Griffiths and Wall: Economics for Business and Management 3rd edition© Pearson Education Limited 2011 Chapter 2 Entrepreneurship and Small/Medium Enterprises (SMEs) Slide 2.1

Griffiths and Wall: Economics for Business and Management 3rd edition© Pearson Education Limited 2011 Schumpeter: entrepreneur as innovator, driving technological change in processes and products Knight: entrepreneur as risk taker, earning profit as a reward Shackle: entrepreneur as creative and imaginative in recognising and exploiting opportunities Slide 2.2

Griffiths and Wall: Economics for Business and Management 3rd edition© Pearson Education Limited 2011 Proactive: demonstrating initiative and assertiveness Achievement oriented: identifying opportunities and exploiting them Committed: to task achievement and the people involved Calculated risk taker: taking specified risks in the expectation of profit Slide 2.3

Griffiths and Wall: Economics for Business and Management 3rd edition© Pearson Education Limited 2011 Early stage entrepreneurs: % of population aged 18 – 64 years involved in starting new businesses. Varies widely – e.g. China 22%, Japan 8% High expectation entrepreneurs: % of population aged 18 – 64 years involved in starting new businesses which expect to employ at least 20 employees within 5 years. Varies widely – e.g. China 4%, UK 0.7% Slide 2.4

Griffiths and Wall: Economics for Business and Management 3rd edition© Pearson Education Limited 2011 Bolton Committee Report (1971) Companies Act 1985 Department for Business, Innovation and Skills (BIS) European Union (EU) Slide 2.5

Griffiths and Wall: Economics for Business and Management 3rd edition© Pearson Education Limited 2011 Emphasis placed on the characteristics which make small firms different from large firms having a relatively small share of the market being managed by owners in a personalised way rather than via a formalised management structure being independent of larger enterprises, so that its owner-managers are free from outside control when taking their decisions Slide 2.6

Griffiths and Wall: Economics for Business and Management 3rd edition© Pearson Education Limited 2011 More specific and defined a company in the UK as small if it satisfied any two of the following: turnover less than £2m; net assets under £975,000; fewer than 50 employees. Slide 2.7

Griffiths and Wall: Economics for Business and Management 3rd edition© Pearson Education Limited 2011 Defines SMEs in terms of numbers of employees as follows: micro firm (0–9 employees) small firm (10–49 employees) medium-sized firm (50–249 employees) large firm (over 250 employees) Slide 2.8

Griffiths and Wall: Economics for Business and Management 3rd edition© Pearson Education Limited 2011 Slide 2.9

Griffiths and Wall: Economics for Business and Management 3rd edition© Pearson Education Limited 2011 Slide 2.10

Griffiths and Wall: Economics for Business and Management 3rd edition© Pearson Education Limited 2011 Slide 2.11

Griffiths and Wall: Economics for Business and Management 3rd edition© Pearson Education Limited 2011 Large firms enjoy economies of scale Large firms stimulate more innovation Large firms increase competitiveness in world markets UK government policy often designed to stimulate growth of large firms Slide 2.12

Griffiths and Wall: Economics for Business and Management 3rd edition© Pearson Education Limited 2011 Supply small (niche) market Provide personal or more flexible service Give entrepreneurs freedom/independence Avoid problems of growth Benefit from government supports Slide 2.13

Griffiths and Wall: Economics for Business and Management 3rd edition© Pearson Education Limited 2011 Large firms often grew through mergers, not from internal growth and economies of scale Small firms more innovative and produced original products Small firms became important as creators of employment Small firms often exported a higher % of turnover Slide 2.14

Griffiths and Wall: Economics for Business and Management 3rd edition© Pearson Education Limited 2011 Relationship with banks Debt structure Lack of training Low turnover and cash flow Government regulations and paperwork Slide 2.15

Griffiths and Wall: Economics for Business and Management 3rd edition© Pearson Education Limited 2011 Easier access to equity and loan capital Enterprise Finance Guarantee Enterprise Investment Scheme Increased tax allowances and grants Lower rate of corporation tax Enterprise grant Less government interference Various government programmes to cut ‘red tape’ and bureaucracy Slide 2.16