Roles of Small Business in the Economy

Topics: Small business, Business, Economics Pages: 8 (2748 words) Published: August 21, 2012
What is a small business?
A small business refers to a designation for firms of a certain small size which fall below certain criteria (that varies from country to country) in terms of annual turnover, number of employees, total value of assets, and other factors which may be used. Small businesses are common in many countries, depending on the economic system in operation. Typical examples include: convenience stores, other small shops (such as a bakery or delicatessen), hairdressers, tradesmen, lawyers, accountants, restaurants, guest houses, photographers, small-scale manufacturing, and online business, such as web design and programming, etc Characteristics of a small business

A small business may be categorized as a firm with 1 to 50 employees, mainly run by an individual (sole proprietorship) or run on the family basis(life style firm). Usually easy to form and always has a sluggish pace of growth and takes a number of years to grow, small amount of capital to start and a small amount of turnover per year. There are almost five significant parameters that have been used to define small business. Each of these parameters is being characterized and analyze in order to clarify the existing status and for suggesting the less ambiguous alternative for using that parameter. First, the business must be independent: For that matter, a subsidiary or a branch can't be considering as independent business. Second, the business is not dominant in the industry it's operating in: Part of 'Monopolistic Competition' definition can be used to characterize the parameter - There are many sellers and they believe that their actions will not materially affect their competitors. Third, firm size (number of employees): This parameter is obviously the most popular in defining small business; nonetheless its use varies dramatically. If you're in U.S. then an employer of up to 500 employees will still be consider as small business, contrary to U.S. in Europe most countries use the limit of 50 employees to define business as small, which can be treated as small business, any business with less then five employees is inadequate for any analysis, and should be named micro-business. Fourth, firm age: The use of firm age means to characterize the minimal period of time needed for a business in order to form some operational and managerial backbone, otherwise, there was a risk that data collected for statistical analysis won’t be suitable. Fifth, annual revenue: What can be considering as acceptable annual revenue for small business? In order to be able to characterize this parameter, a preliminary step of defining the industry that the business relates to must be taken. There is a substantial difference regarding the revenue in different industries. Small business in Tanzania

Majority of the third world countries, the major activity of the people is mostly agriculture, business is at a very low level of practice and it is mostly practiced in urban areas. since independence people started to practice business at a small scale, but the growth of business sector was mostly boosted up by the introduction of capitalism in the early 1990’s where there were mass changes in the structure of Tanzania’s economy (from socialism economic ideology to capitalistic mode of economy). Through those changes, people were now able to run private investments without intervention from the government and the government only job was to facilitate and supervise the economic activities of the private individuals and institutions which in a one way or the other engaged Itself in business activities whether small scale or large scale business.

Since that time the small business sector has been growing at a reasonable pace and contributes much towards the growth of Tanzania’s economy.

(a) THE ROLES AND CONTRIBUTION OF SMALL BUSINESS IN TANZANIA’S ECONOMY Small businesses contribute greatly to the economy all around the world. Almost...

Bibliography: BOOKS;
Charton I, (2010), Entrepreneurial Management in Small Firms, 8THEd, Sage Publications, New Delhi
Mishkin P (2008), The Economics of money, Banking and Financial Markets, 6th Ed, Pearson International, London
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