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Entre 2

Micro and small enterprises are defined by size and economic/control criteria, focusing on characteristics like market share, independence, and personalized management. They play a crucial role in local economic growth, job creation, and rural industrialization, while also facing challenges such as income uncertainty and managerial incompetence. Success factors include clear objectives, sound organization, adequate finance, and effective management.

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16 views14 pages

Entre 2

Micro and small enterprises are defined by size and economic/control criteria, focusing on characteristics like market share, independence, and personalized management. They play a crucial role in local economic growth, job creation, and rural industrialization, while also facing challenges such as income uncertainty and managerial incompetence. Success factors include clear objectives, sound organization, adequate finance, and effective management.

Uploaded by

girmabarok657
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Unit Two

Micro and Small Business


Definitions of Micro and Small Enterprise
 Micro and Small business enterprise is a specific form of small
business.
 It almost involves businesses with informal characteristics.
Such enterprises usually include small service businesses,
bakeries, metal working business, small furniture makers’
repair and maintenance business, copying business, small scale
food production business, etc.
 Generally, there are two approaches to define a small business
enterprise. These are:
Size criteria and
Economic/control criteria
Size Criteria
 Though the criteria used to measure the size
of business may vary, the following criteria
are commonly used to measure the size of
businesses.
Sales Volume
Number of employees
Asset Size
Volume of deposits
Economic/Control Criteria
The definition of a small business referring to
economic/control criteria cover the following:
Market share
Independence and
Personalized Management
Characteristics of Small Business
 The following characteristics should be satisfied in order for
the business firm to be categorized as a small business.
Market Share: The market share of a small firm is not large
enough to enable to influence the prices of national goods
sold to any significant extent.
Independence: The owner of a small business is independent
in that he/she has full control over the business.
Personalized Management: It is the owner who actively
participates in all aspects of the firms’ management and in all
major decision making processes. Thus, there is little or no
devolution or delegation of authority.
The Importance of Micro and Small
Enterprises
Micro and small enterprises are considered to be
greatest value in building up a local production
structure and in promoting economic growth.
Micro and small enterprise are also considered as
a means of creating employment opportunity and
achieving a fair distribution of national resource
income, knowledge and power.
Small scale enterprises are also seen as a seedbed
for the development of local entrepreneurship.
Small enterprises are also important in that can
help to promote rural industrialization.
Cont…
Small scale enterprises are also termed or seen as forms
enterprises in which more appropriate technology is applied.
They require less capital and more labor. They have the capacity
to generate a much higher degree of employment with less
capital as compared to the large-scale sector. Thus, they are less
capital intensive and more employment oriented.
Small-scale enterprises are also important in that can serve as
suppliers of parts and accessories to bigger industries. This
ancillary function involves specialization in specific areas and
results in greater profitability.
Small-scale enterprises or industries can also play a prominent
role in promoting the export market.
The Potential Advantages of Small
Business Ownership
 Opportunityto gain control over own destiny
 Opportunityto reach your full potential
 Opportunityto reap unlimited profits
 Opportunityto contribute to society and be
recognized for your efforts
The Potential Drawbacks of Small Business
Ownership
 Uncertainty of income
 Risk of losing your entire invested capital
 Long hours and hard work
 Lower quality of life until the business gets
established
 Complete responsibility
Quiz
1. Define the term entrepreneurship,
enterprise and entrepreneur?
2. Discuss the similarity and difference
between manager and entrepreneur?
Cont…
If the problems facing MSEs are not timely managed, they may
be forced to cease operation. It is common that every year many
small firms cease operations. The following are major reasons
count for the failure of small business;
Incompetence – the owners simple do not know how to run the
enterprise
Unbalanced experience – do not have rounded experience in the
major activities of business production
Lack of managerial experience – do not know how to manage
production.
Lack of experience in the line – the owner has entered a business
field in which s/he has very little knowledge.
Cont…
Neglect – the owner does not pay sufficient attention to
the enterprise.
Fraud – involves intentional misrepresentations or
deception (purchasing materials / goods for him / herself
with the company’s money)
Disaster – refers to some unforeseen happening
Moreover, the following are specific managerial causes of
small business failure:
Inadequate records: unable to establish an adequate record
keeping system.
Cont…
Expansion beyond resources
Lack of information about customer
Failure to diversify market
Lack of marketing research
Nepotism or favoritism toward family members
One person management
Lack of technical competence
Absentee management: the owner stayed away for long
period
Factors Contributing to the Success of
Micro and Small Enterprises
Determination of objectives
Sound organization
Research
Adequate finance
Proper Location, Layout and Size
Effective and Efficient Management
Marketing Network
Modernization

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