There is no one single definition of a business being small or medium. The categorization can be based on many factors such as number of employees, sales or revenue generation, number of units produced etc. The EC have come up with a method of categorizing the small and medium sized enterprises. According to them an enterprise with 0 9 employees is considered as micro, 10 99 employees is considered small and 100 499 employees is considered as medium. (Lauder, D. Boocock, G. Presley, J. 1994)
IMPORTANCE OF SUPPORT FOR SMES
The SME sector has started to gain its importance worldwide. The government and the economists have started to realize that it is not the large organizations which run the economy rather it is the small and medium sized businesses. Small and medium sized enterprises are found to be more flexible and responsive to the change in the market demand. This gives them a competitive advantage over large organizations which have a stiff organizational culture. (Lauder, D. Boocock, G. and Presley, J. 1994)
It has been recognized that to ensure a healthy SME sector constant support needs to be provided. Small and medium sized businesses are opened by people who are not very highly educated and have no managerial experience as such. Another problem that small businesses face when starting off are the finances. These are the major reasons that support needs to be provided to this sector. (Davis, J. Powell, J. Hides, M. 2002)
AIMS OF SUPPORT
The aim of the support should be providing efficiency to effectiveness, improving functional performance to improving business performance capability and creating trade cartels, which can benefit small businesses, which are involved in the export and import of products. Another aim of this support should be to enable small and medium enterprises to survive in this globally competitive business environment. (Davis, J. Powell, J. Hides, M. 2002)
In the article by Boter, H. and Lundstrom, A.(2005) it is mentioned that the neoclassic economic theory establishes the framework for analyzing the need for support programs. There are stages in the economy in which the demand and supply are in equilibrium. It is at this point that the resources are most effectively used but a small business is not able to take advantage of this as they have a limited resource base. Thus the smaller businesses are not able to compete on the same level as the large businesses. This is another aim of the support program that should be provided to the SME sector.
TYPES OF SUPPORT SYSTEMS
There are different types of support systems, which should be provided to the SME sector. The most common types of support that needs to be provided to the SME sector are
Finances small businesses are short on startup capital and later on working capital for their business. It is not very easy for them to obtain funds, as many banks and lending institutions are hesitant in providing small and new ventures with startup capital n fear that they might not be able to return it.
Managerial help many small business owners do not have the necessary skills to handle the business and make it successful. They have the idea and the want to start the company but the managerial skills and guidelines required are not up to the mark. Providing them with a support program, which will help build on these skills will increase the probability of these businesses being successful and decrease the risk of failure.
Training small businesses do not have the cash to invest in training. This is a necessary expense if the business wants to stay competitive. In a small business the costs of training are higher. By forming associations which will help conduct these training sessions and bringing different small companies together so that a general training session can be conducted.
Marketing the marketing costs are higher as we all know. Small firms cannot afford to spend on such promotional activities. Associations can be formed which can help small companies carry out these promotional activities.
For small companies, the insurance costs are higher. The government or the insurance companies can create packages, which will be affordable to the small companies. This will result in better operations and less risk. SMEs need to be supported in their risk management strategies.
(Boter, H. and Lundstrom, A. 2005)
EXAMPLES
The USA has created a support system for its SME sector. This support system was initiated in the last two decades. Before that the country did not realize the importance of its SME sector. In the period when multinationals were making layoff, the number of people employed increased. All these people were being employed by the SME sector.
In the UK, support for the SME sector has undergone much change after the war. Policy making in the UK is controlled at the central level, which makes it difficult for the local government to come up with laws for the SME sector. Thus, policies are not designed easily. Those policies, which have been designed such as the training policies by the government have also been abandoned and are not being implemented. There are some support programs concerning consultancy and information dissemination, which are being provided to the SME sector in the UK. (Lauder, D. Boocock, G. and Presley, J. 1994)
The NUTEK report (2000) on Sweden tells us that the support services for the SME sector have been divided into public and private services category. In the private sector there is a program by the name of Other support services to companies and consists of accounting firms, organization and information consultants, technical consultants, PR firms, employment agencies, law firms, bookkeeping agencies, translation services, conference organizers and others.
There are many new programs that are currently such as the Euro Info Centers (EIC), Universities, Science Parks, The Swedish Trade Council, Industrial Development Centers and many others.
INFLUENCE OF SUPPORT
To study the influence of support and whether it has been successful, Simpson, M. Tuck, N. Bellamy, S. (2004) say that it is important to know what success means to the small business owners. There is much diversification in the definition of success and individual owner characteristics, organizational values and performance measures all are associated with success and if a company is successful or not.
When the SME sector will be provided with a good and efficient support system, there is a very high chance that the success rate of small businesses will increase. The author Huang, T.C. (2001) in his article mentions that there is a high chance of expansion in a company when it has a trained and efficient workforce. This shows that when the support program will offer training facilities to the SME sector, they have a higher potential to expand and grow, which will enable them to compete against the large organizations that exist in the market.
In the UK, around 40,000 small businesses fail every year. The main reason behind this failure is the weak support system that exists within the country for the SME sector. The repercussion of this is that the number of small businesses within the country is decreasing. (Thurik, R. Wennekers, S. 2004)
The SME sector is an important driver of the economy. If it provided with the right kind of support it can help with innovation, providing competition to the larger companies, job creation, creating a demand and supply of many small products, which may not be used otherwise. In a study by Boter, H. and Lundstrom,(2005) A. it was seen that most service sector small businesses prefer to use private support systems as compared to the manufacturing SME sector, which prefer to use the government provided support system.
Those entrepreneurs or small business owners, which do not take advantage of the support system are more individualistic in nature and do not want others to interfere in their business. Also most of the support systems, which are provided to the SME sector, are standardized in nature. (Davis, J. Powell, J. Hides, M. 2002)
Small business owners are generally competent all they need is a little guidance as they have not handled a business by themselves before. Once this guidance has been provided to them in the right manner, maybe in the form of community based education, then it can be very beneficial for the small business owner. It helps develop the business and the owner personally. Also, these programs then have long term effects on both the business and the owner. (Redmond, J. Walker, E.A. 2008)
When SMEs are given opportunities and access to more information and markets, it builds on their confidence. The business owners get the courage to enter new markets because they know that if they need help in any area, they have people to whom they can refer to and ask for help. (Redmond, J. Walker, E.A. 2008)
In a study by Huang, T.C. (2001) the effect of training and management support was assessed with respect to the performance of SMEs. Those small businesses which did make use of training programs and supported their employees to get the necessary training experienced better performance. Their businesses operated more efficiently and effectively.
The support programs that provide training are general in nature and do not target the specific and specialized needs of the individuals. Thus there are times when the support that is provided becomes useless and unnecessary. The government and the support agencies before starting any program should do some research as to what are the needs of the small business owners. The support programs can be planned accordingly. (Devins, D. Gold, J. 2002)
Many at times, the quality of the support programs that are being provided is not up to the mark. In other words, the quality of these programs lags behind when compared to that of the support that large business owners get. The major problem lies in the implementation of such programs. The government needs to take an active part and ensure that there is proper quality implementation. (Caniels, M.C.J. Romijn, H.A. 2005)
In many developing countries, small business owners do not even have proper infrastructure provided to them. For example the road network is weak and there are electricity issues. This makes it difficult to conduct business. The larger companies can survive because they tend to create their own infrastructure for smooth operations. This becomes a major disadvantage for the small business owner and results in a major portion of the expenditure that needs to be made by the business.
Looking at the situation in an optimistic manner, we can conclude that support is always helpful in any form. When policies are being introduced to help the small and medium enterprises within the economy, it will enhance their operations. The number of firms will increase we have also seen an example when these support services are not being provided, then the number of firms within the economy decrease. (Simpson, M. Tuck, N. Bellamy, S. 2004)
The problems that are faced by small business owners can be overcome by enrolling in the right support program. This means that researching the support programs that are being offered and then choosing one, which fits the needs of the business. This is a more efficient method when compared to just randomly following other businesses.
In the end, small business owners are the backbone of the economy and need to be taken care of. Proper services and support programs should be provided to them so that they do not face any barriers and their business operates as smoothly as possible.
IMPORTANCE OF SUPPORT FOR SMES
The SME sector has started to gain its importance worldwide. The government and the economists have started to realize that it is not the large organizations which run the economy rather it is the small and medium sized businesses. Small and medium sized enterprises are found to be more flexible and responsive to the change in the market demand. This gives them a competitive advantage over large organizations which have a stiff organizational culture. (Lauder, D. Boocock, G. and Presley, J. 1994)
It has been recognized that to ensure a healthy SME sector constant support needs to be provided. Small and medium sized businesses are opened by people who are not very highly educated and have no managerial experience as such. Another problem that small businesses face when starting off are the finances. These are the major reasons that support needs to be provided to this sector. (Davis, J. Powell, J. Hides, M. 2002)
AIMS OF SUPPORT
The aim of the support should be providing efficiency to effectiveness, improving functional performance to improving business performance capability and creating trade cartels, which can benefit small businesses, which are involved in the export and import of products. Another aim of this support should be to enable small and medium enterprises to survive in this globally competitive business environment. (Davis, J. Powell, J. Hides, M. 2002)
In the article by Boter, H. and Lundstrom, A.(2005) it is mentioned that the neoclassic economic theory establishes the framework for analyzing the need for support programs. There are stages in the economy in which the demand and supply are in equilibrium. It is at this point that the resources are most effectively used but a small business is not able to take advantage of this as they have a limited resource base. Thus the smaller businesses are not able to compete on the same level as the large businesses. This is another aim of the support program that should be provided to the SME sector.
TYPES OF SUPPORT SYSTEMS
There are different types of support systems, which should be provided to the SME sector. The most common types of support that needs to be provided to the SME sector are
Finances small businesses are short on startup capital and later on working capital for their business. It is not very easy for them to obtain funds, as many banks and lending institutions are hesitant in providing small and new ventures with startup capital n fear that they might not be able to return it.
Managerial help many small business owners do not have the necessary skills to handle the business and make it successful. They have the idea and the want to start the company but the managerial skills and guidelines required are not up to the mark. Providing them with a support program, which will help build on these skills will increase the probability of these businesses being successful and decrease the risk of failure.
Training small businesses do not have the cash to invest in training. This is a necessary expense if the business wants to stay competitive. In a small business the costs of training are higher. By forming associations which will help conduct these training sessions and bringing different small companies together so that a general training session can be conducted.
Marketing the marketing costs are higher as we all know. Small firms cannot afford to spend on such promotional activities. Associations can be formed which can help small companies carry out these promotional activities.
For small companies, the insurance costs are higher. The government or the insurance companies can create packages, which will be affordable to the small companies. This will result in better operations and less risk. SMEs need to be supported in their risk management strategies.
(Boter, H. and Lundstrom, A. 2005)
EXAMPLES
The USA has created a support system for its SME sector. This support system was initiated in the last two decades. Before that the country did not realize the importance of its SME sector. In the period when multinationals were making layoff, the number of people employed increased. All these people were being employed by the SME sector.
In the UK, support for the SME sector has undergone much change after the war. Policy making in the UK is controlled at the central level, which makes it difficult for the local government to come up with laws for the SME sector. Thus, policies are not designed easily. Those policies, which have been designed such as the training policies by the government have also been abandoned and are not being implemented. There are some support programs concerning consultancy and information dissemination, which are being provided to the SME sector in the UK. (Lauder, D. Boocock, G. and Presley, J. 1994)
The NUTEK report (2000) on Sweden tells us that the support services for the SME sector have been divided into public and private services category. In the private sector there is a program by the name of Other support services to companies and consists of accounting firms, organization and information consultants, technical consultants, PR firms, employment agencies, law firms, bookkeeping agencies, translation services, conference organizers and others.
There are many new programs that are currently such as the Euro Info Centers (EIC), Universities, Science Parks, The Swedish Trade Council, Industrial Development Centers and many others.
INFLUENCE OF SUPPORT
To study the influence of support and whether it has been successful, Simpson, M. Tuck, N. Bellamy, S. (2004) say that it is important to know what success means to the small business owners. There is much diversification in the definition of success and individual owner characteristics, organizational values and performance measures all are associated with success and if a company is successful or not.
When the SME sector will be provided with a good and efficient support system, there is a very high chance that the success rate of small businesses will increase. The author Huang, T.C. (2001) in his article mentions that there is a high chance of expansion in a company when it has a trained and efficient workforce. This shows that when the support program will offer training facilities to the SME sector, they have a higher potential to expand and grow, which will enable them to compete against the large organizations that exist in the market.
In the UK, around 40,000 small businesses fail every year. The main reason behind this failure is the weak support system that exists within the country for the SME sector. The repercussion of this is that the number of small businesses within the country is decreasing. (Thurik, R. Wennekers, S. 2004)
The SME sector is an important driver of the economy. If it provided with the right kind of support it can help with innovation, providing competition to the larger companies, job creation, creating a demand and supply of many small products, which may not be used otherwise. In a study by Boter, H. and Lundstrom,(2005) A. it was seen that most service sector small businesses prefer to use private support systems as compared to the manufacturing SME sector, which prefer to use the government provided support system.
Those entrepreneurs or small business owners, which do not take advantage of the support system are more individualistic in nature and do not want others to interfere in their business. Also most of the support systems, which are provided to the SME sector, are standardized in nature. (Davis, J. Powell, J. Hides, M. 2002)
Small business owners are generally competent all they need is a little guidance as they have not handled a business by themselves before. Once this guidance has been provided to them in the right manner, maybe in the form of community based education, then it can be very beneficial for the small business owner. It helps develop the business and the owner personally. Also, these programs then have long term effects on both the business and the owner. (Redmond, J. Walker, E.A. 2008)
When SMEs are given opportunities and access to more information and markets, it builds on their confidence. The business owners get the courage to enter new markets because they know that if they need help in any area, they have people to whom they can refer to and ask for help. (Redmond, J. Walker, E.A. 2008)
In a study by Huang, T.C. (2001) the effect of training and management support was assessed with respect to the performance of SMEs. Those small businesses which did make use of training programs and supported their employees to get the necessary training experienced better performance. Their businesses operated more efficiently and effectively.
The support programs that provide training are general in nature and do not target the specific and specialized needs of the individuals. Thus there are times when the support that is provided becomes useless and unnecessary. The government and the support agencies before starting any program should do some research as to what are the needs of the small business owners. The support programs can be planned accordingly. (Devins, D. Gold, J. 2002)
Many at times, the quality of the support programs that are being provided is not up to the mark. In other words, the quality of these programs lags behind when compared to that of the support that large business owners get. The major problem lies in the implementation of such programs. The government needs to take an active part and ensure that there is proper quality implementation. (Caniels, M.C.J. Romijn, H.A. 2005)
In many developing countries, small business owners do not even have proper infrastructure provided to them. For example the road network is weak and there are electricity issues. This makes it difficult to conduct business. The larger companies can survive because they tend to create their own infrastructure for smooth operations. This becomes a major disadvantage for the small business owner and results in a major portion of the expenditure that needs to be made by the business.
Looking at the situation in an optimistic manner, we can conclude that support is always helpful in any form. When policies are being introduced to help the small and medium enterprises within the economy, it will enhance their operations. The number of firms will increase we have also seen an example when these support services are not being provided, then the number of firms within the economy decrease. (Simpson, M. Tuck, N. Bellamy, S. 2004)
The problems that are faced by small business owners can be overcome by enrolling in the right support program. This means that researching the support programs that are being offered and then choosing one, which fits the needs of the business. This is a more efficient method when compared to just randomly following other businesses.
In the end, small business owners are the backbone of the economy and need to be taken care of. Proper services and support programs should be provided to them so that they do not face any barriers and their business operates as smoothly as possible.
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