Micro-Enterprise Growth: Lessons from Home-Based Business in New Zealand

...

property protection was perceived to be moderately important for the HBB sample overall; however the importance increased with increasing geographical sales scope and this difference was statistically significant. Finally, legal expertise was rated as only moderately important for growth of HBB.

The top three sources of finance were reinvestment of profits into the business, salary payments from employers and bank overdrafts. These results are consistent with the prior research on financing activities of small firms as the internal sources of finance are considered to be more important for HBB than external sources.

The top three most important marketing-related activities were word of mouth promotion and face-to-face networking, getting direct feedback from customers and identifying target markets for your product/services. These results are interesting as they show that personal contact is important for the two highest ranked marketing activities and this firs with the relationship marketing approach. Identifying target market is also a priority for HBB with plans to grow sales using market development and diversification strategies. Having a distinctive name for the business and advertising your products/services were perceived to be important by over two-thirds of the HBB.

Selling more of current products in new markets (market development) was the top strategy for HBB (94%) and 2/3 of the HBB were planning to develop new products for current markets (product development). Very high proportions of HBB were aiming for growth by developing both new products and new markets with a diversification strategy.

The top two most important relationships for HBB were with their key customers and key suppliers which reflects connectivity with both ends of the business value chain – buyers for outputs and providers for inputs. The very high ratings for maintaining very good/strong relationships with key customers show recognition of their importance to the growing business. The second cluster of important social capital factors showed very high mean rankings for relationships with family, industry and external advisors/experts. This is very interesting result which possibly characterizes HBB as equal priority is given to family and external business contracts.

According to the article these gender results may also reflect other factors such as potentially higher proportions of women leading the smaller firms that are not economically significant, and possibly a high propensity of women to spend time completing a detailed survey.

Identification of Assumption(s)

It has been mentioned in the article that while scholars have recognized that small firms operate differently from large firms, some of our findings suggest that micro-enterprises operate differently from small firms. Rather than assuming that a micro-enterprise is a “mini” small firm, it is important for micro-enterprises to be identified and studied in their own right – separately from SMEs.

For managers, these findings are encouraging as they demonstrate that HBB can operate well beyond their home residences – indeed these mini-enterprises are not constrained to local sales.

Another factor that is highlighted in the study is that business website is very important for HBB seeking to operate internationally and the internet is a key resource for business ideas and information. Furthermore, the aspirations, energy and commitment of the HBB owner-manager serve as a critical resource for micro-enterprises that may help individuals to decide whether to start up a HBB or continue to work as an employee.

Very high growth aspirations level of HBB provides another potential source of opportunity for economic and employment growth for consideration by government officials, advisors and policy makers.

3 Major Points of Agreement

A. As the micro-enterprises gain more support from bigger enterprises and the public sector, this group of business will be a strong driver of economic growth.

B. Having been experienced in managing or observing a family business in the Philippines, the group has come into a consensus that individual relationships and close personal ties are very important.

C. Reinvestment of retained earnings back into the company is very important to help the company grow, as well as, to help the organization keep a healthy financial position.

3 Major Points of Disagreement

A. Just as it was explicitly pointed out early in the reading, the basis for qualifications of what constitutes an SME or a micro-enterprise in the paper s vague as the growth-drivers utilized in the paper are scrutinized for further study. The baseline of less than 10 employees and having revenues 2-million euros is a stark contrast to SMEs and micro-enterprises in the Philippines, having converted values of Php106.9-million in revenues. More so for enterprise-juxtaposition of having less than 250-employees and 50-million euros in revenues, equaling to Php2.673-billion.

Furthermore, the common trend in the nature of business of the studied HBBs is not clearly stated as well as if multiple industries are considered for these HBBs, what with its inclination to utilizing online resources and online technological expertise. Euro-centric study. Jamak and Ghazali (2014), in discussing success and growth-drivers for Indonesian micro-enterprises, lists “entrepreneurial readiness”, “escape from poverty and survival instinct” and “technical skills” (that is, regarding financing through loans), among others, as main key trends in micro-enterprise growth success—hinged on the level of involvement of the owner or manager, whether part-time or full-time.

Another example comes in the study of Phonsuwan and Kachitvichyanukul (2011) wherein they proposed a business-decision process flowchart for Thailand rural micro-enterprises—defined in their paper as having 1-4 workers, comprising 75% of business enterprises in Thailand—to mirror SME and large enterprises supply chain system decisions of handling inventories and physical resources for increased management

...