The small firm – Part 1
Hello again. This week’s lesson will cover definitions and examples of the small firm, characteristics of the small firm and its role in Caribbean communities.
Although we have seen that many firms expand and go into large-scale production, there are some that do not increase their size; they remain small. In the Caribbean, there tends to be more small firms than large. These small firms exist alongside large firms.
Definitions and examples of small firms
It is not an easy task to find one appropriate definition for the small firm, therefore, many persons use various criteria to identify such firms. According to B.M.C. Abiraj, in his book, Principles of Business for CXC, several definitions of small firms are used in Trinidad and Tobago as outlined by the Management Development Centre in Port-of-Spain. These definitions include:
(a) A firm whose total assets excluding land and buildings do not exceed TT$500,000.
(b) A definition from the Central Statistical Office. This definition states that for a firm to be considered small, it should have fewer than 10 employees.
(c) A third definition states that a small firm should employ ONE top manager who should manage the business and perform other functional duties as well.
Examples of small firms include direct services such as hair-dressing, small shops, restaurants, small private schools, private nursing homes and so on. You may wish to do some research and add to this list of examples.
Characteristics of small firms
1. These are firms which cannot easily be divided into departments since they lack the space and personnel.
2. Workers in small firms do not specialise much, if at all.
3. Many small businesses are family oriented.
4. Small firms do not normally have middle-management personnel. The top manager performs all the important duties himself.
5. Small firms are often characterised by a wide variety of tasks and skills.
6. These firms exhibit many of the characteristics of the sole trader.
It would be good if you could revise these characteristics.
The role of small firms in Caribbean communities
1. Small firms provide employment for many, especially in rural areas.
2. They provide services that are either not provided by larger firms or are not adequately or properly provided.
3. Small firms provide competition to larger firms, forcing them to be efficient and keep their prices low.
4. These firms serve as a means for persons to supplement regular income, for example, as farmers, fishermen and so on, especially where the nature of work is seasonal.
5. Many small firms assist larger ones in ‘breaking bulk’ and in the distribution process. For example, small-scale retailers.
6. Small firms often try out new ideas and expand to become larger firms to the benefit of the community.
7. Small firms can manage the demand small communities, whereas larger firms may see their demand as insignificant and a waste of time.
8. These firms are flexible and, therefore, easily adjust to changes, including changes in the community demand.
9. Some businesses are difficult to control on a large scale. Therefore, if it were not for the small firm, these businesses would not exist in some communities, for example, taxi services.
10. Small firms are often linkages to larger firms in the community, obtaining materials from them or supplying them.
Now go through this lesson again; do some additional reading on the topic then write an outline to the following question:
(a) Define a small firm. (2 marks)
(b) Give TWO examples of small firms. (2 marks)
(c) Discuss four characteristics of small firms. (8 marks)
(d) Explain FOUR important roles of small firms in your local community. (8 marks)
Total: 20 marks
The small firm – Part 1