modern management of small businesses

Modern Management of Small Businesses v 1.0 This is the book Modern Management of Small Businesses (v 1.0) This book is licensed under a Creative Commons by-nc-sa 3.0 (http://creativecommons.org/licenses/by-nc-sa/ 3.0/) license See the license for more details, but that basically means you can share this book as long as you credit the author (but see below), don't make money from it, and make it available to everyone else under the same terms This book was accessible as of December 29, 2012, and it was downloaded then by Andy Schmitz (http://lardbucket.org) in an effort to preserve the availability of this book Normally, the author and publisher would be credited here However, the publisher has asked for the customary Creative Commons attribution to the original publisher, authors, title, and book URI to be removed Additionally, per the publisher's request, their name has been removed in some passages More information is available on this project's attribution page (http://2012books.lardbucket.org/attribution.html?utm_source=header) For more information on the source of this book, or why it is available for free, please see the project's home page (http://2012books.lardbucket.org/) You can browse or download additional books there ii Table of Contents About the Authors Acknowledgments Dedications Preface Chapter 1: Foundations for Small Business Small Business in the US Economy 11 Success and Failure in Small Businesses 22 Evolution 32 Ethics 39 The Three Threads 49 Chapter 2: Your Business Idea: The Quest for Value 61 Defining the Customer’s Concept of Value 65 Knowing Your Customers 82 Sources of Business Ideas 94 The Three Threads 103 Chapter 3: Family Businesses 110 Family Business: An Overview 114 Family Business Issues 126 Conflict 146 The Three Threads 154 Chapter 4: E-Business and E-Commerce 158 E-Business and E-Commerce: The Difference 162 E-Commerce Operations 176 E-Commerce Technology 194 The Three Threads 202 Chapter 5: The Business Plan 207 Developing Your Strategy 211 The Necessity for a Business Plan 226 Building a Plan 234 The Three Threads 262 iii Chapter 6: Marketing Basics 267 What Marketing Is All About 271 The Customer 286 Marketing Research 304 The Three Threads 314 Chapter 7: Marketing Strategy 319 The Importance of a Marketing Strategy 323 The Marketing Strategy Process 326 Segmentation and the Target Market 331 Differentiation and Positioning 335 Marketing Strategy and Product 342 Marketing Strategy and Price 368 Marketing Strategy and Place 375 Marketing Strategy and Promotion 387 The Three Threads 405 Chapter 8: The Marketing Plan 412 The Need for a Marketing Plan 416 The Marketing Plan 422 The Three Threads 474 Chapter 9: Accounting and Cash Flow 479 Understanding the Need for Accounting Systems 483 Financial Accounting Statements 491 Financial Ratio Analysis 516 The Three Threads 525 Chapter 10: Financial Management 533 The Importance of Financial Management in Small Business 537 Financial Control 552 Financial Decision Making 556 The Three Threads 570 Chapter 11: Supply Chain Management: You Better Get It Right 577 The Supply Chain and a Firm’s Role in It 581 A Firm’s Role in the Supply Chain 596 The Benefits and the Risks of Participating in a Supply Chain 604 The Three Threads 609 iv Chapter 12: People and Organization 619 Principles of Management and Organization 623 Organizational Design 639 Legal Forms of Organization for the Small Business 657 People 667 The Three Threads 692 Chapter 13: The Search for Efficiency and Effectiveness 698 Personal Efficiency and Effectiveness 702 Creativity 714 Organizational Efficiency 722 Going Lean 744 Personnel Efficiency 755 The Three Threads 763 Chapter 14: Icebergs and Escapes 773 Icebergs 778 Disaster Assistance 791 Escapes: Getting Out of the Business 795 Exit Strategies 799 Chapter 15: Going Global: Yes or No? 817 US Small Business in the Global Environment 819 What You Should Know Before Going Global 831 Key Management Decisions and Considerations 861 The Three Threads 872 Chapter 16: Appendix: A Sample Business Plan 877 Executive Summary 878 v About the Authors David T Cadden Dr David Cadden was born in New York and received his undergraduate degree in engineering from the Brooklyn Polytechnic Institute He received an MS in management from the same institution He attended Baruch College, which is part of the City University of New York, where he received his MBA and earned his PhD in management planning systems Dr Cadden is the author of many journal articles, book chapters, and proceedings publications For several years he ran a program at Quinnipiac University where students traveled to Nicaragua to assist local small businesses in improving their operations He teaches in the areas of operations and strategy and places special emphasis in these courses on the unique demands of small businesses Dr Cadden has consulted with several firms, including McDonaldDouglas Aircraft and the Blue Cross and Blue Shield Association Prior to coming to Quinnipiac, Dr Cadden worked for Hazeltine Corporation, Baruch College, and Fairfield University Sandra L Lueder Dr Sandra Lueder is an associate professor emeritus at Southern Connecticut State University She has a PhD in marketing from the City University of New York (Baruch College), an MBA in management and marketing from the University of Connecticut, and a BA from the University of Wisconsin in Madison She also taught at Sacred Heart University in Fairfield, Connecticut Her noneducation employment includes working in government, small business, and United Engineers and Constructors, a large corporation that is a division of Raytheon Dr Lueder has been passionate about small business for more than twenty-five years As the proud daughter of a twice-entrepreneur, she has lived the life and has seen the ups and downs of small business ownership She has taught small business management courses and has integrated the small business perspective into most of About the Authors the marketing and leadership courses that she teaches Dr Lueder has been published in the New England Journal of Entrepreneurship and The E-Business Review She has also made many presentations at academic conferences Acknowledgments We would like to thank the following reviewers Their insightful feedback and suggestions for improving the material helped us make this a better text: • • • • • • • • Diane Denslow, University of North Florida Vada Grantham, Des Moines Area Community College Kirk C Heriot, Columbus State University Richard Kimbrough, University of Nebraska-Lincoln Dr Luis I Molina, Miami-Dade College Dr Donatus A Okhomina, Fayetteville State University Dr Marvin Anthony Parker, Fort Valley State University Brenda A B Smith, Southwest Tennessee Community College Our acknowledgments cannot be complete without words of appreciation for the wonderful people at Unnamed Publisher Michael Boezi saw our vision and was willing to take a chance on us He supported us throughout the project in spite of many creative blocks Jeff Shelstad and Eric Frank—how wonderful that their genius created Unnamed Publisher in the first place It is the place where we realized our dream Claire Hunter was our indispensable reviewer for the last few chapters, helping us refine our thinking Becky Knauer, our project manager, was awesome! She kept us on track and showed compassion and understanding during the multiple hardships we experienced during this journey We probably would not have made it had it not been for her She kept us sane Dedications David T Cadden To my grandmother, Helen Lane, whose love taught me what it means to be a real human being To my mother, Dorothy I wouldn’t be who I am or where I am without her constant support and love To my wife, Sandy, whose passion was the driving force behind this book and whose love and support made sure it would be completed To my daughter, Helena, who taught me more about learning than all my years in the classroom Sandra L Lueder To my Dad, a twice-entrepreneur, who instilled in me the love of small business and the importance of integrity in everything I To my Mom, always the soldier in support of my Dad’s entrepreneurial ventures It wasn’t easy She was amazing! To my husband, David, whose shared passion for small business helped to make this book a reality This book is our dream To Helena, our beautiful daughter, who is very entrepreneurial in her own right May she realize her dreams Preface Imagine a text that your students might actually read Imagine a book that is the core of your course without the bloat Imagine a book that uses customer value, digital technology, and cash flow as key themes rather than afterthought add-ins Imagine a text that contains extensive ancillary materials—PowerPoints, websites, videos, podcasts, and guides to software—all geared to enhancing the educational experience Sound good? Small Business Management in the 21st Century is your text This text offers a unique perspective and set of capabilities for instructors It is a text that believes “less can be more” and that small business management should not be treated as an abstract theoretical concept but as a practical human activity It emphasizes clear illustrations and real-world examples The text has a format and structure that will be familiar to those who use other books on small business management, yet it brings a fresh perspective by incorporating three distinctive and unique themes that are embedded throughout the entire text These themes ensure that students see the material in an integrated context rather than a stream of separate and distinct topics First, we incorporate the use of technology and e-business as a way to gain competitive advantage over larger rivals Technology is omnipresent in today’s business world Small business must use it to its advantage We provide practical discussions and examples of how a small business can use these technologies without having extensive expertise or expenditures Second, we explicitly acknowledge the constant need to examine how decisions affect cash flow by incorporating cash flow impact content in several chapters As the life blood of all organizations, cash flow implications must be a factor in all business decision making Third, we recognize the need to clearly identify sources of customer value and bring that understanding to every decision Decisions that not add to customer value should be seriously reconsidered Another unique element of this text is the use of Disaster Watch scenarios Few texts cover, in any detail, some of the major hazards that small business managers face Disaster Watch scenarios, included in most chapters, cover topics that include ... fails to recognize that small businesses are the overwhelming majority of all businesses in America; not only are the majority of jobs in small businesses, but small businesses have also been... majority of businesses in the United States are small businesses with fewer than five hundred employees The SBA puts the number of small businesses at 99.7 percent of the total number of businesses. .. Rates: A Review of the Literature,” Journal of Small Business Management 19, no 4, 1.2 Success and Failure in Small Businesses 23 Chapter Foundations for Small Business (1981): 50–59 Small- business