Impact Of Small And Medium Sized Businesses On Jobs And The Economy

Entrepreneurship and small businesses is the foundation and driving force of America’s success. Apple, Amazon, Google, and Wal-Mart (just to name a few) all started as small businesses. Small businesses make up: 99.7 percent of U.S. employer firms, 64 percent of net new private-sector jobs, 49.2 percent of private-sector employment, 42.9 percent of private-sector payroll, 46 percent of private-sector output, 43 percent of high-tech employment, 8 percent of firms exporting goods, and 33 percent of exporting value. It’s essential that small businesses continue to flourish if we are going succeed as a nation.

Small businesses have gained steadily more importance after they started to rise in the mid1990s. They are characterised by a high chance of entrepreneurial risk; their link is inborn and cannot be rid of; however, small firms are steadily progressing and acquiring a noteworthy role in nowadays society. These types of businesses are particularly significant for the global economy and for the commercial flow; “they are known by governments worldwide for their contribution to the economic stability and growth, employment and new job creation and social cohesion and development” (Morrison et al, 2003). For instance, according to Delephanty, in the US small business employs almost half workforce of the country and creates two-thirds of all net new jobs; that’s why small businesses have a major importance worldwide (2015). In 2007, the number of small businesses in the UK was up to 4,6 million and they contributed to almost 50% of employment (BERR, 2008). There are several elements that help the entrepreneur determine the success or the failure of SBs; they distinguished between internal and external factors. Their importance can be denoted by the way they influence the progress of the company.

99% of the private sector organizations are SMEs and representing 59.3% of private segment employment and 48.1 % of private sector turnover in 2013. (Rowlatt, 2013)

The financing for Small and Medium-sized Enterprises (SMEs) is an interesting subject for policymakers and researchers because of the major contribution of SMEs to private sectors all over the world and SMEs are deemed financially constrained (Beck et al, 2010; Berger and Udell, 2006). SMEs in industrialized countries account for more than 90% of all enterprises, contribute to around two-thirds of all workforce and almost 50% value added in non-agricultural production. Therefore, SMEs is crucial for growth promotion and poverty reduction (Baas and Schrooten, 2006).

The collected data or information was categorized in groups, for example, the definition of SME was viewed within a global and regional. Various definitions were explored and analyzed for their interest and specificity to developing countries.

From the report by Yoshino, Taghizadeh-Hesary, Charoensivakorn and Niraula (2015), the activities of SMEs in Thailand within the year 2007 to 2011 constitute to the increased in economy growth accounted for about 37.0% of Thai’s GDP and produces around 80.4% of employment opportunities in Thailand. However, during the same period, reports from Yoshino et al (2015) is that the SMEs in manufacturing sector experience a decrease employment rate for almost 6.2% because of the decrease in the sector’s growth rate. Furthermore, it was reported that the overall SME in Thailand experience a decrease in growth rate of 1% from 8.3% to 7.3% between the year 2010 to 2012.

The purpose of this report is to introduce an overview about SMEs. A critical evaluation and analysis of two small and medium enterprises, Icosium and NotontheHighStreet.com will be presented in this report and also will include the following steps: the business concept and sources of competitive advantage, the current demand and the competitive environment, the growth and development of the business to date, the challenges of managing and running the business, an estimate of the current valuation of the business, the SMEs current growth and development strategy and future recommendation. Furthermore in work will include a conclusion and recommendation.

According to a survey on the Brazil economy, Haner (2011) showed that a major contribution to the growth of the Brazilian economy is due to the impact of the small and medium scale enterprises (SMEs). It is estimated that the SMEs account for 20% of the Gross domestic product (GDP) and 54% of total formal employment in the country (Office of Evaluation and Oversight [OVE] 2014). SMEs also play an important role in the economic development in Malaysia accounting for 33% of GDP, 58% of employment and 19% of export (Hashim 2015). There is a higher survival rate of SMEs in Malaysia with 97.3% of business establishments recognised as SMEs (Khalique 2011; Lim & Xavier 2015).

In most western economics Small and medium – sized enterprise (SME) development is considered as a key to economic growth, innovations and market competition (Acs and Audretch, 1990).

The SME (Small and medium enterprise) sector is one of the crucial important contributor to economic growth in terms of Gross Domestic Product(GDP) and job creation worldwide(IFC,2010). According to OECD(2006), SMEs had created more than sixty percent of the job opportunities for OECD countries. That situation for developing counties are even more obvious. There is no doubt that the development of SMEs is closely linked to national economy. The growth of SME sector, however, presents a stalled tendency, even recession situation, owing to the deficiency of accessing to

It is an undeniable fact that small business has become a crucial part of the business environment of any country. What is the small business? A small business is owned and operated privately, and it has a few employees and a small volume of sales. Depending on the countries and industry, the legal definition of "small" is usually different. In Australia, “a small business is defined by the Fair Work Act 2009 as one with fewer than 15 employees”( Fair Work Act 2009). Even thought individual small business only creates a small number of position for unemployed people, the quantity of various small businesses is enormous. They together can provide a lot of positions and play a significant role in the economy. The small

SMEs in Singapore generate a large share of new jobs. The government handed out $98 million to be used in upgrading projects for small and medium sized enterprises with the sole aim of increasing a torrent of new jobs. According to the Minister of State for Trade and Industry, Teo Ser Luck, these projects would create 15,000 new jobs and produce over $4.4 billion to the economy in terms of value added. SMEs employ more labor intensive production

The small and medium scale enterprises (SMEs) in developing countries such as Ghana have been playing very strategic role in the developmental agenda of the nations in the areas of rapid industrialization and other developmental goals as well as job creation among the youth. The interest in the role of SMEs in the development process continues to be in the forefront of policy debates in most countries. Citing Abor and Quartey (2010), Nyameet al (2013) revealed that SMEs represent 92% of Ghanaian businesses and contribute about 70% to Ghana’s GDP and over 80% to employment for the year 2010. Obviously, SMEs form a greater part of the informal sector, and hence contributes significantly to Gross Domestic Product (GDP) whenever assessing the overall productivity of an economy (Stokes & Wilson, 2006).

The Small and Medium Enterprises worldwide are recognized as engines of economic growth. The commonly perceived merits often emphasized for their promotion especially in the developing countries like Bangladesh include their relatively high labor intensity, dependence on indigenous skills and technology, contributions to entrepreneurship development and innovativeness and growth of industrial linkages. Out of 11% employment of the civilian labor force provided by the manufacturing sector, about two thirds are estimated to be provided by the small and cottage industries sector. Again, development of small industries facilitates the effective mobilization of capital and labor resources. They also help in raising standards of living.

The importance of small and Micro Enterprises (SMEs) in the economy of any country cannot be overlooked. In fact for nearly 15 years, most researchers dealing with economic planning have highlighted the significance of these enterprises stating that they are a key player in realizing any country’s economic goals. As such, governments as well as other organizations with interest in development are laying plans and strategies to promote the establishment of Small and Micro Enterprises. This is seen as a move to ensure that there is full participation of SMEs in the country’s economy. The Small and Micro Enterprises have been known to contribute to a large extend as a source of innovation, entrepreneurial skills as well as source of employment. For example, statistics in 25countries of the European Union show that 99% of the jobs provided to its citizens come from the micro, small and medium-sized enterprises. Rowe (2008) points out that the British economy relies heavily on the participation of SMEs. On the other hand, 99% of the UK’s economy is composed of small and micro enterprises.