What are advantages and disadvantages of large versus small organisations? Final draft
Reading & Writing course C
Language & Learning Unit
03rd Sept 2010
What are the advantages and disadvantages of large versus small organisations?
Porter, Lawler and Hackman (1975) state that organisation is a social entity, existing in order to achieve certain goals, involving specialisation and having some degree of permanence. It is composed of two or more people but the actual number and the way in which they are organised into groups vary from one organisation to another therefore creating the differences between small and large organisations. This essay will briefly gives a definition of an organisation as a whole and subsequently definitions of small as well as large organisations with respect to business particularly. It will cover both advantages and disadvantages of small and large organisations in business respects and will argue that large businesses have an advantageous position in the economy.
The definition of ‘’small business ’’ varies by country and by industry. Small businesses have small number of employees, low volume of sales and focus on certain localised business regions. Most of them are privately run by families or single owners, for example: a neighbourhood restaurant or a local bakery. Being small seems to bring them many advantages. The majority of businesses are considered small businesses and they currently employ 13.2 million people which accounts for greater than 58% of the UK private sector workforce (Connell,2007),and Mack(1999) also claims that virtually all the net new jobs being created are by small firms. Moreover, they play an important role in increasing the GDP of households. Haynes(2007) demonstrates that the wealth and income of households owning businesses tend to grow faster than ones that do not own businesses. Small businesses can be set up easily, entrepreneurs have their independence in making decisions and they do not need to consider others’ opinions. Small businesses serve fewer customers and usually have more frequent contact with those customers than large businesses. They also get the direct information from customers about what they like or dislike. Therefore, small businesses gain an advantage when customers have unique needs, want more individual attention, and are willing to pay a bit more for the product or service to obtain what they really want (Dlabay, Burrow and Kleindl, 2009:135).
On the other hand, not all small businesses succeed. In fact, their failure rate seems to be higher than larger businesses. There is only one owner thus capital is very limited and difficulties in many areas become noticeable. As a result of having difficulty in obtaining loans from the banks, the main daily financial source of a small business is from the customers. Some small firms have cash flow problems frequently due to customers who are late payers; some are closed down as a result of the inability to pay suppliers or debts in time. Additionally, over one third small businesses experienced cash flow problems during the past two years (Small businesses,2010). Furthermore, depending on the size and nature of businesses, environmental legislations have brought them difficulties in seeking efficient environmental solutions such as sourcing environmentally friendly products and limiting manufacture waste. Further, one of the business needs is insurance, which provides an important means to handle business risks. In recent years, insurance has become hard to find for small businesses, is less affordable and gives less protection. Longenecker et al. (2006:470) indicate that 28 percent of the companies responding cited insurance as their largest...
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Dlabay,L., Burrow,J. and Kleindl ,B (2009) Intro to Business (7th Edn.). Florence: South-Western Cengage Learning.
Haynes,G. (2007) ‘Income and Wealth: How Did Households Owning Small Businesses Fare From 1989 to 2004?’. Income and Wealth, Vol 1 No.3, 5-8.
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Mack, R.A.(1999) ‘Congressional Record’. United States Congress, Vol 145 No.59 , p4798.
Porter, L.W., Lawler,E.E. and Hackman,J.R. (1975) Behaviour in Organisations(1st Edn.). NewYork: McGraw-Hill.
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