An Investigation Into Smes Survival and the Discrimination Between Fgsmes and All Other Smes
2494 Words10 Pages
In a competitive global market, micro, small and medium-sized enterprises (SMEs) play an increasingly important role in a nation’s economy. Today they make a substantial contribution to job creation, innovation, as well as entrepreneurial skills. A report conducted by European Commision(2005) stated that in the enlarged European Union of 25 countries, 23 million SMEs provide about 75 million jobs and account for 99% of all enterprise. SMEs are also the vital attributes for lifting the productivity of economy. This is primarily because SMEs are been considered as having a key role to play in providing new products. Take UK for example, SMEs have become more and more dynamic. SMEs have enjoyed higher productivity growth than…show more content… So in order to survive, firms have to look out for financial threats to the firms’ solvency and maintain effective management control over their finances.
2. Human capital
In most SMEs, power is centralized in the hands of the owner-managers and the owner-managers always play multiple roles in a company, including general manager, sales manager, production manager, financial manager and so on, so that characteristics of the owner-managers, such as education background, family business background, personal goals, previous work experience, strategic awareness have a significantly impact on firm’s activities and performance. Several studies indicate that in SMEs, the personality of the owner-managers is a critical determinant of corporate structure and strategy(Miller and Droge 1986; Miller and Toulouse 1986). Owner-managers who are inability to motivate staff, rarely listen to others’ advices, have little knowledge of marketing strategy, finance, and personnel management may act as a significant constraint to SMEs’ survival.
On the other hand, owner-managers are not experts at everything, many owner-managers in small firms are lack of the leadership and management skills which are necessary for the firms’ survival and growth. Deakins and Freel (1998) found that one of the critical factors in the success of a SME was the ability to build an ‘entrepreneurial team’. The presence of a diversified management team may imply a greater variety of complementary