Are SMEs “little big businesses”???

I would like to share my thoughts about the module on “Managing the SME” by Friederike Welter. I found it very interesting to learn about the specifics of SMEs. From the module literature and the lectures, It is very obvious that SMEs are not “little big businesses “and need to be managed differently than large organizations. Before this module, I never thought about the relationship between the size of an organization and strategy making, business development, finance and risk management, and crisis management. If we take these management practices and concepts from the perspective of Small and Medium Size Enterprises, we see that they should be modified or fitted with the characteristics of SMEs.

So, how do we define SMEs? Actually, we talked about two criteria in the class as qualitative and quantitative criteria. European Commission defines it as “An enterprise which employs less than 250 people; has an annual turnover of less than €50m and/or balance sheet assets of less than €43m; and has no more than 25% of its capital or voting rights owned by a larger firm or public body.” This would be considered as quantitative criteria and whether SME is independent business or owner-managed or not can be regarded as qualitative criteria. In addition, SMEs are particularly focusing their operations on single product or service. Srinivas (http://www.gdrc.org/sustbiz/what-are-smes.html) associates SMEs with three words: Small, Single and Local. Small, according to the number of employees, capital and assets, and turnover. Single, as having one owner and maybe producing one product or providing single service. Local, as having the market localized where they also have an office. It is also very important to distinguish SMEs from large organizations when analyzing the economical importance and the impact they have on the society. “SMEs are socially and economically important - they represent 99% of an estimated 23 million enterprises in the EU and provide around 75 million jobs representing two-thirds of all employment. SMEs contribute up to 80% of employment in some industrial sectors, such as textiles, construction or furniture. “(http://www.gdrc.org/sustbiz/what-are-smes.html).

After we know that SMEs are not “little big businesses” and the importance of SMEs on the economy, it is very attractive to know more about the characteristics of SME. Derived from the module, I can characterize SME as small and flexible enterprise with informal structures. SME has few employees and limited resource base while resulting in big difference in output size comparing with large businesses. Significantly, SME often has one person as the owner and the manager of the company known as owner-manager. Consequently, he/she (owner-manager) is mainly responsible for most decisions and furthermore, delegation is low or absent within the company.

Taking the definition and the characteristics of SMEs into consideration, we need to design strategies, develop business development plans, construct financial and risk management scenarios, and deal with crisis in a different way than we behave in regard to large organizations bearing in mind that SMEs are not “little big businesses”.


REFERENCES:
Srinivas H, (2008). What are SMEs? The Global Development Research Center, Retrieved
2008-11-26 from http://www.gdrc.org/sustbiz/what-are-smes.html
Welter F., (2008) Lecture 10th of November, Strategies and Strategy making in SMEs Retrieved
2008-11-11 from Jönköping International Business School’s website:
http://jibsnet.hj.se/documents/files/download/338583202/4045835152691469727/lecture%201_strategies_module%20managing%20sme_ibc%202008.pdf