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Advantages and Disadvantages That Large Firms over Small Firms

Enterprise Essay CB 613 Number of words: 1202 a) Explain the advantages and disadvantages that large firms have over smaller firms and vice-versa, in the pursuit of entrepreneurial activity. As an enterprise can be defined as private business, it can thus be separated into two main categories which are small firms and large firms. Within many countries and many industries there are normally a large number of small firms and a smaller number of large firms as can be seen in the United Kingdom where there are only a few thousand large firms and over 4 500 000 small to medium sized firms according to the BERR.

This essay will look at both of these categories of firms and will provide information on the factors which set them apart from one another. These factors will play a big a part in setting out the advantages a large company may have against a small company and vice-versa. Furthermore, this essay will look at how these factors will affect their pursuit of entrepreneurial activity. A small firm is one that has a relatively small market share and is managed by its owners in a personalised way and not through the medium of a formalised management structure (Beaver, 2002).

Statistically speaking small firms have a number of 0 to 200 employees and a turnover figure of roughly ? 50,000. These features of a small firm will highly contribute to the advantages and disadvantages one such firm may bring to a market. A small firm is much more flexible than a large firm with the ability to have a more hands on approach. There is a limited hierarchy which means that decisions can be reached quickly as there is a smaller number of people involved in decision-making.

This also means there will be an ease of communication and thus more ease in retaining skilled staff. In the same time there are a number of disadvantages to being a small firm. As according to Beaver (2002) small firms will be heavily reliant on small number of customer in a single market and the founder will have high levels of personal investment and risk. Furthermore, small firms will have limited access to external capital for expansion. In contrast to a small firm, a large enterprise has a large market share and is typically controlled by a board of directors accountable o remotely located shareholders resulting in a formal management structure where every decision must be analysed thoroughly. It will generally have more than 250 employees and high turnover figures. Again this will affect the companies capabilities and therefore the advantages they will have. A large firm has the ability to operate in more than one market and as a result of their size they are also able to influence the market by price and quality strategies. A large firm has greater access to capital and thus a greater capability to expand.

However, they will also face a number of disadvantages such as very small personal contact with their employees which can result in difficulties retaining them. Due to its size there may be problems of effective control and task achievement. Entrepreneurs will use these advantages in their pursuit of entrepreneurial activity and in achieving their mission. Entrepreneurial activity can be defined as the enterprising human action in search of the generation of value, through the creation or expansion of economic activity, by identifying and exploiting new products, processes or markets (Lavoie & Wright, 2000).

Therefore, following this definition, for large firms, the ability to easily attain capital is crucial when it comes to expanding their economic activity along with many of their other advantages. In the same time small firms are easier to start up and if an entrepreneur discovers a product or service, they will exploit it. In conclusion, there are multiple advantages and disadvantages both large and small firms have.

If used properly entrepreneurs can use their properties in pursuing their own entrepreneurial activity by increasing economic activity within the market and thus achieving their own mission. b) Explain the processes by which large organisations may retain or regain their original entrepreneurial culture. Entrepreneurial culture is a big part of any company as not only does it represent the company’s values along with the values of the founder, but it will also provide a framework as to how the company will be run in the future.

This however can change over the course of time which can have very negative effects on the company such as decreased efficiency and performance along with a loss of customers. This essay will look at what is entrepreneurial culture and how it be retained or regained throughout a firm’s existence. Enterprise can be defined as either a private business or the readiness to engage in undertakings of difficulty risk or danger. In other words, enterprise can represent the daring spirit of an individual (Abercrombie & Keat, 1999).

Inevitably the culture of any venture is influenced, if not created, by this individual who imprints their value on to it. Hence, if founded by a true entrepreneur, the culture of a new venture might be expected to be entrepreneurial. However, the culture of any organization is also determined by the organization’s structure by the means through which the founder delegates authority and divides up responsibilities. It can be concluded that there are cultures that encourage and reward innovation and initiative, and those who discourage it. (Kirby, 2003)

At IBM, the culture of the firm not only led to the belief that mainframe computer would always be the dominant product design, but it encouraged conservatism, risk aversion and a reluctance to challenge the status quo. When the company did realise that this was the not the case and that the future of the computer industry lay not in mainframes but in personal computers, their average decision making period of time drastically slowed . In contrast Dell tried to keep the company as smooth as possible and decided to create a customer-service culture.

This was done by decentralizing authority and decision making, and by encouraging all employees to get as close to the customer as possible, to ensure both high-quality customer service and that the company is aware of, and respond to changes in the market which has resulted with them being now among the top personal computer sellers. (Kirby, 2003) It can be stated that there is a clear difference in success in maintaining a positive and adaptive entrepreneurial culture, however there are times when this culture may become more administrative.

In order to maintain an entrepreneurial culture there will be a number of points which the company still has to display. There must still be an external focus, and unlike IBM there should be a factor of risk-taking and encouragement of individuality. Innovation and competition have to be sought after and a commitment to the mission should be wanted rather than a commitment to the organization (Gray, 1998). Furthermore, a simple organization should be kept instead of a complex one with group rewards applied.

In conclusion, an entrepreneurial culture plays a very important part to a company as it can increase the performance of the employees along with the quality of products if a positive, adaptive culture is in place. It can become difficult at times to maintain this culture as there is normally an inclination to the administrative side of managing a company, but if certain factors are met, an entrepreneurial culture can be maintained or regained. References Abercrombie, N. & Keat, R. 1991)Enterprise culture, London, Routledge| Beaver, G (2002) Small business, entrepreneurship and enterprise development, Harlowe, Financial Times/Prentice Hall| Gough, W. J. (1969) The rise of an entrepreneur, London, Batsford | Gray, C. (1998) Enterprise and culture, London, Routledge| Kirby, A. D. (2003) Entrepreneurship, New York, McGraw Hill| Lavoie, D. & Wright, C. E. (2000) Culture and enterprise: the development, representation and morality of business, New York, Routledge|

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