Which Firms Are Important to a Society and Its Economy? Large Firms or Small Firms
Which firms are more important to a society and its economy: Large firms or Small firms? Large firms refer to those which require huge infrastructure, man power and a more capital assets. Small firms refer to those which require small infrastructure, less man power and fewer capital assets.
1.1 Comparison between the large firms and Small firms.
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Small Firms are also Important same as like large firms. Small firm Role and Impact supports the claim that small firms make two useful contributions to the economy of society. First, they are an integral part of the renewal process that pervades market economies. New and small firms play a crucial role in experimentation and innovation that leads to technological change, productivity and economic growth. Second, small firms are the essential mechanism by which millions enter the economic and social mainstream of society. The public policy implications for sustained economic growth and social well-being are the continued high-level creation of new and small firms by all segments of society. It should be the role of government policy to facilitate that process by eliminating entry barriers, lowering transaction costs, and minimizing regulation.
2. Small business over the large business.
From our point of view small firms are more important to a society and its economy over the large firms. Because small firms are more creative over the large firms, small firms are also more innovative than larger firms. Small firms can identify problems whatever if it is internal or external than large firms because large firms have may department and many product they produce so they cannot identify problems easily. Because of they can solve the problems easily so they can generate more ideas creatively. And small firms are handled by less number of people so they can select from that idea and able to commercialize speedily than large firms. so as small firms commercialize greater degree of ideas than large firms so it is useful to the society and its economy as well.
An engineering firm which is small has both advantages and disadvantages compared to large firms. The owners can more easily respond to the needs of clients through their direct contact with them and their knowledge of local situations. Small firms can be more flexible, both in their employment terms and in their market responses and they can take on work which does not interest larger firms. However, small firms may have trouble retaining staff, and owners may not have adequate management or marketing skills.
Small firms are also beneficial to people of the society who want to start their business in the market of society, because of small firms relatively needed very small amount of money to start their businesses so this is the very strong point because to start the business money is a main milestone, in some cases banks might not be willing to borrow more or large amount of money to business which are started new. Small firms are good for those people who have experience in particular field but do not have a necessary amount of resources, in the terms of resources contain land, labour, capital and enterprise. Small firms not require more space to start production so require less amount of land same as land in production small firms require less number of people. Enterprise is the risk taking ability of the owner.
Small firms give the freedom of their owner to choose the way in which they want to work, like an example the office hours or day off. If the owner of the small firms want to work in night they can work or work into day they can work they have flexibility in work, if the owner want they want like to work today then they can. They can free to choose their break time as well. The owner or the entrepreneur has complete right over the profit. He or she does not have to share it with other, then in the large firms or public limited large companies have to give out the profits to large number of shareholder in the form of dividends. In the small firms the owner has complete right over the profit so he or she motivates himself or herself to work harder because he or she is responsible for the all the profits and loss of the whole firm. In the other side if we can see than large firms owner have not that much freedom like a small firms, and in the large firms owner of the company cannot motivates them to work harder for the company.
2.1Advantages of the small firms
Small firms are provide employment to a very large number of people and in some countries small firms employ more than half of the total employees of the countries so it is very useful to the countries which have this type of economies. In the US, small business (less than 500 employees) accounts for around half the GDP and more than half the employment. Regarding small business, the top job provider is those with less than 10employees and those with 10 or more but less than 20 employees comes in as the second, and those with 20 or more but less than 100 employees comes in as the third (interpolation of data from the following references).The most recent data shows firms with less than 20 employees account for slightly more than 18% of the employment. Of the 5,369,068 employer firms in 1995, 78.8 percent had fewer than 10 employees, and 99.7 percent had fewer than 500 employees.
Small firms are act as competitors to large firms which will help to improve their efficiency and lower the prices offered to the consumers. So if there are no small firms into the economy then large firms takes the prices from the consumer whatever they want and make big profits. Small firms are works as competitors of large firms so they provide good quality of product than small firms. As we discussed above small firms can commercialize more ideas than large firms so in some cases this innovative ideas can lead to mass production of products and exports to foreign markets which has huge advantages for the economy of country. Most businesses start with being small. Therefore there is an enormous chance that small businesses of today might become the market leaders of tomorrow and provide greater benefits to the economy.
Small firms are have more tax benefits than large firms, the governments should offer lower amount of corporate taxes for small businesses. Most governments do that. Government loans and grants should be provided to these businesses which are free of interest or at very small rates of interest. Grants should be given to small businesses for operating in underdeveloped areas of the country with high unemployment etc.The government should provide them satisfactory level of training so that the owners and employees could work more efficiently to make the small firms more successful. Small businesses are vital to tackling graduate and youth unemployment.
That’s according to the Federation of Small Businesses who say that the Government must ensure that small organisations are given the tools they need to take on more graduate interns and apprentices, to tackle youth unemployment and bring the country out of recession. An overhaul of apprenticeships, including an increase in the national minimum wage for them and an introduction of a wage subsidy for workers who’ve had their hours cut to avoid redundancies and enable employers to retain their staff.
Small-business owners offer health benefits for a variety of reasons: they’re genuinely concerned about their employees being taken care of, it’s mandated in their state or they want to be more competitive to attract top talent (a large majority of employees consider a health plan to be the most important benefit they can be offered, according to a survey by the National Business of Group on Health).
2.2 Small firms act as a backbone example.
If we take an example of world’s largest US(United States) economy then small firms are the backbone of the us economy. Small firms produce roughly half of the private Gross Domestic Product (GDP) and create, on Average, about two-thirds of net new jobs annually. Small businesses are the greatest source of new employment in inner cities, percent of establishments and 80 percent of total employment. American small business is the world’s second largest economy, trailing only the United States as a whole.
Small businesses employ more than half of private sector employees. Ninety percent of small businesses employ fewer than 20 people. Small firms represent 99.7 percent of all employers. Nearly 16 million people operate a small business as their primary occupation in a year. Women-owned firms have grown at around two times the rate of all firms8; minority-owned firms have grown at around four times the rate of all firms. More than 70 percent of adults think small business owners’ work harder than government workers, big corporation employees and corporate CEOs.
The latest UK figures show that SME businesses make up almost 60% of the private sector workforce and account of 52% of business turnover. And yet, with the economy still struggling to emerge from recession, many are hampered by sluggish cash flows and a general lack of liquidity. In fact – SMEs across the country now face a staggering £18.6bn late payment problem – representing an increase of almost £3bn from 2007.small firms improve cash flow, liquidity and administrative cost of chasing late payments.
So in recession times they can become solution providers in where bank fail to perform. Small firms recognize the problem of economy like its organisation problem and they do something on it. So, recognising the problem is one thing – being able to do something about it is another. Some organisations struggle with the practicalities and commitment to investment that new solutions represent. However, once that new solution is uncovered, many are surprised how quickly their purchase to pay cycles can turn around. In fact, many wonder why they didn’t approach this area of their business much earlier
Even though this much advantages of small firms they are not more interfere with the government and less regulated by government. As they are less interfere by government so small firms are also not make any interfere to government to make any decision about economy like large firms in some cases for their benefit large firms are interfere or stop the government to take good decision for people of the country. Small firms provide better customer care than large firms
Small Businesses Provide Better Customer Care. Sure you’ve noticed that the larger a company grows, the harder it becomes to provide good customer service. but it’s the small business not the mega corp. that really excels at it. Small businesses know that their livelihood is based on their customers. Small is great for customers.
Small Businesses Encourage the Passion Needed to Succeed. Apathy doesn’t breed nearly as well in small businesses as it does in big business. Small business owners and their workers are focused and immensely proud of what they do. Small business owners are passionate about their businesses. How many employees in bureaucratic organizations can say the same?
Small Businesses Owners Are Highly Skilled. In a small business, you have to excel at a lot of things to succeed. Small business owners and their key employees are masters of dozens of disciplines and perform their intricate balancing act like pros. So what if they wear more than one hat? Whom should we admire more — the corporate manager or the jack-of-all-trades small business owner, who’s skill-set, is sharpened to a razor’s edge, and who survives and succeeds and serves? My vote is with the latter.
Small Businesses Allow Owners the Freedom to Innovate. Small business owners learn to be risk takers and innovators. Corporate employees, on the other hand, too often interpret their prime directive as keeping their jobs. Risk-taking can get in the way of career-building. Innovative small businesses are prize targets of larger corporations that often find it more cost-effective to acquire than to innovate on their own.
Small Businesses Can Change Course Rapidly. Large corporations can be adverse to change, while small businesses know that their ability to make rapid decisions and implement course corrections is their key to success. In the ocean of business, mega-corporations turn like tankers, while small businesses can zip around them with the agility of a speedboat.
Small Businesses Can Be Quite Profitable. Small business is not a synonym for small earnings. In fact, many small businesses are extremely profitable. Their advantages of leanness, manoeuvrability, innovation, and customer focus meld them into steady enterprises that earn a significant return on investment year after year after year. Being big isn’t a worthy goal. But delivering top customer service, a passion for excellence, a willingness to dream and create, and the freedom to make timely decisions — these are worthy of acclaim.
Small businessperson, I salute you for your dedication, your intelligence, your business acumen, and your contribution to society. Be proud of your small business. Stand tall, free, and unapologetic. Don’t offer excuses for the size of your business. Small businesses make the very biggest impact of all! To conclude, small business are extremely importance for the welfare of those involved directly or indirectly with the business, i.e. the whole economy. Therefore, I recommend that people should start own businesses. Even if they don’t succeed, there will be a great chance of gaining priceless experience from the business.
From our above discussion in the first look we can see the both the firms are important for the society and its economy. But at the end of our discussion we can conclude that small firms are more important than large firms. As Large firms are Important in providing huge employment. In the other side Small firms are provide less employment but they provide better customer care, allows owner to freedom innovation means in small firms owner of that firm can free to do any experiment in his own business, not more interfere to government this points are also important to the growth of the society.