Home Entrepreneurship How to Analyze Small Business Enterprise Strengths and Weaknesses

How to Analyze Small Business Enterprise Strengths and Weaknesses

by Olufisayo

Small Enterprise Weaknesses

Financial Limitation
Small enterprises find it difficult to get enough funds for their operations. Unlike multinationals, they do not receive red carpet treatment by financiers when asking for a loan.

A small enterprise cannot use credit as a selling tool as readily as companies with large financial reserves like multinationals.

Staffing Problems
Small companies cannot pay fat salaries and provide opportunities and status normally associated with big companies.

Small enterprise owners must concentrate on the day-to-day problems of running the business and have little time left to think about objectives.

High Direct Cost

A small enterprise cannot buy raw materials, machinery, or supplies as cheaply as a large company or obtain large producer’s economies of scale.

Per unit production costs are usually high for a small enterprise, but overhead costs are generally lower than that of multinationals.

Lack of Credibility
The public accepts a large company’s product because its name is well-known.

A small company needs to struggle to prove itself each time it offers a new product or enters a new market. Its reputation and past success in the marketplace seldom carry weight.

Small Enterprise Strengths

Personal Touch
Customers will often pay a premium for personalized attention. In many companies where products and prices differences are minimal, the human factor emerges as a prime competitive advantage.

Greater Motivation
Key management of small enterprises normally consists of the owner(s). They work harder, longer, and with more personal involvement. Profits and losses have more meaning to them than salaries and bonuses have to the employees of a multinational company.

Greater Flexibility
A small enterprise has the prime advantage of flexibility. A big company cannot stop operation without opposition from organized labor, or even increase the price of their products without possible intervention from the government.

Small enterprises have shorter lines of communication. Their product lines are narrow, their market limited and their factories and warehouses are close by. They can quickly spot trouble or opportunity and take appropriate action.

Less bureaucracy
In a small business, the whole problem can be understood readily, a decision can be taken quickly and the results checked easily. But in a multinational company, bogus management structure can lead to delay in taken action and bureaucratic influences. –

Unobtrusive (Less Conspicuous)
A small company can try new sales tactics or introduce new products without attracting undue attention or opposition. This is possible because it is not quite as noticeable as a multinational company.

A large company is constantly faced with proxy battles, antitrust actions, and government regulations. It is also inflexible and hard to change or restructure.

Photo by Stijn Swinnen on Unsplash

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Saksham Talwar April 5, 2011 - 7:57 AM

Staffing and financial problems are the main ones faced by small business I assume! BTW, nice post!

Fabrizio April 12, 2011 - 12:58 PM

Motivation is always going to be an issue especially of there are no incentives, thanks for posting.

jack February 9, 2012 - 8:46 AM

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zippy February 10, 2012 - 10:38 AM

financial limitation is the most disadvantage to them

murja May 22, 2012 - 2:34 AM

very interesting

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