Cottage industries, Small Businesses, and Linkage industries

Cottage Industries

Cottage Industries: Where production happens at home, using natural resources and little to no equipment. 

Examples of Cottage Industries;

• Knitting 

• Basket weaving 

• Clay pottery 

• Jewellery making with beads and shells 

Characteristics of Cottage Industries;

• Labour use is often family members

• Labour is unpaid 

• Local materials are used in productions (E.g. seeds, beads, crops, clay, cotton) 

• The business is small-scale but has growth potential. 

Advantages of Cottage Industries;

• Provides employment 

• Labour costs are low

• Provides linkage industries

• Little to no location cost

Disadvantages of Cottage Industries;

• Lack of a ready market

• Scarce raw materials 

• Production needs long hours from the owner

Small Businesses 

Small Business: A privately owned entity that makes less annual profit compared to a large corporation.

Characteristics of Small Businesses;

• Compared to a cottage industry, small businesses have their own location.

• There are paid employees, a maximum being 10.

• The value of assets owned is less than large corporations. (E.g., Buildings, equipment)

Functions of Small Businesses;

• Creates employment; especially in rural areas

• Provides personal services that large corporations cannot provide. (E.g., here salons, nail spa, Taylor)

• Provides vital services in small communities

• Provides a means of Regular income, especially to "seasonal workers"

• Provides a niche market.

Niche Market: Provides a particular good or service to particular people.

Benefits of small businesses;

• Offers more choices than larger companies:

• Create competition for larger businesses:

• Provides an income for the owner:

Challenges for small businesses;

• Competition from larger companies/ businesses

• Raising large amounts of capital

• Unlimited liability

Reasons why a small business may grow;

• To achieve greater security (long-lasting business)

• To increase profits from large markets

Ways businesses can grow;

• Creating New Products: Expanding markets through diversification.

• Creating Competition: Enhancing overall market competition.

• Merger: Voluntary combination with another business in a similar industry (integration or amalgamation). Agreements reached by management and shareholders.

• Takeover: Strategy to gain ownership of another company by purchasing at least 51% of its voting shares. (Usually happens when a business is on the verge of bankruptcy)

Changes Experienced When a Business Grows;

• Organisational Structure:

• Transition from a simple structure centered on one entrepreneur.

• Development of a managerial hierarchy with department heads.

• Increased Capital

Raising additional capital through:

• Company profits

• Selling shares

• Borrowing from financial institutions

• Expanding Labour: Hiring additional workers as the business expands.

• Improved Technology: Acquisition of more advanced equipment through increased capital.

• Export Demand: Opportunity to explore export markets for offering goods and services.

Organisations in Dominica that help small businesses;

• Dominica Youth Business Trust (DYBT)

• Small Business Support Unit (SBSU)

• National Development Foundation of Dominica (NDFD)

These types of businesses provide;

• Financial support

• Training

• Provides a market

• Advice

Linkage Industries

Linkage Industries: When one industry depends on another's output for its own production.

Types of Linkages;

• Backwards linkage: Occurs when one industry forms a linkage with the output of another industry, typically involving suppliers and the process of getting raw materials needed for production.

• Forward linkage: When the output of one industry serves as the input for another industry, showing how products move forward into the next stage of production or processing.

Benefits of Linkage Industries;

•  Encourages Large-Scale Production;

• Surplus goods can be exported.

• Generates foreign exchange for the country.

• Stronger Business Relationships: Firms, especially local ones, build mutually beneficial networks.

• Employment Creation;

• Economic activity increases from the purchase of goods/services.

• Leads to more job opportunities as businesses grow.

Challenges of Industry Linkages

• Capital Requirement;

• Setting up linkages often needs a large investment.

• Securing the needed capital can be difficult.

• Limited Foreign Market Access: Exporting through foreign linkages may face strict regulations.

• Inadequate Domestic Raw Materials;

• Domestic supply shortages may lead to increased imports.

• This can hurt local industries and reduce their competitiveness.