changes that will support a successful business plan.
My previous employer started as a couple of people at a folding table in an upstairs office and grew into
an international company that has branched off in many directions. It was so much time and money put
into it in the beginning and it is still owned and managed by same owner and manager as 17 years ago.
He really made the place into his life in the beginning and was only able to step away and take some
time away from the place when it became successful enough to operate without him.

5-4: Given that it is 2020, I think that small business is more important than ever. I think there are more
of them and there are more people wanting to do something on their own and work for themselves.
With so many developments and advancements in technology, both computer and phone based, the
possibilities have been endless with new software, gadgets, enhancements to existing products,
automated devices, etc. I never thought there would be an Alexa that you just speak to or an app on
your phone to order food at a drive-thru. There are so many things that we didn’t even know were
possibilities until technology advanced as well.

Closing Case Questions

1-1: I don’t really watch movies. I rarely watch them and have seen very few, especially when people
talk about “must-see” movies and I’ve almost never seen any of them. While I don’t have personal
screen inspirations, I do think that movies can provide lessons into how to run a small business (or
maybe how not to as well) I’m sure there are valuable lessons in financial struggles, overwhelming
stress, and issues that you don’t prepare for when you start the business. I did watch a movie about the
creation of Facebook which was called The Social Network. That was pretty insightful as to how an idea
develops, its progress, how it can explode into something you didn’t even intend for it to be and how to
capitalize on its success. This went from a site where you rate attractiveness to Facebook as it is now.
You also get to see the negative aspects of it that go overlooked or unconsidered when thinking about a
small business.

1-2: I’ve never seen any of the three movies listed in this question. I think I might have seen bits and
pieces of Office Space which probably gives insight into the everyday lives of an average employee that
works for someone else. I think I remember the traffic going into the office and the cubicle life. It
probably just shows the everyday life of employees in an environment such as a call center and will most
likely make anyone who works for themselves appreciate their situation. It might also encourage others
to consider the idea of entrepreneurship instead of working for another corporation.

1-3: I’m going to stick with The Social Network since I’ve actually seen that. From what it started as,
Mark Zuckerberg was faced with an uphill battle. It started as a website rating girls’ looks after he was
broken up with by his girlfriend. The site is so popular that it ends up crashing the network, causing the
first of many roadblocks that got in the way of its success. He was able to get one of his friends to invest
in the company as well to turn it into what he wanted. It continues to expand, he continues to adapt to
the changes needed and what seems to appeal to the people and he continues to get people to invest in
his vision. He faced so many obstacles but was able to continue to grow an extremely successful and
profitable company.

1-4: I don’t like how the whole ending went down with Zuckerberg not giving the initial investor and his
friend a fair portion of Facebook’s success. I think this is a bad reflection on him as an owner/manager.
They ended up settling with the friend because of how bad Zuckerberg would have looked if the case
went to trial anyway. I think that the success and fame went to his head and that he lost sight of how
small his humble beginnings really were. I think that this is probably common when companies
experience a huge growth of success quickly.