Small and Big Business

Small and major companies differ not only the sizes. They differently interact with the market.

Small and Big Business

Small business

Small firms (small business) strongly depend on a situation which develops in the market, and almost can’t change this situation even if it is adverse for them. Each of small firms hasn’t enough for this purpose resources, and they aren’t able to coordinate the activities almost, at least, on the majority of questions. Even joint lobbying of the interests by them in political life usually turns out at them less effectively, than at major companies which can mobilize for this purpose big resources. As a result small firms much more to a bowl are ruined. So, in Russia the coefficient of disposal of small business (a share of the firms which stopped the existence in a year) makes 8% against 1% in economy in general.

At the same time small business in many countries provides a huge part of employment (that is very important in case of high unemployment), is more sensitive to the competition and requests of consumers, and, above all — is an entrepreneurship incubator. Owing to this fact in the majority of the countries society supports small business, inducing the state to assess this business with the reduced taxes, to grant it soft credits and other types of the help to increase stability of small business. As for Russia, small business is developed poorly, first of all because of insignificant support from the state here. Number working in small business in our country constitutes about 10% of all busy, and its share in gross domestic product is even less.

Big business

Major companies (big business) depend on market conditions owing to the big resources, more precisely, than “an organizational fat” less, i.e. a reserve stock of resources which the companies can use in case of approach of adverse conditions. Moreover, many of the large companies can affect market because of the high share in the market. So, decrease or increase in prices for nickel by the Russian firm “Norilsk Nickel” changes a situation in all world market of nickel. Similar possibilities of impact on the market lead it to attempts of the large companies to monopolize, thereby weakening one of market bases — the competition. Therefore the state pursues the anti monopoly policy in relation to the largest companies.

At the same time the large companies make a big contribution to production of many goods especially difficult (knowledge-intensive) and requiring heavy expenses of the equity (capital-intensive). “As soon as we will look at indicators of production of separate goods, it will become clear that achieved the greatest progress… large-scale concerns” — Schumpeter wrote. Only the large companies are able to organize development and mass production of the aerospace equipment, cars and vessels, farm vehicles and the energy equipment and also mass production of raw materials (oils, gas, ore) and mass production of materials and semi finished products (steel, aluminum, plastic). From here dual relation of the state to the large companies: on the one hand, they are aimed to be limited (through the anti monopoly policy), and on the other hand, they are supported as pillars of the knowledge-intensive and capital-intensive industries.

Big and small business in an entrepreneurship

The economy represents set of major, medium-sized and small firms. The statistics of the majority of the countries accurately classifies usually large and small business, average business is intermediate kind of. The combination of firms, various by the size, not equally in different industries of economy is also determined first of all by scale effect.

Role and the place of big business in market economy

In the majority of developed countries of the world large business takes the leading place in economy. As a rule, more than 50% (and it is frequent — more than 60%) are the share GDP of it. It, certainly, dominates in many industries of mechanical engineering (generally and transport mechanical engineering. in the electro technical industry and instrument making), in the chemical industry, in ferrous and non-ferrous metallurgy, in fuel and energy complex and in mining industry. Concentration of production also grows in many industries of service trade. Especially it concerns such industries of service trade as the higher education, health care, finance, production of the software, information services, transport, trade, etc. So, in the USA, for example, about 60% of GDP and 47% of all labor power are the share of a share of large business (the statistics carries to large enterprises with number of busy 500 and more people). Sales volumes and scales of capitalization (i.e. market value of capital stock) the separate largest companies constitute tens and even hundreds of billions dollars and are quite comparable to GDP of many countries of the world. Scales of capitalization of General Electric corporation, for example, constituted in 2002 about 380 billion dollars, Exxon Mobile corporations — 300 billion dollars, “Choose” — 255 billion dollars, Intel — 204 billion dollars.

But in Russia the role of large business is even higher, than in other countries. In 2002 at the entities of large and medium business (the separate statistics on large business in Russia is absent) nearly 89% of GDP were created. However, not advantage of the Russian economy, but its shortcoming also says it about insufficient development of small business. Considerably also the level of capitalization of the largest Russian companies which doesn’t exceed tens of billions of dollars (Gazprom, RAO UES of Russia, Lukoil) lags behind developed countries.

Role and the place of small business in market economy

Role and the place of small business in market economySmall business plays an important role in modern economy. In the different countries criteria of reference of the companies to category of small business are various. In the USA, according to official statistics, all entities with number of the occupied less than 500 people treat small business. In Russia the commercial organizations in which authorized capital share of state-owned property of the Russian Federation and territorial subjects of the federation, the municipal property, the property of the public and religious organizations, charity and other foundations doesn’t exceed 25% and at which the average number of workers doesn’t exceed the following extreme sizes treat small business entities: in the industry, a construction and on transport — 100 people, in agricultural industry and the scientific and technical sphere — 60, in retail trade and consumer services of the population — 30, in wholesale trade, other industries and in case of implementation of other types of activity — 50 people.

Small enterprises gained still poor development in Russia. In 2002 in the country there were only 882,3 thousand small enterprises with number of 7,2 million people (11% of total number of occupied) occupied at them that is incomparable to the average world level of 40-60% general of number of busy. At small enterprises of Russia only 11% of GDP of the country while in the USA-more 40% of GDP were made in 2002.

Small businesses of Russia are distributed on the territory of the country extremely unevenly. So. at the beginning of the 2000th to Moscow about 25% of these entities, were the share of St. Petersburg — 10%, on them more than 25% of a total employment were employed at small enterprises. At the same time approximately to 1/3 territorial subjects of the Russian Federation it was registered less than on 0,5% of total number of such entities.

Very unevenly distribution of small enterprises on industries of the Russian economy. In 2002 rub industries nearly 80% occupied in a small entrepreneurship were necessary: 39% busy were the share of trade and public catering, 20% — of the industry, 18,6% — of a construction.

Poor development of a small entrepreneurship in Russia is in many respects connected with backwardness of mechanisms of its state support. In many developed countries there is well developed system of the state support of small business. So. in the USA the state actively supports a small entrepreneurship. For the purpose of support of small business in 1953 in the USA special federal department — Administration for small business (AMB), designed to render the financial, advisory and organizational aid to small entrepreneurs was created. AMB has more than 100 departments in the capitals of states and the large cities. Provides many services AMB to entrepreneurs free of charge. AMB grants also to entrepreneurs loans from own sources (on the amount no more than 150 thousand dollars). participates in loans of commercial banks (if these loans at least 350 thousand dollars), provides the state guarantees at the rate to 90% of a loan amount (but no more than on the amount of 350 thousand dollars).

In addition to activities of AMB representatives of small business get support from regional executive bodies in case of which 19 thousand commissions on economic development work. The main goal of these commissions — to contribute in the specific region to business development, increase in production of the perspective goods and services having demand in this area.

These commissions render to small business the following types of support:

  • direct support of business: financial (provision of public credits and credit guarantees), in training;
  • technical assistance, including rendering and payment of consulting and project services;
  • legal, organizational and financial, carrying out engineering developments, marketing, etc.;
  • administrative services: lease of rooms, accounting services, services of administrative nature.

Small business has many advantages before large — it is more mobile, adapts to challenges of the external environment quicker, in many small firms scientific and technical and managerial innovations take root quicker. It is possible to carry smaller opportunities for attraction of financial resources to shortcomings of small business.

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