SMALL BUSINESSES IN AUSTRALIA
Small Businesses in Australia
The Australian Bureau of Statistics (ABS) defines small business as entities that are in active trade with 0-19 employees. The small business segment in Australia contributes to almost a half of the source of employment in the private sector. In addition, the small businesses contribute to an estimated one third of the private sector industry additions of value between the year 2010 and 2011. An estimated 3.4% of the population in Australia is involved in the creation of new businesses as compared to 4.9% in the United States (Australian Bureau of Statistics, 2012, p.6). It is claimed that a majority of new startups fail within their first years of existence. This is an exaggerated claim in that new start-ups may be bought by larger entities within the market or they may change their legal status.
There has been an increase in the number of small businesses registered in Australia and more so around the world. This has been driven by the growing nature of competitiveness in professions necessitate the need for skilled and educated individuals to venture into businesses as a means of survival and income generation. In addition, small businesses are the main source of innovation given that they are driven to compete in volatile markets against resource-laden entities. Innovation and creativity is their primary tool for growing in highly competitive markets against established businesses in the market (Australian Bureau of Statistics, 2010, p. 17).
In essence, a majority of small businesses in Australia and the world struggle with the need to establish themselves as sufficient to provide quality services and products. The lack of experience for new startups poses the greatest challenges towards success in a new market. This is due to the existing competition posed by established entities that have experience in relating with customer and providing quality products. In addition, a majority of customers think that they make their purchases decisions based on thoughtful considerations of products and services rendered to them by organizations. However, purchase decisions are largely influenced by the image presented by an entity through its products and services to its target consumers. The initial impression provided by a small business determines its success with consumers in a new market. This is because consumers are also drawn to impulse purchases as opposed to thought product or service selection (Peacock, 2004, p. 37).
In Australia and around the world consumers are moving away from the loyalty placed on large brands. This is driven mainly by service quality and overall customer satisfaction. Large entities have to contend with the need for personalized services and sales activities for a large customer base. This is compared to small business that may provide exceptional services to customers due to the low number of customers. This results in emphasis on the development of a personal relationship between the business and its customers. Customers have evolved over the years and yearn for exceptional service satisfaction that is provided by small businesses as opposed to large entities that are entirely driven by the need to increase profits (Reserve Bank of Australia 2012, p.13).
From research conducted in Australia by the Kaprin report, indicate that a majority of SMEs in Australia lacked adequate managerial skills and knowledge, which resulted in lower productivity levels and failure of the SMEs. In addition, this inhibits the small entities from moving up the ladder into larger organizations given that the lack of adequate management skills is a hindrance towards quality management of resources in the small businesses. The Kaprin attitude highlighted that the main hindrances towards success of small business was made up of inadequate management development, the lack of a positive social or community attitude. This was compared to other countries around the world that illustrated a positive attitude towards small business such as in the case of Japan, the United States, Germany and United Kingdom (Sarasvathy, 2011, p.36).
Community attitudes towards small businesses in Australia were based on the negative attitudes in Australia towards selection of small businesses as a preferred career path. Formal employment in large organizations and established entities was favored given that it highlighted professionalism and maturity. The high risks posed in small businesses in terms of risks for loss and competition informs the negative public view of small businesses. In addition such risks result in a negative image with the small businesses being viewed as unstable and relatively susceptible to failure and loss due to competition from large entities (Winborg, & Landstrom, 2001, p. 21).
It is important to note that the world population has moved significantly away from reliance on formal employment as the main source of employment. This is mainly attributed to the growing success rates of small businesses with the appropriate management skills that have been able to transition to large entities. In addition, the negative connotation of entrepreneurship in Australia is mainly due to the low regard for entrepreneurs in terms of social status and respect.
For instance working for a major firm as an accountant, lawyer or medical doctor commanded respect from the society as compared to working as an entrepreneur. In addition, the negative view towards enterprise in Australia according to the Kaprin Report is based on three primary reasons. The first is low risk tolerance among Australians, secondly a lack of enterprise culture within the population and thirdly the presence of a specific work ethic among Australians.
The numerous risks posed to small business can be termed as the primary source of the negative image for small businesses. In addition, the stability that exists in formal employment in organizations and professions brings about the negative view of small businesses in Australia. Failure of small businesses results in stigmatization whereas success is celebrated in the Australian community. This is compared to other countries such as the United States and Europe where failed startups are recognized for taking up the risk of startups. As employment opportunities decline in large organizations due to high population levels of a high number of skilled and educated labor force, this has created a necessity for enterprise culture in Australia.
Increasing knowledge and skills in management has been termed as a means of increasing the possibilities for success for small businesses and new start-ups. The Australian Bureau of Statistics (ABS) indicates an increasing the number of new business start-ups in Australia between 2010-2010. This is an indication of the gradual shift in the social attitudes towards enterprise activities in Australia. The negative attitude in the Australian society towards enterprise is attributable to the lack of exposure to enterprise in schools and social life. Thus enhancing the availability of knowledge on enterprise management in institutions would be a means of creating a new culture that has a positive attitude towards high risk and entrepreneurial activities (Zhao, & Seibert, 2006, p. 29).
With the growth of globalization and technological advancements, Australians have gained exposure to the growth in enterprises around the world. Global influences towards entrepreneurial activities have influenced the young population in Australia towards their involvement in new business startups. The risks in new businesses are intense despite the promise of high returns in the event of success of a new business.
In conclusion, the reliance on the public sector and large organizations in the private sector for employment has declined over the years. This is attributable to the decline in risk-averse attitudes among Australians given the possible benefits present in entrepreneurial activities. In addition, numerous success stories provide examples for the youthful population on the possibilities of success in small businesses. Success of technology startups are examples of success of small businesses.
Peacock R W 2004, Understanding Small Business: Practice, Theory and Research, Scarman Publishing, Adelaide
Winborg, J & Landstrom, H 2001, ‘Financial bootstrapping in small business: examining small business managers’ resource acquisition behaviours’, Journal of Business Venturing, vol.16 no.3, p.235–254.
Zhao, H & Seibert, S. E 2006, ‘The Big Five Personality Dimensions and Entrepreneurial Status: A Meta-Analytical Review’, Journal of Applied Psychology, vol.91no.2, p.259–271.
Sarasvathy, S. D 2011, Causation and Effectuation: Toward a theoretical shift from economic inevitability to entrepreneurial contingency, Academy of Management Review, vol.26 no.2, p.243–263.
Reserve Bank of Australia 2012, “Small Business Finance Roundtable: Summary of Discussion”, Bulletin, June Quarter 2012, 91-94.
Australian Bureau of Statistics, 2012, Forms of Employment, Australia, November 2011, cat. no. 6359.0.0, ABS, Canberra.
Australian Bureau of Statistics, 2010, Innovation in Australian Business, 2010–11, cat. no. 8158.0, ABS, Canberra.
Australian Bureau of Statistics, 2008, Australian Small Business Operators—Findings From the 2005 and 2006 Characteristics of Small Business Surveys, 2005–06, cat. no. 8127.0, ABS, Canberra.