Essay writing Assignment help on : small and medium sized enterprises

Essay writing Assignment help on : small and medium sized enterprises

Executive summary:

The main purpose of the essay is to critically evaluate the criteria for developing policy in relation to small and medium sized enterprises (SMEs) in the United Kingdom. For this, the report has been continued in several parts containing the information and understanding of small and medium sized enterprises’ success stories. First part of the report has identified key criteria for success of SMEs concerning the actual way of addressing those. Afterward, one of the key criteria has been chosen for further discussion and evaluation that may bring success to small and medium sized companies. Next, some examples of successful SMEs of UK and abroad have been presented in support of theoretical background of considered factors for SMEs’ success. Other portion of the report has evaluated the criterion that has been chosen for the discussion. In addition, issues of conflict are also a part of discussion which may be addressed by the government while making policies for SMEs of the United Kingdom. Evaluations made for the criteria chosen are also based on the United Kingdom. This has been mentioned in the report that government using these policies for the development of small and medium sized organizations takes care of ethical, political and other issues related. At the end, recommendations have been made for the government which will help them in developing a long term strategy for SMEs of the United Kingdom.

Introduction:

Small and medium sized enterprises are characterized as having up to 10 and 250 employees respectively. Additionally, they should have an annual turnover of either less then or up to EUR 50 million or hold a balance sheet of total number more than EUR 40 million. Moreover, such organizations include a wide range of firms that contribute to the domestic economy of the country associated. Therefore, SME sector is considered as highly vital area in most economies (Venture navigator, 2007). Modern and new SMEs are playing a developing role in creating and growing the role of jobs in a country’s economy. To fulfill their prospective of long run growth and job creation, government should come forward and play an important role to make sure the business environment. It should encourage entrepreneurship and not impose undue loads on small and medium sized organizations. Similarly, government should come up with a set of structural policies that would address market, overall framework and government collapses in areas of financing, knowledge networks, intellectual assets’ management, access to market and entrepreneurial or industrial human capital. It is also considered that governments must address the problems that crisis has intensified and put a well-framed and effective policy framework into place that is more favorable and led to growth and development in future (McQuaid, 2003).

Key criteria for success of SMEs:

The criteria defined for the success of SMEs is as follows:

• Workforce relations: One of the major factors that decides the success and important for SMEs business is their positive relations with clients, employees’ satisfaction and loyalty with them. In addition, success also depends upon positive, supportive work culture and climate as well.
• Personal fulfillment: Other key criteria that is vital for their business is personal fulfillment of employees and therefore their attachment with the enterprise. For this, work-life balance of employees, time flexibility and their decision-making capability is noticed and measured. Similarly, personal growth and development of employees create a pillar for the company’s success and future growth.
• Community impact & environment: It refers to contributing back to the society, social responsibility for employees, creation of new working places and environmental friendly company are some criteria that define the success of a SME enterprise.
• Company performance: It is one of the key factors which is considered for success of any business. It includes company growth and profitability in terms of employee, revenue and profit. It can be measured better when compared with competitors. The level of companies and their competitors’ profitability and growth decides the success.
• Personal financial rewards: It includes personal income enhancement. The success of a company is also defined on the basis of company giving personal, financial and family security to its employees in order to make their life balance and get productive results out of them.
• Contribution to domestic economy: The last and most important criteria which is important for SMEs’ success is company’s contribution to domestic economy. This is noticed by the government of a country on the basis of job creation by a particular SME and its contribution to economy’s growth and development (Dej, Gorgievski & Wegge, 2010).

Out of these six criteria, one of the major factors is SMEs contribution to the economy. If a medium sized company is able to generate almost more than 50% of employment across a variety of countries. Thus, if an appropriate policy framework of SME maintains its positive impact on employment, innovation and long term growth, company will be considered successful in this context.

Evaluation of criteria:

Furthermore, criteria that may be defined in relation to SMEs’ success include a number of facts. First, it would be beneficial for SMEs to use more than one source of finance in order to both start their business and sustain with it in the market. However, it has been seen that most of the SMEs use only one source of finance that is their family or personal savings with some proportion using a bank loan. To get and achieve success in their business, they should go for more funds through remortgaging personal property, venture capital finance, business angels, leasing, factoring and invoice discounting. Next, SMEs success should be decided on the criteria of monitoring their cash flow and liquidity proactively. A proper cash flow and liquidity level of SMEs can help dealing with monetary issues and acknowledge the significance of the broad variety of success factors. Afterward, the success of SMEs’ business can be identified on the basis of their impact on job creation and long term growth of country’s economy. As SMEs demonstrate the majority of most of the businesses and employment, they play an important role in job creation in their country’s domestic market (TiE UK North, 2010).

In this regard, total contribution of SME sector to the domestic or national research & development is measured in both smaller and larger economies on an average basis. A fourth criterion for their success is SMEs’ access to international markets and knowledge flows. Nevertheless, SMEs are considered as under-represented in an international economy, they usually add around more than 45% to national economies’ GDP. Moreover, they report for only up to 30% of exports and even less of international level direct investment. Next criteria defined for success of small and medium sized enterprises is their level of competitive advantage and adaptation to dynamic market conditions. In sum, examples can be presented from the United Kingdom and other countries.

Examples of SMEs:

Small and medium sized organizations that grow their businesses high are amplifying the economy even at the time of recession. On the basis of analysis, it has been noticed that less than five percent of small and medium sized companies in the UK amounts to more than two-thirds of all employment in private-sector. Moreover, these SMEs of the UK represented flexibility at the time of recession all over the world and created about more than 172,000 jobs while other similar size of organizations had amounted to around 400,000. These small and medium sized firms had reported breakthrough turnover between 500,000 EUR and 10,000,000 EUR. Due to impressive and continuous growth of SMEs in the UK against the poor economic conditions might be the critical key to economic growth of the United Kingdom (Zainzinger, 2012).

Examples of some successful SMEs of the UK are TESCO Plc, 44 Anglo design CCTV, moneysupermarket.com finance, Int’l mobile phones, entertainment music, Bannatyne fitness leisure, Sophos software, etc. These firms have contributed to around 50-60% of employment in UK and across the world. Employment growth is one of the key criteria based on which these companies have gained success. Another basis for their success has been made on growth of turnover and profitability. Study of these champions revealed by the government of the UK signified that penetration level and success factor were mainly in sectors such as human health activities, social work, manufacturing, architectural and engineering activities. Besides, small and similar sized organizations have played a significant role in driving economy recovery of the UK (Management today, 2005).

Statistics of government of the United Kingdom demonstrated that SMEs of the United Kingdom make up around 99 percent of more than 4.5 million businesses of the UK. In addition, these organizations contribute to 49 percent turnover of private sector and more than 55% of private sector employment. These organizations have impact on UK’s both local and national economies. As a result, they help the country to create more jobs, excite overall supply chain demand and drive and accelerate growth of economy. Moreover, an analysis made by the government of the UK sought the creation of more than 260,000 jobs between 2005 and 2008. A data was presented by the government showing the growth made by different regions SMEs (Santander corporate banking, 2011).

Furthermore, more examples can be presented from other countries where SMEs have got success on the basis of the criteria chosen. Germany based small and medium engineering enterprises have worked out and given good results. The businesses there have potential and capability to focus on their marketing of the products which make them to play as a global player worldwide. Apart from this, empirical evidence based on Singapore successful SMEs have been taken into consideration. A survey of almost 50 SMEs were done in Singapore to see their criteria and parameters of success and achievement. In this context, result demonstrated that out of total SMEs 43% are in manufacturing sector and have around more than S$5 million. Accordingly, these companies also generate more than 35% of employment in the country and all over the world. Similarly, there are retail, service, engineering and other sector SMEs in Singapore contributing a great amount to its domestic and national economy and have great access to international market access. All these organizations make up about more than 15% long term growth a year and contribute to its economy. There is a set of factor which has been adopted by these Singaporean SMEs such as regionalization capability, a committed, supportive and strong management team and good working relations with their client and employees (Ghosh al, 2004).

Conflict and issues:

There are a few barriers to success of SMEs in every country which come up as major conflicts for innovative SMEs and entrepreneurship. The conflicts and barriers are as follows:

• Poorly adapted framework conditions: The significance of framework conditions is acknowledged by the country’s ministers, government and other important representatives. Therefore, lack of macroeconomic stability in country may bring failure to the business of small, medium and other similar sized firms. These frameworks affect the firm’s entry, growth & development and their exit. Volatile exchange & interest rates can create issues for the success of small organizations. Other than this, there may be political laws and regulations which may impose unnecessary loads on these SMEs and entrepreneurship. These regulatory frameworks may include high and regressive agreement cost for the companies, lack of precision and transparency in rules and regulations’ applications, laws and procedures related to inefficient bankruptcy, lack of coherence in products standard in modern and exclusive market world, unfair policies for competition and finally unproductive measures for anti-corruption. These factors will create big and unexpected issues for such companies and become barriers to their capability and success and their potential role in the economy. Besides it, many SMEs may suffer due to lack of access to financial services.
• Blockages to accessing international market and knowledge flows:

There are many factors which are affecting the internationalization of entrepreneurs and small and other similar sized organizations. Many of them are internal and external to those SMEs such as SMEs having restricted information on international markets, technology partners and supply chain. Other issues can be due to lack of managerial time for engagement with international clients and potential partners, lack of knowledge to access markets, lack of workforce, investment and working capital to finance exports. Other issues and conflicts are weak intellectual assets management by SMEs, lack of entrepreneurial human capital and insufficient utilization of public research and procurement opportunities. In case of UK’s SMEs, Cambridge policy consultants had identified 5 key barriers to the start-up of SMEs’ business and its survival. Companies like TESCO Plc had only one source of finance and therefore least access to finance. Second, UK small enterprises had less access to technical support for their businesses. In addition, they were having least access to premises and facilities and lack of economic foundation. Therefore, according to DTI, more than 25% of the small and medium sized enterprises were ceased trading by the third year and more than 50% by the fifth year in the United Kingdom. Similarly, reports have shown that there is a very small proportion of SMEs in the UK that employ 50 workers or more than that (McQuaid, 2003).

(Source: Hall and Young, 1991)

Recommendation:

Taking conflicts of SMEs of the UK in view, some recommendations can be made for the government of the United Kingdom so that entrepreneurial and SMEs business’ success can be advanced.

Policies and programmes:

• First, government should create a favorable business environment for entrepreneurs and SMEs in the UK. For this, government should make sure stable macroeconomic and other political, laws and regulatory framework conditions. Moreover, Government should step ahead in order to streamline and simplify administration and all the regulations that may affect new firm formation and SMEs. In addition, UK government should reduce tax and social security conformity loads and thus secure fair tax and treatment for social security (Raynard, Peter & Forstater, 2002).
• Next, government should facilitate internationalization of SMEs and entrepreneurs for their long term growth and development. In this context, participation of small and medium organizations can be allowed to increase in international collaborative research programmes that would be beneficial from their business’ perspective. In this context, government should also deal with the barriers to internationalization. Government of the United Kingdom should also SMEs to participate in worldwide value chains.
• Furthermore, strengthening devices for international evaluation and information exchange on entrepreneurship and SME policies & frameworks would also help and encourage their business.
• Moreover, government should help UK companies to reinforce their competitive advantage and business innovativeness to achieve the success (Trapp, 2010).

 Conclusion:

On the basis of overall discussion, some decisive points can be drawn out that SMEs are making profit and significance value in countries and across the world. More of the examples have been presented with respect to SMEs of the UK. Report has presented that small and medium sized enterprises consist of up to 49 and 249 employees respectively. In addition, the organizations earning 7 million EUR and 40 million EUR are considered as small and medium sized organizations. This has also been mentioned that SMEs in the UK make up around 40 and 505 of the total employment in the country and the all over the world. In the UK, SMEs generate 3.7 million of business and amount to both domestic and national economy of the country. Afterward, paper has represented the key criteria which are important for the success of SMEs. One of the criteria, contribution to domestic economy has been chosen for the discussion. Therefore, study revealed that small firms such as TESCO Plc and others have tremendous contribution to the job creation in the country and have accessed to international markets. Accordingly, political, ethical and issues related to laws and regulations have been described in further discussion of the paper. These have included, barrier to internationalization of SMEs and entrepreneurs and lack of knowledge of market, changes in tax, interest and exchange rate changes, etc. At the end, paper has made some recommendations for the government of the United Kingdom to be considered in order to help SMEs in gaining success.

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