Page 157 - Introduction to Business

CHAPTER 4 Small Business and Entrepreneurship 131

Despite the possibility of inefficiency due to the loss of cost benefits from not
achieving economies of scale, small firms do have some advantages over larger
firms. Small firms can often react more rapidly to technological changes than large
firms; redirecting the efforts of five or ten employees is much easier than trying to
do so with 5000 employees. The computer or telecommunications industry, for
example, features a myriad of small firms attempting to invent new technologies or
to take existing technologies and adapt them to produce a new successful product
or service. Larger firms tend to operate in established or traditional sectors of the
economy, whereas small firms are well suited to excel in new technology areas.
Another advantage of small firms is that their size encourages experimentation.
Large firms must focus on mass markets to cover high fixed operating costs of plant
and equipment. Small firms can operate with low production expenses. Their
largest expense is often employee salaries. With lower cost pressures and with more
human capital as a proportion of their total assets than large firms, small busi-
nesses can more readily experiment with new ideas for products and services.
Experimentation on a small scale is an effective way to test the market to find out
what people want. You may have a great idea for a product, but if no one wants it,
there would be little or no profit in pursuing it. Small firms are constantly churning
out and testing new products and services. Simply put, small firms are more
dynamic than large firms. Able to more freely experiment, invent, and innovate new
business ideas, they create diversity, competition, and change that are essential to
a country. Indeed, for any country to have a healthy business sector and economy,
it must have dynamic and prosperous small businesses.
Of course, large businesses are the consequence of a successful small business.
How can a large business retain the entrepreneurial spirit that is the hallmark of
small firms? An intrapreneur is a person within a large corporation who has the intrapreneur A person within a large
responsibility to develop a new product through innovation and risk taking. The corporation who takes the responsibility
to develop a new product through
intrapreneur’s compensation is linked to the success of the new product. Large
innovation and risk taking
companies need intrapreneurship to stay competitive and increase their chances of
continued survival. Creative people within the organization can be lost to entre-
preneurial opportunities that cause them to leave the firm. The benefits of staying
with the firm are more security and more potential resources available through the
firm than on their own as entrepreneurs. Intrapreneurship gives them a way to
express their creativity within the firm.

Sytel is a small company with
300 employees headquartered in
Maryland. The company
specializes in delivering
information technology professional
services to government agencies.
Some clients include the U.S. Air
Force, Army, and Navy, the State,
Justice, and Homeland Security
departments, the NSA, and the
USDA. Here we see how Sytel
assisted the government in
encouraging families to buy fresh
fruits and vegetables from farmers
markets. One beneficiary, Carletta
Thompson, feeds her five-month-
old son an organically grown pea
at the Spokane Farmers Market.

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