[Solution] Small Businesses and International Entrepreneurship
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Author: Sarah Bennett
Like any other business, a start-up must choose a strategy. Key issues that managers of start-ups must make decisions about are which industry to compete in, how to leverage distinctive competencies, and how to write a business plan.
Small Businesses in Services and Retail
This figure shows how businesses with fewer than 20 employees are distributed across industries. Over half of all these businesses are in the service sector. Small businesses are especially prominent in the retail and service industries due to the relatively low cost of entering these markets.
Distribution of Small Businesses by Industry
Small Businesses in Manufacturing
Though less common than service and retail ventures, small manufacturing businesses can be successful by:
- Producing specialized components for larger manufacturers
- Creating custom or artisanal products
- Leveraging new technologies that reduce capital requirements
- Starting with limited production capacity and scaling gradually
Small Businesses and Distinctive Competencies
Successful small businesses often identify and leverage distinctive competencies that set them apart from competitors:
- Specialized expertise or unique skills
- Superior customer service or personalized attention
- Ability to fill niche markets that larger companies ignore
- Agility and ability to adapt quickly to market changes
Small Businesses and Business Plans
A well-developed business plan is critical for new ventures, typically including:
- Executive summary
- Company description
- Market analysis
- Organization and management structure
- Service or product line description
- Marketing and sales strategy
- Financial projections (income statement, cash flow, balance sheet)
- Funding requirements and use of funds
Select the terms that best complete the following sentences.
Entrepreneurs often find opportunities in the retail and service sector because these industries have .
View Explanation
Starting a service or retail company can often be done with nothing more than the expertise of the entrepreneur. For example, someone who bakes delicious cookies might start supplying them to local restaurants, or someone with a lawnmower might begin mowing neighbors' lawns.
A part of the market that established companies are not serving is known as a .
View Explanation
Outside the business context, a niche is a place in which a person or thing fits nicely, such as an alcove the perfect size for an ornamental plant. In business, a niche is a part of the market that is empty until an enterprising company fills it.
Select the correct response for the following question about a strategy commonly pursued by small businesses.
An entrepreneur decides to start a business to serve customers whose needs are not being met very well by existing businesses. Which strategy is this entrepreneur using?
- Identifying a new market
- Identifying a niche in an established market
- Exploiting a first-mover advantage
View Explanation
This entrepreneur is entering a market where there are already competitors, but she has identified a niche in the market where there is an opportunity to earn a profit.
Select the correct responses to the following question.
Which of the following are typically included in a business plan? Check all that apply.
- Income statement
- Franchise agreement
- Financial plan
- Sales forecast
View Explanation
A business plan should include a sales forecast, which is a projection of revenues, and a financial plan, which shows how the business will meet its obligations and achieve profitability. Among the important parts of a financial plan are an income statement; others are a cash budget, balance sheet, and breakeven chart.
A franchise agreement is a contract that allows an entrepreneur to sell a large company's product under that company's brand name and with the company's support.
