I feel that the topic of micro-enterprise warrants further investigation because much of our university education has been geared toward big business and theories aimed at successfully managing them; although I feel this is worthwhile, many of us do not and will not end up working in a big business. The current graduate employment market looks discouraging, as does lending for new ventures, so I used the opportunity to create a wiki on micro-enterprise to research this avenue of employment further - to assess its viability. This has been useful to me, and hopefully the content of the wiki will be useful to you too.


This wiki entry looks into micro-enterprise, and what this means to the new trends in management module. It has three main aims:
  1. Explore the current trends within Micro-Enterprise
  2. Synthesise key themes from the new trends in management module with academic discourse surrounding the strategic potential of micro-enterprise.
  3. Evaluate the findings to determine the role of micro-enterprise in the UK and Global economy and discuss some of the implications this has for managers of micro-enterprises and larger companies competing with them.


Micro-enterprises are frequently studied in developing countries, and are praised as a vehicle for poverty alleviation and employment (Naude, 2010). Roy and Wheeler (2006) distinguish micro-enterprise owners from entrepreneurs, arguing that entrepreneurs are concerned with self-actualisation and accomplishment, whereas micro-enterprises have been associated with subsistinance and necessity. These delineations are not identified in actual definitions of micro-enterprises, in developed countries they are used both for both subsistinance and entrepreneurship; it is the decision of the owner to decide how their business will operate. The UK has a benefit system in which anyone can subsist if they wish to, and the study of micro-enterprise in the UK as a vehicle for growth as opposed to survival reflects this.

The EU (2003) definition of a micro-enterprise is an entity that has less than 10 employees and annual turnover of less than €2m (£1.6m).

There are three key characteristics that micro-enterprises are said to have:
  • Under ten employees
  • Small start up capital
  • Predominantly localised businesses

Micro-enterprises are the smallest type of business vehicle; despite being unique, and making a valuable contribution to economies across the globe, they often fall under the category of SMEs. Many different types of business may fall under the category of a micro-enterprise, providing they meet the above criteria; this commonly includes nascent entrepreneurs, the self-employed, partnerships, co-operatives and other types of business which fit the EU criteria.


The below graph looks at the growth and total number of micro-enterprises in existence in the UK from 1985-2000:


Changes since 1985 have been incremental, but cumulatively, the existence of micro-enterprises are increasing. A 2011 report by The Department for Business Innovation & Skills (BIS) found that over four million micro-enterprises exists within the UK – these businesses are responsible for employing seven million people generating turnover of £600bn (19% of 2010 GDP); other research suggests that micro-enterprises are responsible for even higher proportions of business within the UK, as studies are not included as they operate sub-legally (Naude, 2010). The graphs, coupled with the latest figures on micro-enterprise suggest that they compromise an important part of the UK economy. Despite this, they are rarely considered an entity in their own right, and are grouped with SMEs when investigated statistically. The remainder of this wiki is dedicated to looking at what micro-enterprises are, some factors that may be responsible for their growth, and the implications this has for managers.

As a vehicle for business, a micro-enterprise can theoretically exist in any industry. The unique characteristics of micro-enterprises results in certain industries being easier for micro-enterprises to compete effectively.


The traditional role of micro-enterprise has been to satisfy the needs of the local community (Roy and Wheeler, 2006), this has resulted in a variety of micro-enterprises, and some of the most familiar are small trade, services and creativity. These can include, but are not limited to corner shops, family restaurants and hotels, legal, dentistry and accounting services and (more recently) marketing and advertising agencies.
Micro-enterprises have been successful in these areas because they are community-oriented, have local knowledge and build relationships which are difficult to replicate on a large scale (Munoz, 2010).


The rapidly changing business landscape has meant that individuals or small groups of people are able to harness the power of new technologies to set up their own business; making money from micro-enterprise in increasingly novel ways. Some of the most prominent ‘new wave’ micro-enterprises include online small trade, independent application and game development or even the monetisation of a blog or website.



Whereas StevenJewel072 may have been limited by the ability to sell their jewellery at a local market stall, they are now able to use the internet to connect with new customers and improve the prospects of their micro-enterprise. The web has opened up new channels for micro-enterprise, helping them to compete with big businesses.
Three Finish students originally set up Rovio, the creators of angry birds. Web 2.0 and digital distribution allowed them to create the game themselves without the assistance of large companies who would want a significant cut. Rovio is now a multi-million dollar company employing over 100 people; furthering notions that micro-enterprise is not only a vehicle for subsistinance and survival, but a for growth, innovation and employment.
seth.pngSeth Godin uses blogging to drive traffic toward his website, he both sells and digitally distributes his books this way. He has also published work through a traditional publisher, and asserts that the internet has allowed creators of work to get a better deal.


This module has previously investigated the way in which knowledge is becoming increasingly important, and with 76% of UK GDP generated through services (ONS, 2007), it is evident that intangibility is becoming increasingly commoditised. This is especially true for developed countries like the UK; in fact they become increasingly dependent on it (OECD, 1996).

Audretsch and Thurik (2001) posit that a paradigm shift to knowledge based economic activities drives growth of the entrepreneurial economy, Stam and Garnsey (2005) explain that this is because there is an onus on individuals and their fresh insights and ideas – these represent risks that bigger organisations may be less willing to take, because projected rewards appear too low to be worth considering.

Industrial companies have been shown to be more capital-intensive than services (Quinn, 1992), the lower capital requirements of services implies that it is possible for micro-enterprises to provide knowledge or services competitively. Although different service industries have different barriers to entry (Ruyter et al, 1998), the increased demand for knowledge and service products may see more individuals start up their own micro-enterprise. The role which micro-enterprises play in services economies is still contested; (Heskett, 1986) posits that many services which make large positive contributions to the GDP figure are beyond the scope of micro-enterprises, providing the example of airline travel.

These trends suggest that micro-enterprise will become increasingly important in developed countries, but the below graph shows that although many small enterprises have been created in services, total growth in micro-enterprise is relatively low, due to failures of micro-enterprise in other industries:


plus.png Movement away from capital intensive industries making it possible for micro-enterprises to start up in the UK
plus.png Micro-enterprises are doing well in the growing service and knowledge industries
minus.png Micro-enterprises in other industries are failing rapidly, implying that restructuring is taking place.
minus.png The role micro-enterprises play in an economy is still contested, some service industries are beyond the scope of small businesses as they rely on high capital expenditure and high labour.


The wide-spread adoption of the internet, coupled with the introduction of new web 2.0 features and digital distribution have had major changes for businesses:
  • New, low cost ways to connect with a global audience
  • Provides users with a new medium to interact with companies
  • New industries and business opportunities
  • New ways to distribute media

More specifically,Fuller and Jenkins (1995) investigated the way in which SMEs used the internet, concluding that the main benefits were:
Revenue, cost and efficiency maximisation opportunities, the ability to reach new markets and the creation and maintenance of new business relationships.

The low cost characteristics of the internet have made it possible for micro-enterprises to market their products and sell to a wider audience (Hegarty, 2011). This short video demonstrates how Macbeth’s Butchers (employer of 7) has exploited the benefits of the internet marketing to increase sales:

Consumers are making new demands of businesses; they want products and services which cater to their idiosyncratic needs and want to take a more pro-active role in creating and identifying with brands (Danaher et al, 2003); big businesses may find it increasingly difficult to compete with the levels of intimacy that small niche providers offer their customers. The fragmentation of online markets, when compared to their retail counterparts, suggests that online specialists are capable of operating competitively online against larger firms: even basic markets, such as groceries, have a higher proportion of small specialists in comparison to traditional markets:


In areas of discretionary spend these trends are even more pronounced - but one of the main rationalities for consumers shopping online is price; 49% of a participants in a separate Mintel (2012) study said the main reason they shopped online was to save money – this strong onus on cost may mean that larger businesses and their economies of scale will still have an important role to play in retailing.

New industries and business opportunities have emerged as a result of web 2.0; new wave micro-enterprises have emerged as new opportunities arise, the efficiency and scalability that the internet offers micro-enterprises creates more opportunities for expansion in comparison with offline environments (Poon and Swatman, 1996).

Digital distribution has given individuals attempting to sell their creativity new methods of doing so; some large firms, such as record labels, provide risk-aggregation services to individuals looking to sell their creativity (Kusek and Leonhard, 2005), digital distribution has reduced the barriers to entry for selling media – many now choose to monetise their work for themselves instead (Fillis and Wagner, 2003). A recent Google Advert looked at how Jamal Edwards, creator of SBTV, is changing the way in which music is shared and monetised:

plus.pngSBTV has become much bigger than a micro-enterprise, and now has a label deal with Sony RCA - big businesses are having to respond to the changing business landscape by working closely with entrepreneurs and micro-enterprises. This is a good example of Fuller and Jenkins' (1995) idea of new business relationships.
plus.pngThe internet has given rise to new opportunities for micro-enterprises, this new channel allows them further reach and a levelled playing field for competing with big businesses.
minus.pngConsumers are still highly price sensitive, micro-enterprises operating online need to add value whilst maintaining competitive prices
minus.pngMicro-enterprises unable to take advantage of the internet may find it increasingly difficult to compete.


Companies of all sizes are facing increasing pressure to maintain profitability and behave in socially responsible ways (Mohr et al, 2001). The first student led seminar investigated the ways in which big businesses have responded to this pressure; the general concensus among the group was that large businesses were engaging in CSR, but these were insufficient and appeared to be self-preservative or shallow.

A 2009 Mintel study found that 60% of those surveyed felt it was important for businesses to act in ethical ways, 40% said this had effected their buying behaviour.

Spence and Perrini (2009) investigated the CSR efforts of micro-enterprise owners and found that ethics and social responsibility practices were greater than expected in micro-enterprises – these efforts were much more informal and community based than larger organisations. Lange and Fenwick (2008) add to this, by arguing that the owners of small business feel a stronger sense of obligation to invest in the local community.

Although the academic discourse suggests that micro-enterprises stand to benefit from heightened consumer awareness and shifting buying behaviours,Mohr et al (2001) found that consumer beliefs about CSR are inconsistent with actual buying behaviour - they add that the more knowledge a customer has about CSR activities the more likely it will influence buying behaviour. This adds gravitas to the sentiments of Pomering and Dolnicar (2008), who argue that CSR efforts must be marketed effectively to provide a business with competitive advantage.

plus.pngSmaller businesses have been found devote proportionately more resources to CSR efforts than larger organisations.
plus.pngConsumers aware of CSR efforts take them in to consideration when making purchases.

minus.pngMicro-enterprise owners may be unable to effectively market their CSR credentials, making it difficult to use them as competitive a advantage.


Early scholarly articles surrounding globalisation posited that large companies would be better geared toward globalised markets; and would be able to benefit from enormous economies of scale in production, distribution, marketing and management (Levitt, 1983), but transportational and communicational advancements has caused more and more small businesses to pursue international opportunities (Oviatt and McDougall, 1994).

Globalisation has brought about new challenges for managers of micro-enterprises, they are now required to invest limited time and resources into international market research and competitor analysis (Knight, 2000), and are exposed to fierce competition from a variety of international competitors (Dunning, 1993).

Despite these drawbacks, micro-enterprises also stand to gain from globalisation, technological changes like web 2.0 and digital distribution have diminished the role of location (Porter,2000), allowing even small companies or sole traders the possibility of engaging in business on an international scale.

Raymond (2003) argues that globalisation and the knowledge economy require businesses to react faster and act farther. Bryson et al (1993) investigated the flexibility of small firms and discovered that they are able to use their size and informal networks to react quickly to change - whether this is enough to compensate for the economies of scale that larger firms are able to exploit remains contested.

plus.pngGlobalisation has given micro-enterprises the opportunity to widen their customer base.
plus.pngIncreasing intangibility coupled with globalisation has reduced the importance of location.

minus.pngManagers of micro-enterprises need greater knowledge of international markets and competitors, requiring further investment of time and money.

minus.pngMicro-enterprises face intensified competition from large firms and international micro-enterprises.


Micro-enterprise is a critical component of the UK economy, the previous sections of the wiki have discussed the way in which changes to business have impacted the managers of smaller businesses, revealing both challenges and opportunities of operating in the new business environment.

The construct of micro-enterprise becomes increasingly questionable, definitions insist that they are localised and low turnover businesses - but many new forms of micro-enterprise capitalise on their position in a global market place, exceeding both the proximal and turnover related parameters of what constitutes a micro-enterprise.

The relevance of the construct of micro-enterprise in an increasingly digital, service based economy like the UK is questionable, but the changing business landscape has meant that even the managers of smaller businesses must now consider international environments and what this means for the business.

Small as a business strategy may still yield significant strategic potential, but it requires a manager to think big:
  • Managing a small business requires greater responsibility and knowledge than ever before.
  • Knowledge or service based businesses face intensified competition from global competitors of varying sizes, and must adapt their competitive offerings to compensate.
  • Price is a key component of competition, but value can be added in other ways.
    • For small firms this is likely to mean intimacy and relationships,
    • For large firms this means economies of scale, variety and customisation.


1. Would you consider setting up a micro-enterprise?
2. How much of university education applies to small business management?


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