OECD (2009) in one its recent reports states that SMEs happen to be key generators of employment and income while driving the innovation and growth potential. In the OCED area half of the labour force has been employed by the SMEs only. Figures of UK employment indicate that out of 4.7 million business establishments in UK 99.3 percent were small firms with about 50 employees, while only 0.6 percent firms were there with 50-249 employees. With globalisation, the management of SMEs have now started giving more thought towards the viability of the venture in the long-term before making strategic decisions for acquiring different types of resources. The global financial crisis has also impacted the functioning of this sector quite adversely, because they do not have the desired backup of resources, which is available to the larger enterprises. While on the one hand many multinational enterprises have started leveraging the economies of operation in different regions or countries the SMEs are bound to look for ways to contain the damage within the limited areas of their operation. While it is believed that even under normal circumstances, SMEs require specific policies and programmes for their survival and growth, under the global financial crisis, it appears all the more crucial that they are in a position to find out a friendly government. While on the one hand the government wishes to have more investment from abroad, thus facilitating the MNCs entry into the country, on the other the safeguard of SMEs interests happens to be a major political issue in the country.
Though SMEs exist in good numbers everywhere around the globe, but there is no uniformity on the definition of SME because of practical considerations. Each country has different classifications of SMEs. Some countries define SMEs based on the number of employees, while others depend on the value of the assets. In general, the lower employment limit for a small enterprise is between five to ten workers and the upper limit is between 50 to 100 workers. Similarly the upper limit for a medium enterprise is usually set between 100 and 250 employees. However, it is difficult to adopt one definition of SMEs in all the countries, because the state of the SMEs also depends on the size of the markets or the economy in which they are operating. For example, a firm with 50 employees in the USA would be considered smaller (relative to the size of the U.S. economy) than a firm of this size in Bolivia. In UK, sections 382 and 465 of the Companies Act 2006 define SME based on the turnover and number of employees1. A company with a turnover of not more than 3.26 million and not more than 50 employees is considered a small company and a company with turnover of not more than 25.9 million, with not more than 250 employees is termed as medium sized company.
Importance of SMEs
Small and medium enterprises (SMEs) play an important role in a nation's economy. They are resources for innovation and they provide a wide base of employment. In addition, SMEs are the most essential sector for a healthy dynamic market economy. Chew
Small and medium enterprises (SMEs) are considered a key component of the local market, as they serve the customised needs of the local people and local industries. There was a time when such industries used to be the most influential ones for the local economy and the respective governments would do everything possible to keep the SMEs in good humour…
characteristics of the business organization, its management, its relationships with other entities and other contextual variables that lead or contribute to the business becoming successful. Furthermore, the focus is on a particular type of business and on those belonging to a particular country.
However, globalization also raises the risk of marginalization of countries, in particular the poorest countries, and the most vulnerable groups everywhere"2
"Several CEI countries, which are moving towards a free market economy, fear, that the globalization process of the world economy and markets might affect an economic texture that is still unprepared from a technical, financial, organizational and social point of view.
SME either Small or the Medium-Sized Enterprises generally serves as the whole Switzerland, by providing the full range of various services and products from the fixed-line and also from the mobile communications to data service, internet, maintenance as well as the operation of the whole IT infrastructure.
According to the essay, SMEs have become serious victims of jeopardy of late, due to various unfavourable factors making it difficult for them to sustain their existence. In order to eradicate such vulnerability, a number of practices like supportive tax reforms, financial aids, agreements with creditors and banks have been embraced by government.
Thereafter, the SME sector depended upon government regulations, protection of property rights, and access to finance. In 1993, SMEs in Russia formed 85.6% of the total establishments out of which 52.7% were small enterprises and 32.9% were medium enterprises
That is, identifying those characteristics of the enterprise relating to its management, relationships with other entities, contextual variables, etc. that either lead to or contribute in some way to the enterprise being successful.
The author explains that small and medium enterprises have been playing a pivotal role in the economic development and uplift all around the world. Their part in creating new employment opportunities has been pivotal and decisive both in the first and third world countries. There are different success criterions for an SME.
The effect of globalization has consequently resulted in industrialization in developing countries. Many SMEs have then been set up through industrialization and therefore it has created employment opportunities.
Developing countries are among other factors,
4 pages (1000 words)Essay
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