Hand Size
Size Of The Business Entrepreneurship
Everything does not depend upon the whim of an entrepreneur. There are some economic and non-economic factors that influences the size of a business entrepreneurship. They are as follows :-
1. Demand for the product : There are some products whoes demand is more and it keeps on increasing. Such products need wide market. Therefore, the size of the business should be large. E.g. iron and steel industries. On the other hand, if demand for a product is less, they can only be sold in the local markets, the size of the business should be small. E.g. Handloom and crafts industries.
2. Nature of the product : Size of a business is greatly influenced by the nature of the product. If the products are perishable in nature, they cannot be marketed in distant places. They need local markets. Hence, small scale businesses are suitable for such products. Moreover, if the customer’s choice and preference gets changed with the fashion, such products cannot keep pace in the markets for a long time. Therefore, they are not produced on large scale. Such items need small scale business entrepreneurship. E.g. food and drinks. On the other hand, the products which are non perishable, standardised, complex in nature and extensively large in size, requires large scale business. E.g. machinery and electronic gadgets.
3. Availability of capital : Large scale business needs adequate funds. As India is a developing country, it is difficult to raise adequate capital for setting up new ventures. However, it is easy to raise fund for small scale businesses as it requires less capital for establishment. Thus the sole-proprietorship and partnership form of business is famous in India.
4. Nature of industry : There are two types of industries; capital-intensive industries and labour-intensive industries. In case of capital intensive industries, large amount of fixed capital is required for establishment and growth. E.g. railway and transport industries. However, in case of labour intensive industries, there is no mechanisation and specialisation degrees. Hence the capital required is less. E.g. cottage industries.
5. Availability of electricity : If the supply of electricity is adequate then large scale industries can develop and run successfully. On the other hand, small scale industries requires less power supply.
6. Cost of transport : Cost of transportation determines the size of the business unit. If the raw materials are transported from distant places to the plant and again the finished goods are transported from plant to the distant markets, the transportation cost will be more. On the other hand, if a new business transports raw material from the local markets and sale the finished products to the nearby markets, the cost of transportation will be less.
7. Laws of returns : In case of the law of diminshing returns, the cost of production will increase with the increase in the output produced by a firm. Such kinds of product cannot grow up, after a certain interval. On the other hand, if the law of increasing returns is applied, the scope of expansion, keeps on increasing.
8. Risk : Large scale businesses are financially sound and it can easily bear any kind of risk. On the other hand, liability is more and it becomes risky to setup small scale businesses.
9. Entrepreneurial ability and efficiency : The ability and efficiency of an entrepreneur greatly affects the buiness. It may happen that the scope of expansion and development of a business is good but the entrepreneur lacks the ability and skill to utilise the opportunity. This may keep the size of the business small. On the other hand, entrepreneurs with the help of his skill and ability has expanded his business to a great extent.
10. Market : If a product can capture both the national and world wide markets, the size of the business will increase. On the other hand, if the product is limited to the local markets, the size of the business will be small.
11. Government regulation : Government has certain rules and policies relating to the size of the business e.g. obtaining licences and taxation policies. Small business undertakings can take the advantage of low taxes. However, before starting any business, entrepreneurs should obtain licence after confirming the standard size of the firm.
12. Influence of environment : Geographical inertia effects the size of the business of a particular country. In case of developed countries like USA, all the businesses whether new or old are in large size. On the other hand, the scope of setting up large buinesses is limited underdeveloped economic countries like in India.
13. Concentration and early start : If a business is started for the first time in a particular area, the scope of expansion is great. Later if the same business is setup, the scope of the business gets decreased.
14. Other factors : There are some other factors that effect the size of the business considerably. The willingness of the entrepreneurs to set up a business is one of the great factor affecting the size of the business. If a business requires skilled labours, it cannot grow up to a large size. If a business is setup to fulfill the requirements of the local people, it will always be in small size, like grocery, saloon, stationery, etc.
About the Author
I write articles for graduate and post graduate students. Most of the articles are brief guidelines for the commerce students. ‘The Indian Financial System’ is one of the main honours subject for the B.Com(Hons.) students. They feel difficult to understand and memorise this subject. Most of the students just avoid it and switch over to the other subjects. I have written most of the topics for them. So that they can do well in exams.
Other than tutorial writings for students, I also write about the best tourist places that I have visited in India and abroad. I love travelling. Amongst so many tourist’s spots, I love temples and its architecture. Therefore, some of my articles are from history, archeological discoveries and ancient Indian culture.
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