CHAPTER II: THEORY OF SMALL BUSINESS

Lecturer: Do Duy Kien, PhD

 I.DEFINITIONS
• Qualitative Approach:
– Owned by individual and independently operated : not
a part of one larger enterprises, or do not have any
control business.
– Business owner who is the full contributor or
contributed the majority of the company's operating
capital.
– Decision-making functions is of the business owners,
who are always working full time at the company, also
known as the operating manager of the business.
– Business only have a small market share in their field
operations.
 I. DEFINITIONS
• Quantitative approach:
Number of employees (if any) to work in business
Expenses for salaries and wages annually
Legal structure of the company
Total annual sales of the company
The monetary value of the property (such as office
equipment and machinery in the factory and / or other
assets) that enterprises owned
Shares by the business owner operating holding.
 I. DEFINITIONS
• General definition:
Small business is an independent business, small scale , it
is managed, financed and operated by the owners of
businesses; and the number of employees, financial
resources and assets are relatively limited.
 II. FEATURES
• Owned by 1 or 2 individuals
• Being funded by the owner
• Small market share
• Short lifecycle
• In some cases, companies operating in the form of part-
time
• Net profit is lower
• Normally open in the house of an individual
• Geographically, usually limited to 1 or 2 branches
• Normally operate in the form of family
• Only exist in the private sector
III. The difference between small businesses
and large businesses.
• The rate of female owner is more than male.
• Few trade union
• Less operation time in a week
• Less use of method to improve the management
and technical planning
• Less use of government support
• Less exports
• Less capital from outside
• Less desirable firm grow larger
• Higher rate of failure
• Differences in management perspective
 IV. The advantages and
disadvantages when operating
small
• Advantages:
businesses
– Self-employed
– Not only reach personal goals, but also to satisfy the
passion
– Many potential financing opportunities, if well
managed
– Family benefits
 IV. The advantages and
disadvantages when operating
small businesses
• Disadvantages:
– Uncertainty in Business
– The likelihood of losses
– Increase of accountability => stress
 V. Economical role of small
• businesses
Create employment opportunities for people
• The next generation could be large enterprises
• Creating a competitive environment
• Promote innovation
• A type of the business
• Exports
• Specializing in one product or certain services
• Support for large enterprises
• Investments in rural areas / restrict firms, corporations
too concentrated in large cities
• Distribution of economic resources, wealth and
opportunity
 VI. Entrepreneurship and owner
operated small businesses
• Entrepreneurs find, evaluate and exploit new business
opportunities. Although they can start with a new small
business as a mean to accomplish this, but they can also
operate a large operating companies, one of the state
company or nonprofit organization. In contrast, an owner
who operate small business are operating active ones, and
in this company, there is not much innovation, new ideas
and risks.
 VI. Entrepreneurship and owner of
operated small businesses
• Entrepreneur is the one who develop new ideas, new
business to establish one business based on these ideas,
and provide added value to society based on ideas that
are proactive and independent. But not all small business
can do these things, because a lot of small business do not
actively seek new ideas and business opportunities.
 Established Firm Management of small
firm
Feature A process in which As the operator of one
one independent
individual find,
evaluate and exploit
opportunities in an small business
independent way enterprises
Firm Size Large, medium and small Small
Risk Level Various Generally, the lower the
level of risk
The It can vary from 1 to many Less
number
of
members
of the Firm
Economic The private sector, government Only in private sector
Area and non-profit
focus High Various

on
development
Key people Entrepreneur The manager
The demand for high achievement (1 Demand achievements
important firm is established to realize in moderation (one
characteristi their dreams), the ability to firm operated for a
cs of control situations high living),
References
Copyright (ppt slides): Tran Minh Thu, PhD
Foreign Trade University