Notesale: Turn your study into money

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UNIVERSITY OF PANGASINAN-PHINMA
HOSPITALITY MANAGEMENT

CHAPTER 2: THE NATURE OF SMALL BUSINESS
Business size is one factor that does not prevent one from engaging in entrepreneurship
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Figure 2 is an illustration of this relationship
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The premise is that if small businesses are managed properly, their chances of becoming
large enterprises are increased
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But if
many small businesses will not develop into large businesses, their contribution is still very
significant
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Under the market share approach, small business may be defined as one which is
independently owned and operated and which is not dominant in its field of operation
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The term “not dominant” indicates that a small business does not control a
sizable share of its market
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A small business may be defined under the total assets approach as one having total assets
that fall within a certain bracket
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A
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5 million to P15
million to be considered small business
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With the assets value bracket assigned to a small business, it is inevitable that all
enterprises having total assets valued P1
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”
One of the disadvantages of the total assets approach is that assets values are affected by
inflation
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From the point of view of business management, the market share approach in defining
small business is more appropriate
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Figure 3 illustrates the kinds of business according to size
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MANUFACTURING
A manufacturing business is one involved in the conversion of raw materials into products
needed by society
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SERVICE
Service businesses are those that provide service in one way or another
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Business services – provide service to other business
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Personal services – provide service to the person
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Repair services – provide repair services to owners of various machinery and
appliances
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Entertainment and recreation – includes movie houses, resorts, billiard pool centers,
and the like;
5
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Education services – include Montessori schools for children, high school,
correspondence schools, among others
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Examples are soft drinks wholesalers in local areas,
dealers of supplies and office equipment, grains wholesalers, and the like
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RETAILING
Retailing covers all activities involved in the sale of goods and/or services to the final
consumers
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Examples are
retail drugstores, fast food shops, appliance stores, and others
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Many of them performs subcontracting
jobs for the bigger contractors such as installing electrical facilities and sewerage
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CHARACTERISTICS OF SMALL BUSINESS

Small businesses have their own distinctive characteristics
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Independent management – The owner is also the manager
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Small capital requirement – Small business requires only small capital and this can be
supplied by a single or a few individuals
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Mostly local operation – Small business usually operates in a certain locality although
there are cases when the market is not confined to a local area
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They assume
the following functions (Figure 4):
1
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2
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These
limited opportunities are naturally fitted for small businesses
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Suppliers of products and services to other businesses – Some businesses require raw
materials, semi-finished parts, finished components, or even labor, which they cannot
economically produced
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Distributors of products and services of other businesses – Some manufacturers do
not have the ability to distribute their products and services
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5
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6
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ADVANTAGES OF OPERATING A SMALL BUSINESS

An individual has various options to improve his economic lot
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be an employee;
2
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be a small business operator (SBO)
An employee enjoy a fixed working schedule like 8:00 A
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to 5:00 P
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The pay he
receives, however, is limited and dependent to a large extent on industry norms and the
financial capability of the company
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Small Business
Economic opportunities
Provider of

for entrepreneurs

Products and services to
Provider of

consumers

Funds to the
Provider of
government in the form
of taxes

Provider of

Employment to the
labor force

Products and serv

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