Today business is changing at light speed. In a world where everything is moving at breakneck speed, small business is caught in the midst of it. Small businesses are facing stiff competition from multinational corporations with deep pockets. The small business is forced to adapt to the changes in business by streamlining operations, automating processes, and minimizing expenses. Small business today is more diversified than ever before thanks to the entrepreneurial spirit that has been nurtured through the years.
Businesses engaged in all types of industries are feeling the heat. According to a recent survey, small businesses are feeling the impact of tougher lending conditions, rising inventory costs, slower investment and net profit growth, less customer clientele, less discretionary income, and reduced access to credit. Many are being forced to downsize or eliminate some of their operations. If you know anything about what a recession does to a country’s economy, then you know what effect it can have on small businesses. The fears of financial doom and gloom are forcing firms to consider consolidation as a means to remain viable during an economic downturn.
There are many factors that drive business economics, including technology, globalization, and entrepreneurial activity. Innovation is key in helping firms improve productivity and profitability. Entrepreneurship helps firms develop products and services that solve real-world problems. By freeing up capital for growth purposes, the economy benefits as firms add to productivity and employment.
As we enter into a recession, business owners will need to be thoughtful about how they manage their businesses during this time. It’s important to realize that small business is not just a business that exists for the purpose of making money. In order to be successful during a recession, a business owner needs to be thoughtful and innovative. Not only must a business owner address current issues but also look to the future. As a result, business owners will find themselves in high demand as entrepreneurial minds look to make their ideas become reality.
To understand business economics, one must understand the difference between managerial economics and entrepreneurial economics. Managerial economics focuses on the factors behind growth while entrepreneurs focus on risk and personal liability. While the two may overlap, managerial economics deals with managing growth and investment whereas entrepreneurship addresses funding, working capital, business operations, and entrepreneurship generally. Also, entrepreneurs generally consider themselves far more “risk adverse” than managers because they often take larger risks.
In order to address business economics, a manager must focus on both entrepreneurship and managerial economics. Many business economists believe that there is often a substantial debate between the value of managerial knowledge and entrepreneurship. However, all business economists agree that good management can help create value and reduce cost while bad management can cause unnecessary expense and loss. This belief is supported by the fact that many large corporations were created from either mediocre management or from sheer bad management in one direction or another. While poorly managed, some companies have become quite profitable; others have failed and are today bankrupt.
While entrepreneurs may not desire to work at a nonprofit organization, business economists know that nonprofit organizations need to think about the cost of services as well as revenue. In addition, business economists also recognize that nonprofit organizations should also consider external factors such as government regulation and competition. Often, entrepreneurs come up with an idea for a business without considering how it would impact society or governmental agencies. This can lead to bad ideas that can cost a business, its employees, customers, or the community in general. For example, if an entrepreneur tries to open a spa where they will allow customers to pay in blood in exchange for cleaning their teeth, this could result in a conflict with local health officials who could penalize the business due to potential health risks.
Another way that entrepreneurship journals can help a businessperson learn about business economics is through a focus on risk. Typically, people who try new business ideas are excited but do not necessarily aware of the risks they might be taking. Unfortunately, bad decisions often result in more damage than good. Entrepreneurial action should be directed toward avoiding bad risks. Through the use of a business economics focus, a company or organization can understand the impact factor of any decision it makes and consider how it will affect the future growth of its endeavors. When this knowledge is properly understood, business managers and entrepreneurs can avoid bad decisions that could potentially lead to the demise of their ventures.