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

Micro-enterprise growth: Lessons from home-based business in New Zealand

In Partial Fulfillment

Of the Course Requirement In

Managing and Harvesting Growing Business (ENT607M)

Submitted by:

JAMORA, CARLOS

Relevance of the Course Reading / Paper in Managing and Harvesting A Growing Business

The research paper, Micro-enterprise growth: Lessons from home-based business in New Zealand, focuses on the importance of key business processes and resources for growth of micro home-base business (HBB). The analysis of micro-enterprises includes evaluation of business indicators, growth strategies, financial resources, social capital, marketing activities, human capital and other core resources for business growth. Moreover, these categories have been further classified and reported by geographical scope such as local, regional, national and international market to have a clear picture of what drives growth for micro home-based business (HBB).

Home-based businesses (HBB) have been chosen as they constitute a major sector of micro enterprises in many countries. Very small firms or micro-enterprises have been defined in the research by OECD as having less than 10 employees or €2M revenue. On the other hand “larger SMEs” are enterprises which may have up to 250 employees or €50M revenue.

There are two major types of Home-based businesses (HBB): (1) firms operating at home, where most of the work is carried out at the owner’s residence e.g. accounting or professional practices; and (2) firms operating from home, where the owner/operator does most of the work out in the field or at a client’s premises but the administration, record-keeping and supplies are maintained at home, e.g. tradespeople such as carpenters or plumbers.

The research paper relates to the class as it unveils how the micro-enterprises, specifically micro home-based businesses (BHH), manage and takes advantage of certain strategies for growth, their preference or choice of market to penetrate, access and sources of financial support, and the like. The research guides and informs entrepreneurs how the micro-enterprises in comparison to the “large SMEs” have and considers a different approach when it comes to growing their businesses. As entrepreneurs, growing our business no matter the scale, will always be a crucial process to sustaining our business.

Objectives of the Course Reading / Paper

One of the objectives of this paper is for entrepreneurs to realize the different types of resources that are needed for growth and superior performance of micro-firms. Secondly, is for managers to be informed on the key resources and capabilities that underpin their products/services as they provide stability in a dynamic competitive environment. Resources in this case are assets that may be tangible or intangible, can be considered individually or in combination, and categorized into different types such as human, financial, physical, technological, organizational and reputation.

Human capital in this sense includes knowledge, skills and abilities of people in the firm, this has been identified as fundamental to the growth of small firms. Therefore, the personal aspirations and characteristics of an owner-manager or entrepreneur are vital components in small and micro-sized firms. Financial, physical and technological resources are also necessary for any business to operate and grow. Marketing activities and strategies are fundamental business components that contribute to obtaining customers and growth within existing or new markets. Moreover, small firms utilize social capital arising from strategic networking and alliances as an important source of resources.

Highlights of Findings, Conclusion, Recommendations

This table shows a comparison of business practices and serves as indicators of the intent to grow the home-based businesses (HBB). We can observe from this data that HBBs have high aspirations for growth and have no significant difference by geographic sales scope. HBB enterprises also show interest in paying for Goods and Services Tax (GST) as their coverage becomes wider. Similarly, preference for using external contractors rather than employing staff were significantly different by geographic scope, with lower levels of contractor preferred by HBB with local scope of (29%). Significant differences in the HBB proportions with websites were found and the levels of website adoption increase markedly with increasing geographic sales from 39% of the HBB operating locally to 87% of HBB operating internationally.

The resource factors have been reported in six key areas including human capital, technology, marketing, financial resources, physical assets, and risk management. The two most important factors were personal human capital factors relating to the HBB owners themselves – their aspirations, energy and commitment, as well as their time.

Second most important factor for HBB growth was a technology resource. Access to internet ideas & info is the leading key resource for Technology having a 4.49 mean importance

Marketing is ranked the third most important as a key resource for business growth. Under this category are advertising & promotion, as well as, marketing expertise including branding. Marketing expertise including branding appeared to have increasing importance with increasing sales scope.

Accounting and financial expertise was rated as “important” or “very important” by approximately half of the HBB, and finding funds to invest in new products was more important for the HBB with national and international sales than those with local and regional sales.

Although the home residences was the most important of the physical assets for HBB growth, it was moderately important. Access to specialized equipment was more important for HBB with local and national sales than those with regional and international sales less important. The size of premises at home was the lowest rated factor which signals that this not perceived a constraint on growing the HBB.

In terms of risk management, intellectual