SMEs Survival in the Highly Competitive Industries - Essay Example

The common assumption is that a good number of newly formed small and medium companies find survival difficult as “Four out of five new firms fail within the first five years”, which is not true as believed by people in general. It does not imply that we should take the issues faced by small and medium firms lightly. The survival of small and medium firms is at stake not only due to the downturn factor but a number of other reasons as well.Research Question motivationThe world economy depends to a significant extent on the success of small and medium businesses, which necessitates the urgency of making an inquiry into the reasons for collapsing of small and medium business firms.

Curiosity arises on the causes of not surviving in the marketplace due to the associated risks. SMEs are not fighting a lone battle against odds; active government support is provided to them as they are the backbone of a country’s economy. This is the reason why so much attention is paid to the growth of the SME sector in all industries.In comparison to small businesses, medium enterprises are in a somewhat better position; they accept the challenges but small entrepreneurs’ market position is very critical due to the high cost of raw material, energy, inflation, and lack of ready finance.

Taking the example of Canada where a small business represents 98% of all business, the government is playing a leading role in clearing the roadblocks to survival and growth of small businesses and leaving no stone unturned in its efforts for SMEs survival. The government is promoting SMEs by celebrating Small Business Week 2009 and introducing Canada’s Economic Action Plan, providing the mechanism for small and medium businesses to come soon out of the repercussion effects of the downturn.

The government there reduced taxes, made the availability of finance on softer terms and easy, and tried to capture red tape. As a result, the survival rate in Canada is comparatively better (Market Wire 2009).