A lot of entrepreneurs of small businesses have the question whether they have to do it. As there is no given formula of the answer to the question, entrepreneurs have to take decisions on their taking a risk. This is the main difference between a small business and any other form of business. The main questions which arise in the small business are related to finance, marketing, service or product, and entrepreneur. They are considered to be like the four legs of a chair. In case one leg fails, then the whole chair fails. The same happens to the business.
The report is based on the business which is situated in Saudi Arabia (Jeddah city) named Albaik restaurant. The business was established in 1974. At first there were only 5 people and the whole operation management was done by the owner. Nowadays, the business has 150 employees. The business works in the domestic market. The operation includes purchasing products and equipment, cooking, cleaning and many other related services. In the cooking process, mostly labor works are required due to the fact that there is not so much automation and the process highly depends on the skills of workers. The restaurant is considered a small business due to the number of employees and the fact that the business needs only labor workers as the major decisions may be taken only by one person. Thus, all decisions concerning management, control, purchasing, and marketing are taken by one person.
Legal Form of Small Business
Partnership, limited liability partnership, limited company and sole proprietor are among the most common forms of business.
A partnership is easily set up. It can be accessed due to the experience of the other partner but bankruptcy, retirement, or death of any partner can lead to the dissolving of a partnership. Limited liability partnership is for shareholders and to high perceived value in the society. But this form of business consumes much time and costs in order to set up due to the setup process which is rather complicated. The simplest form of all above mentioned arrangements is sole proprietor as there is no need of registration for any operation. The only complication is unlimited liability which is attached with this form.
Startup Strategy and Finance
Albaik is a sole proprietor restaurant as it is established by one person who is still managing the business on his own. As the person has established the restaurant, he bears all risks related to the business. The restaurant was started for the owner’s capital but during the development stage the owner did not have enough money and got it from the relatives in order to carry out the restaurant. After the business was running smoothly, the owner started to retain profit. The restaurant is still bringing profit and thus caused business development. Nowadays, the owner has no debts and the business is 100 percent owned by him. The restaurant is not registered as there is no requirement to register the business of a sole trader, there is also no legal taxation liability in this form of business. Albaik restaurant has high turnover that is why it is necessary to prepare a book of account.
The Impact of Human and Organization Resources on Small Business
Changes in the technology and in the international market competition have caused the fact that small firms face huge shifts in their competitive landscape. These changes directly influence the strategic option of small businesses and their performance. These small business firms are trying to compete in their sector that is notorious due to high failure. Moreover, small business firms have lack of capabilities or resources that can lead to competitive advantages because there is less opportunity to put up barriers to imitation. In order to develop and grow the business, it is necessary to develop bundles of resources which are unique and can distinguish it from competitors.
Centralize and decentralize distribution of power has been used from top to bottom. The owner of the company takes such decisions as purchasing, selling, service, price fixing, employee hiring, and others. Of course, there are managers who are directly connected with the owner and contact him at least twice a day. They exchange information concerning performance and problems. There is a constant flow of information and managers are considered to be middle men who pass information from top to bottom and bottom to top.
The owner actively takes steps in case there is any positive feedback from the employees through manager and it can result in better performance. For example, several years ago some workers complained about the restaurant machinery which causes lower productivity. The owner replaced machinery with latest one without any hesitations. The owner made the changes because he wants better productivity and efficiency. Guidance is regularly given for better performance from top to bottom.
As human resources is directly related to the performance of a firm, it is critical to hold it better in the small business.It has been often argued that the management of human resource field could benefit in case it looks more closely at HR processes within small firms. There us an idea that unique and potentially valuable context of business is a good environment for testing the theories and principles of HRM. Human capital in new ventures has been considered to be really necessary to venture success for some time. It is advisable to know what has already been done and what is not clear about new venture HRM.
Human resource management can benefit not only from large organizations, but also from small businesses and bring better outcomes. It can also benefit from HR processes within new and small firms in case of having a close look at them. It has been recognized that small firms grow due to the number of people to employ, but not due to the production and sales rate. Nevertheless, it is a common problem that small businesses have difficulties in the developing and hiring personnel as they have lack of HR policies.
It is necessary to take into consideration the human resource management. Very often small businesses do use human resource management in the firm, but they are not satisfied with the result. This happens because the majority staff is not aware of the theory of HR policies. Lack of appropriate education results in unsatisfied productivity and has a negative influence on the performance of the firm. One of the reasons behind the lack of human resource management is that the company owner is not appropriately educated, has only the experience of five years of schooling. In spite of the fact that they are trying hard to organize, lack of knowledge leaves them a step behind from others in the HR. The only process of HR they follow is training, but only for a short period of time. Workers face the problem of absence of benefits except the base pay, thus they have no lack of motivation. A party for workers, organized by the owner, is not enough to motivate employees. One of the main problems of the owner is that he uses the same strategies which are used by the competitors and he does not want to implement anything new in the policy of HR. One more reason may be lack of knowledge about management benefits of human resources.At the same timeworkers are also less educated and they have no need to argue with this system. They take it as a norm which gives the right to the owner not to change policies in the business.
Adapting the Environment and Strategic Positioning
It is more and more often spoken about the constant change to which small business owners have to adapt. The entrepreneurs need to adapt to new trends, new circumstances and changing market in order to get a competitive advantage. There is a necessity to understand not only the particular sector where they are dealing, but the whole market and be able to respond to changes which occur in the external environment at the same time taking the benefits from it. Strategic adaptation presupposed changes concerning products and services which are offered by the entrepreneur according to the external environment. Thus, the entrepreneur should be able to lay down one opportunity and to take up a new one. But it is possible only in case he is aware of the business.
There are varieties of services and creative proposals in the sector of restaurant business. So, one can easily switch from one restaurant to another if they find it more comfortable and welcoming. Albaik restaurant was dealing with various offers and services since the time the business was started. Though, the business has faced many problems in the beginning but the owner never lost his hope and tried to find new ways to attract customers. The owner tries every opportunity to get the benefits of the business due to his good entrepreneur skills and knowledge about his business.
According to Cranfield there exist four dominant types of relationship with the staff, they are strategists, heroes, artisans, and meddlers. The theory shows two relationship elements between business founders and their organization. The first element relates to the time that is spent on such routine management as analyzing figures and marketing. The second element studies the level of business skills that has been attained by the key staff (Are Entrepreneurs the real Barrier to Growth?).
The behavior of the owner is understood in the following way: he spends most of his time on the functions which re non-manufacturing or on the strategic issues like disinvestment, new product development, and acquisition. However, the owner is still engaged in the management tasks. But for the majority of management team representatives, who are mostly untrained, the tasks seem to be new.
The strategist is considered to be one of the most desirable types of entrepreneur due to the development of business. Such people develop team’s skills of management to a high level. The artisan is characterized by low occupation with routine management tasks. The person spends most of the time on product production or service delivery. There is almost no time for routine tasks as reviewing models and analyzing performance. Contrary to artisan, hero is the head of one function of management; it may be sales or production. Little is done for handling other accounts. Heroes spend most of the time on business management because of the relatively low knowledge level of the employees. They are called and treated as heroes as they introduce new ideal to a firm. Failing to let go of the tasks of routine management, the meddler raises management skill level with the help of training or recruitment (Barrow 1998).
Applying the Cranfield theory to the Albaik restaurant, it becomes evident that the business has implemented artisan relationship. Most managers are not concentrated on the efficiency and productivity; they are focused on the overall progress of the restaurant and the work that is assigned to them. They pay attention to the reviewing other related work and analyzing their work. The owner of the restaurant does the analysis and reviewing and timely provides his feedback. It is his style of management. Managers have no authority to make any changes without the owner’s instructions or not contacting him. Managers do not have enough knowledge to analyze and review performance due to the lack of qualification. As there is a lack of motivation for the innovative idea in the restaurant, there are no heroes and strategists in the business. Nonetheless, the owner wants to continue the same process as it is beneficial for him and for the restaurant. It happens because the owner feels lack of different styles of management. Millers train good workers and managers who do their best at work and show progress in order to help them get a promotion to the upper level or post.
Thus, the owner of the Albaik restaurant puts great emphasis on the management issues keeping him busy with daily business management. He does not care about the development or acquisition of new products, but knows all the issues which are related to the sector. The burden of management (only he is responsible for the business as the employees are not enough qualified) keeps the owner away from focusing on the concept.
The restaurant industry has a variety of similar businesses which provide excellent service and catering. The main difference between them and the Albaik restaurant lies in the fact that the last one does not try to provide the customers’ dishes from world cuisine, but only the national one. The restaurant is not engaged in importing or exporting their services to other companies or cities. Of course, there are some restaurants is the area with the same manufacturing processes like Albaik, but their strategies and marketing are different.
Due to the fact that the owner of the restaurant is well aware of his business, he develops the knowledge very efficiently. Unfortunately the Albaik restaurant has applied limited management theories of small business which is explained by the lack of theoretical knowledge. There is no higher educated person in the business, so they have difficulties to apply beneficial theories and to develop them. However, the owner is really well experienced in business and it makes him powerful. It is necessary to employ the person who will have enough knowledge to be responsible for the proper management of the business. Having a very good opportunity in the market abroad, the restaurant needs to utilize the opportunity by hiring good marketers. Finally, the restaurant owner should not only focus on the process itself, but also think widely and be ready to accept new ideas and strategies.