Small Business Fundamentals: Criteria, Strategy, and Ethical Growth

Small Business Criteria and Economic Contributions

A small business is typically defined by the following criteria:

• Financing is supplied by one person or a small group.
• Localized business operations (except for marketing).
• Business size is small relative to larger competitors.
• Fewer than 100 employees.

Economic Contributions of Small Businesses

Small businesses are vital to the economy, demonstrating significant impact:

• Produce 14 times more patents than large company staff, and are twice as likely to turn innovation into market success.
• Account for 50% of the Gross Domestic Product (GDP).
• Create more than 60% of new jobs.
• Account for 44.3% of total payrolls.

Women Entrepreneurs: Growth and Challenges

The role of women in business ownership has expanded significantly:

• The number of women-owned firms nearly doubled between 1997 and 2006.
• Females owned 30% of businesses as of 2006.
• Women are increasingly moving into nontraditional businesses.

Challenges Faced by Female Entrepreneurs

Despite growth, female entrepreneurs often face specific hurdles:

• Newness to the entrepreneurial role.
• Lack of access to credit.
• Lack of networking connections.
• Discrimination.

Strategies for Gaining Competitive Advantages

Small firms can establish a strong market position by focusing on key areas:

• Customer Focus: The orientation of the organization is primarily to serve the client.
• Special Niche Business: Focusing on a specialized part of the market.
• Innovation: Developing, rebranding, and changing designs within a timely framework.
• Integrity & Responsibility: Delivering and submitting products/services in the right way.
• Quality Performance: While small businesses may have limitations, they are often better focused and effective in delivering quality.

Business Integrity and Its Impact on the Economy

Integrity is the uncompromising adherence to doing what is right and proper.

Key Integrity Issues in an Expanding Economy

Examples and challenges related to integrity include:

• Internet ethics, transactions, and security.
• Maintenance of personal privacy.
• Risks associated with buying and selling on the internet.
• Protection of intellectual property rights.
• International issues with integrity, such as illegal immigrants and forced labor in sweatshops.
• Challenges posed by corruption acts and ethical imperialism.

Building a Business with Integrity

Establishing an ethical foundation requires a three-pronged approach:

1. Having a Strong Foundation: Built upon underlying values.
2. Leading with Integrity: The leader's ethics have a more direct effect in small firms, and they must insist that ethical principles are followed by employees.
3. Supportive Organizational Culture: Creating a code of ethics clarifies the rules and provides guidance to employees.

Social Responsibilities of Small Firms

Small businesses have obligations extending beyond profit generation:

• Environmental protection.
• Obligations to stakeholders.
• Response to community needs.
• Consumerism (protecting consumer interests).
• Support of education.
• Compliance with government regulations.

Types of Startup Ideas and Examples

Startup ideas can generally be categorized into three types based on their market approach:

Type A Ideas: New Market

Targeting a new age market with nutritional value beverages.

Type B Ideas: New Technology

Using high-tech computers to simulate an airplane ride (e.g., advanced simulation services).

Type C Ideas: New Benefit

Developing a misting device to keep outdoor workers cool.

Strategies to Capture Market Opportunities

Businesses employ various strategies to secure and expand their market presence:

1. Broad-Based Strategy: (General market approach).
2. Differentiation-Based Strategy: Aims to market and develop unique products for different customer segments.
3. Cost-Based Strategy: Focuses on efficiency and low pricing.
4. Focus-Based Strategy: Concentrates its resources on entering or expanding in a narrow market or industry segment.