‘There has been a rapid growth in the small business sector in many economies in recent years. Describe and explain the factors that have contributed to this growth.’

Christian Thomas M00405763
Dr. Ignatius Ekanem
Word Count: 1967
Date: 16th January 2015

Introduction

This paper will define the reasons why, over the past 35 years, there has been a growing number of small businesses globally. It will first define the characteristics of a small business and what steps need to be taken to create a business and then move onto what has enabled and encouraged people to start a business. These will include political changes and policies that encourage entrepreneurs to start business. The effect the economy has on small business start ups will also be looked at. Changes in social wants and needs prove to be factors for change not to mention the different advancements in technology that have led to an easy to enter .com market where business experience may no be essential for success of the business.

Report

There are various characteristics that a company must have to be considered a small business. These include the company not having more than a certain number people in the workforce, although this may vary in different industries due to the intensity of the labour. For example a manufacturing company can have up to 200 employees and still be considered a small business whereas an IT company may only have 10 employees and will be considered in the same bracket as the manufacturing company. Another way to class small businesses is by the amount of turnover generated; again this varies by industry, ranging from £50,000 in retail to £200,000 in wholesale trades. Some of the less ‘fixed’ guidelines given by Bolton (1998) to a small business is that the company must have a small share of the market, there is an absence of formalised management, this means that the company is managed in a more personalised way by the owner or owners. Bolton adds that small businesses have a high degree of financial independence and many businesses can be found in industries where there are low barriers of entry encouraging entrepreneurs to invest minimum capital. The type of business Bolton describes would also tend to be a ‘price taker’ rather than a ‘price maker’ due to its lack of market share although this may not always be true as there is a great variety in the types of business and the services provided, including many niche markets where competitors may not be as prevalent.

Over the past 35 years, since the 1980’s, there has been steady change in policies and cultural views regarding starting a small business. Nowadays small businesses represent 99% of all businesses in the EU with the majority of those being micro businesses (employ 9 or fewer people). In the UK, small businesses accounted for 47.9% of all employment in 2014(Ward and Rhodes 2014). When Margaret Thatcher was elected prime minister of the United Kingdom in1979 she imposed many policies and rules that greatly affected the UK economy. Not all of her changes were popular with population although in hindsight she aided the economy’s growth and with it small businesses. Tax cuts aimed at boosting national enterprises helped kick-start the small business boom (BBC 2013). Thatcher was also responsible for the change in the UK from a more manufacturing country to an economy dominated by services which is more attractive for entrepreneurs to enter into business with. This is due to the fact that with small businesses there is an opportunity to find a niche market that only they can cater to. As small often businesses start with an entrepreneur, who needs to be creative and have an ability to spot opportunity among other traits, the changes imposed by Thatcher provided a ‘push’ or ‘pull’ incentive for many to go into business on their own.

In 2011 the government published a ‘Plan for Growth’ that was said to have been of ‘particular