Small Business Economics

Question: Discuss about the Small Business Economics. Answer: Introduction The financial characteristic of a firm is related to a great deal of things and this includes things like the expenditure and the income that is being earned by the firm. Along with it, the financial characteristic of the firm depends on a great deal on the view of the person and on the group of the people as well. For instance, the Commonwealth government payment type, measurable income, recurrent expenditure and the income source recurrent helps in determining the financial characteristic of the firm (Price, Rae Cini, 2013). A large firm consists of not only a relatively great size but at the same time it consist a huge organization as well. The large firms most of the time are of good quality as well. On the other hand, the small firms are those firms, which is privately owned and operated. In small business or in a small firm the number of employees that are there are small in number. The global market is a competitive market, where the small business or the firms have to compete with the large as well as with the well-established business. It is possible that in the same marketplace both the small and the large business are operating together, yet they will have differences, and those too significant differences, which could affect the business operation (Bentolila, Jansen, Jimnez Ruano, 2013). There are times when the small businesses are grouped together for analysing, but then the industry where the small business operated helps in determining the financial characteristic of the business. The employment of the people working in the small firms, have reduced by 11% in the recent years and the business that had 50 or more employees under the payroll, there it has decreased by 7%. In the period of 20007 and 2012, most of the small businesses faced a disproportionate job loss, and in the overall scenario, the job losses are double the 30% share of the total employment. Thus, the situation is such that one could not find out the things that went wrong with the small business firm and thus the study tries to analyze the gap at a methodological level. Problem Statement Small businesses are those businesses that have a tendency of migrating towards the less capital-intensive industries, whereas in case of large businesses or firms the company tends towards the more capital-intensive industries (Whyman Petrescu, 2015). Therefore, the large firms are into manufacturing, transportation, telecommunication, mining and technology. On the other hand, the small businesses or the firms are into the service sector as well as in the retail sector (Varum Rocha, 2013). Therefore, it is true that the small firms have the faster turnover and at the same time it has a higher turnover at the same time. Even after that, the small firms are prone to probability of loss of sales as well, and this is there because the firm suffers from inadequate capacity, inventory and credit. Large companies or the firms has more dependence on profitability and on the return on investment, which helps them to maximize their stock price; On the other hand the small businesses do not give emphasis is given to the maximization of the company rather greater emphasis has been provided to cash flow, turnover and liquidity (de Wit de Kok, 2014). Therefore, in an economic downturn the small businesses suffer more than large enterprises, because the financial resources that they have are limited, along with having shortcomings in the managerial sector and at the same time having shortcomings in case the human capabilities as well (Aga, Francis Rodrguez-Meza, 2015). Moreover, as compare to the large firms the number of customers and the suppliers that the small firms have are relatively low, therefore, it become difficult for the small firm to sustain in the competitive market, especially during the time of economic crisis. The scenario therefore, tries to find an answer to the problem that what actually went wrong with these small sized firms. The study therefore uses both the empirical evidences and the research methodology to find an answer to this particular problem. Research Objective The aim and the objective of this particular research proposal are to investigate the fact that why the small business or the firms are having job losses, and how it is affecting the performance of the firm. Apart from investigating an answer for this particular question, the study tries to answer the following research question at the same time: RQ1: How the employment loss is affecting the performance of the firm? RQ2: How can the small firms respond to these phenomena of job losses? RQ3: What are the factors that are responsible for the job losses in the employment sector? RQ4: How the job losses are affecting the sustainability of the firm in the competitive market where the firm compete against the large and established companies? RQ5: How high employment turnover could have an affect on the small business and firms during the economic downturn. Justification of the Project The small firm businesses or the SMEs had created huge amount of job opportunities in the OECD countries, especially in the countries like USA, Italy and Japan. Apart from creating job, opportunities in these countries created new avenues in the area of employment, and the SMEs are successful in creating disproportionately new jobs for the people (Ayyagari, Demirguc-Kunt Maksimovic, 2014). The SMEs, although have succeeded in creating it, they have not succeeded in increasing the higher turnover in the employment sector. One of the main reason behind this is the fact that most of the SMEs, stays in the market not even more than five years, thus creating problem regarding job security. Moreover, things as survivals, growth as well as the profitability of the small sized firms are hugely different from the large sized firm because of the financial characteristic of the both the small sized and the large sized firms are vastly different. The small sized business have the lack of collat eral security, therefore, they have to face the problem of credit rationing and at the same time they have to face the problem of giving higher interest to the banks. The particular problem is such a problem that is most of the time not faced by the large sized firms. It is true that with the increase in private equity in the market there has been an increase in the number of the venture capitalist. The venture capitalist truly provide funds to the start ups as well as to the SMEs, but at the same time it is true as well that even then there lies a difference between both the countries. In such a situation, the justification or the benefits of conducting this particular proposal are the following: The managers of the SMEs could use the research to fight the problem of lower turnover of the employment and thus could improve their performance at the same time by increasing the turnover of employment and decreasing the job losses. The start-ups could use the research or the study to have a broader view or the knowledge about lower turnover of employment and job losses. The study will therefore, help them in their new venture or business. The research proposal would explicitly help in understanding the problems that the SMEs face due to job losses, and how it affects their sustainability in the competitive market and increase the differences that are there between the large and the small sized firms. Expected Research Outcome The possible outcome of this particular study will be that it would provide an analytical framework, which would be helpful in investigating those factors that could result in the job losses in the small sized firms. The research outcome would help the small-scale firm to come up with such a strategy that would help them to increase employment turnover, and this employment turnover, would ultimately help in the growth and the development of the firm. The research outcome would also help the firm in coming up with those strategies that would be helpful for the firm to have a high rate of employment turnover, which would help the firm during the time of economic crisis or during the time of economic down turn. The research outcome would try to answer all the five research questions that have been laid before and this would be done with the help of data collection, finding, and at the same time with the help of a deep analysis, which would be empirical in nature. The outcome of this par ticular work can be viewed as an important work in the field of academics, with relation to the problem that has been stated before in the beginning of the proposal. Apart from providing an answer to the research question, the particular proposal would try to answer the question that is related to the objective that has been stated in thee beginning of the research. The answers would be provided with the help of the findings, data collection and along with the analysis that would be made. The research outcome would not only be beneficial for the existing small sized business and firms but at the same time it is beneficial for the new start up companies as well, it would play an important role in guiding them, and would help them to make effective strategic decisions. Conceptual Framework and Hypothesis The financial structures of the SMEs are such that only a small proportion of the SMEs have achieved the success; and had enjoyed the success (Banerjee, 2015). According to research and scholars, only 50% of the total SMEs, who come up each year, could at least survive for around five years or more. The others could not even survive for that much of time; and the reason behind the decline is very simple and that is the SMEs, are less financially supported organization (Nguyen, 2013). Therefore, it become difficult for them to sustain in the competitive market, moreover, the policies of the government are not neutral towards the SMEs, thus the support that the large financial organization receive is more, whereas the support that the small financial organization receives is very less. Thus, it is obvious that the financial organization could not provide security to the people and thus most of the people working in the organization tend to leave that small-scale organization to gain mo re security (Chinedu Eze, Duan Chen, 2014). The 7% decline in the employment rate mostly occurs in the constructional sector or to be more specific it occurred in the wholesale trade area (Mudambi Doh, 2013). The SMEs, who were located in both the cities as well as in countries are affected because of these declines (Thornton, 2015). There was although, a different picture as well, and that was the young, and not that much established SMEs showed a growth in the employment rate especially during the time of 2005 to 2008. The two opposites pictures are likely to create a positive image, but then such was not the case, the decrease in the employment rate has a negative impact on the SMEs, and those are the following impacts: At least 40% of the SMEs faced a problem at the time of obtaining the finance. The crisis had a negative impact on the overall demand that is there in the market. Companies faced problem regarding innovations; almost 70% of the SMEs, were considered as modest innovators (Laforet, 2013). The differences that were there between the large and the small firms based on the size became prominent. (Figure 1: The Employment Created by Different SMEs During 2005 to 2008 Source: Varum Rocha, 2013). The problem statement and research objectives would help in forming two important, Research Hypothesis, those are: H1: Null Hypothesis: The job losses in the employment sector do not have any impact on the SMEs H2: Alternative Hypothesis: The job losses are having a huge impact on the SMEs. Methodology The following research methodologies would be undertaken, in this particular research: Literature Review: The particular research requires an in depth analysis of the literature and for the in depth analysis of the literature it is important to gain information from different sources (Hamari, Koivisto Sarsa, 2014). It include sources like Google Scholar, journal articles, data collected from the online sources, are the important sources as well (Panneerselvam, 2014). There will be a thematic analysis of these documents, which will help in understanding the effect that job losses could have on the SMEs, especially during the time of economic crisis (Mackey Gass, 2015). Data Series and Surveys/Questionnaire (The Method of Data Collection): Information that is required for this particular research could be collected through the process of series of data collection (Flick, 2015). Apart from data, collection through data series surveys would also be conducted to find out what are the factors that are responsible for the job losses that are taking place in the SMEs (Blumberg, Cooper Schindler, 2014). The surveys would also help in having the viewpoints of the people who are working in these SMEs, and it would help in knowing their beliefs and their thoughts, whether they had sense of insecurity or not (McMillan Schumacher, 2014). The questionnaire would be given to the people or to the respondent helped in knowing that how the SMEs react to the problem of job losses (Lewis, 2015). In the questionnaire, the five-point Likert scale has been used. In this particular scale 1=Strong Positive Effect to 5= Strong Negative Effect; and along with it the data survey or the data collection method also use the eleven items that are related to both financial and non-financial measures. Observing Key Indicators of Job Losses: The National Bureau of Economic Research and the other data obtain from the government source would help in determining the key indicators of the study. In fact, these sources have determined certain key indicators, which will help in measuring the impact that will be there on the SMEs if they face the problem of job losses (Bryman, 2015). Data Analysis Method: Two kinds of data analysis will be used in this particular research and these two types of data analysis are the qualitative and the quantitative way of analysis. The quantitative way of data analysis will include the descriptive statistical analysis, including the mean, median and mode as well as the deviation and the distribution of the key variables (Jensen, 2013). The hypothesis testing would be carried out with the help of regression analysis. The concept of the literature review would help in analysing the qualitative data (Taylor, Bogdan DeVault, 2015). The particular research would use all methodologies that are being discussed here. The in-depth review of the literature would help in understanding the problem then the data that is being collected through questionnaires and survey should be organized properly, and then should be analysed in a proper way (Creswell, 2013). Organisation of the Study The research would be organized in the following way: Chapter One: The first chapter or the chapter one will be based on that Research Proposal that has been described in this particular assignment. Chapter Two: Chapter two deals with the in-depth analysis of the research and the case study of job losses in the small sized firms or in the small sized business. Chapter Three: The details of the methodology would be provided in Chapter three; and this would include the literature review, data series and the surveys, and this would include the data collection method at the same time. Along with it observing key indicators of job losses in SMEs would be included, and it would have the inclusion of Chapter Four: The findings and the analysis of the proposed research would be included in chapter four. Chapter Five: Summarization of those findings that are important and this chapter would also discuss the implication that the SMEs would have due to job losses. Gannt Chart The table here shows the time that would be required to complete the whole research Task Proposal Start Day End Day Duration Project Proposal 2/06/2016 21/03/2016 19 days Literature Review 22/06/2015 8/07/2016 16 days Data Collection 9/07/2016 9/09/2016 61 days Data Analysis 10/09/2016 10/10/2016 30 days Final Report Submission 11/10/2016 12/11/2016 31 days Project Budget and Budget Justification The estimated budget of this particular project is around $3500, and the timeframe within which the particular research would be conducted, is 12th November 2016. The fact is mentioned in the Gannt Chart. The reasons behind having this particular estimation of this budget are the following: The research includes a Literature Review, and to conduct this particular Literature Review, it is important to take the help of the academic journals, textbooks and online resources. The resources are accessed with money and it requires around $1250. The process of data collection could not be carried out with the help of the email because there are chances that the email would be there in receivers spam mail box. Thus, the data collection process should be carried out through the process of face-to-face interview. The face-to-face interview would help in knowing how the managers of the SMEs face the problem of job losses, and the views of the employees working and those who have left could be found as well. There can be a time when physically approaching the person would not be possible and in such a situation, things should be sent to the people by post. Therefore, the required estimated amount in case of data collection is around $1500 Accessing the charts and the government data for data analysis also requires the fund of around $750 Purpose Estimated Amount to Spend Literature Review $1250 Data Collection $1500 Data Analysis $750 Total Budget Estimated $3500 Conclusion The problem of job losses in SMEs should be a topic of research, since in todays world, there are more and more new start-ups and SMEs coming up everyday. Therefore it is important that these start ups and the SMEs, have the knowledge about these things and that would help the companies in strategic decision making, which would help them to increase the employment turnover rate that will be innovative for the company and at the same time it would also be beneficial for the existing SMEs as well. References Aga, G. A., Francis, D., Rodrguez-Meza, J. (2015). SMEs, age, and jobs: a review of the literature, metrics, and evidence. 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