Economics Research
Small Firms
Small firms are business that is privately owned and operated, with a small workforce , usually 50 employees. It can be classified according to either its workforce, sales, assets or net profit. Small firms are common in many countries. Some examples : convenience stores, a bakery, hairdressers, tradesmen, lawyers, accountants, restaurants, guest houses, photographers, small-scale manufacturing, and online business, such as web design and programming, etc.
Advantages of small firms
1. Limited hierarchy: Decisions can be reached quickly since there is a limited number of people involved in the decision making process. 2. Ease of communication: In a small firm, employees almost can meet every one the payroll in one day ,they will have more time to talk to each of the staff members. 3. Flexibility: Small firms are capable of adapting to change. The owners are active in the business and can react to change. 4. Personal Service: Owners are more accessible in small firms. Some people prefer to discuss matters with the owner of the firm directly and are prepared to pay higher for the privilege. 5. Lower Wages: Since most of the workers who work in small firms are not associated with trade unions, the owner can reduce their wage to the limit of the minimum wage legislation. 6. Innovation: Small firms need to be creative in their products to compensate for their size and influence in the market. If they are not innovative, they may lose market share.
Disadvantages of small firms
1. Lack of good infrastructure: Good infrastructure such as ample office space, latest hardware and software, well written manuals, long term vision and goals, etc may not always be available in a small firm environment.
Ignasius Edwin
Level 9A
Page | 1
Economics Research
2. Constant changes in vision and in goals: In some small firms, change in vision and in goals is so prevailing it makes it impossible for managers to put in place a long term strategy. 3. Limited budget: As a manager in a small firm, you may have to work with a small budget which will limit your ability to solve problems and create new strategies 4. Lack of experience: Since you will be working with a small number of people, the total over all experience of the firm may be limited and in certain cases you will have to look outside the firm for help. 5. Vulnerability: Small firms many find it difficult to survive than large firms when trading conditions become challenging because they lack the ability to draw resources. 6. Difficult attracting the right staff: Small firms are not capable of attracting high quality and experienced staff because of their lack of resources.
Small Firms in Indonesia
Small firms is a term referring to a type of small business that has a net worth of Rp 200 million excluding land and building of business premises and standalone business. According to Presidential Decree no. 99 of 1998, the understanding of a small firm is: "Economic activity of small scale with people who are in the majority of businesses are small business and need to be protected to prevent unhealthy competition."
Small Firms criteria in Indonesia Criteria for small business according to Law no. 9 in 1995 is as follows: 1. Have a net worth of at most Rp. 200.000.000, - (Two Hundred Million Rupiah) excluding land and bulding of business premises. 2. Has annual sales of Rp. 1.000.000.000, - (One Billion Rupiah) 3. Belong to Indonesian Citizens. 4. Independent, not subsidiaries or branches of companies that are not owned, controlled or affiliated directly or indirectly with Medium or Large Firms. 5. Shaped the efforts of individuals, business entities are not a legal entitiy, or a legal entity, including cooperatives.
Ignasius Edwin
Level 9A
Page | 2
Economics Research
In Indonesia, SMEs are the backbone of the economy of Indonesia. The number of SMEsuntil 2011 reaching approximately 52 million [1]. SMEs in Indonesia is very important for the economy because it accounts for 60% of GDP and contain 97% of the workforce. Butaccess is limited to financial institutions was only 25% or 13 million SMEs have accessto financial institutions [2]. Government of Indonesia, develop SMEs through the Department of Cooperatives and SMEs, in each province or district / city.
Resources: Google
http://id.wikipedia.org/wiki/Usaha_Kecil_dan_Menengah http://en.wikipedia.org/wiki/Small_business http://itknowledgeexchange.techtarget.com/itproject/advantages-and-disadvantages-of-managinga-small-firm/ Edexcel IGCSE Economics Text book
Ignasius Edwin
Level 9A
Page | 3
