Introduction TO SMEs By Assoc. Dr. Susanne DursT South Ural State University –

– 13 December 2016
University of skövde – www.his.se/EN

in SMEs

customer focused
Large – reliable
How is it seen by the

other?
Small (by large) – lacks credibility, unreliable
Large – bureaucratic, price maker
What are the key words?
Small – uncertainty, diversity, flexibility, failure
Large – reliability, brand, market power, influence

Word associations

5

you are in the world: in all countries large businesses

represent less than 5 per cent of the enterprise population
Contribute a great deal to employment and income of any economy: in the EU, two-thirds of employment is provided by SMEs

Why focus on small business?

6

2,9 mln private entrepreneurs

1,4 mln micro-enterprises (up to 15 employees,

annual sales without VAT up to 1,5 mln EUR);
229.000 – small companies (up to 100 employees, annual sales without VAT up to 10 mln EUR);
25.700 – medium companies (up to 250
employees, annual sales without VAT up to 25 mln EUR).
SME employ 19 mln people (14% of the total population of Russia) that is about 22% from the general employment over Russia

Number of SMES in Russia

8

Source: RUSSIAN AGENCY FOR SUPPORT OF SMALL & MEDIUM BUSINESS

EU-27, 2012
(European Commission, 2013)
9

activity
Self-employment – no agreed definition but does often involve four

elements:
Control
Integration
Economic reality
Mutuality of obligation

Defining the small business

10

alignment of aspirations
Legally independent – focus on enterprises rather than

establishments
Have a small share of the marketplace – price takers

Bolton’s (1971) conceptual definition of a small business

11

sector may be large in another
How do you measure small

businesses?
Prefer ‘grounded approach’ (asking small businesses to self-define ‘smallness’)

Curran and Blackburn’s (2001) approach

12

likely to be registered
May operate in the informal economy
Registration thresholds

likely to be set higher than lower
No standard measure of what is an ‘SME’
Yet despite these issues, SMEs are most common type of enterprise in the world

International problems with measuring SMEs

15

and harassment, by business size, EU-27 (%)
16

greater levels of formality (rules and procedures)
Smaller business workplaces

marked by greater levels of informality (e.g. owner-managers more likely to know their staff)

In Europe: higher job satisfaction must be related to aspects such as work autonomy and the meaningfulness of the work. Experts confirm that it is particularly the "soft" side of the work relationship that is valued highly by employees in SMEs. Employees seem to value the face to face relationships in SMEs positively, and most managers at SMEs are not autocratic (EIM, 2011).
.

17

in large enterprises, even when a correction is made for

enterprise, job and employee characteristics
Possible explanations:
Labour productivity increases with firm size.
Larger firms have more financial resources.
SMEs can better monitor individual employees, whereas large enterprises pay a premium to avoid shirking.

18

of job satisfaction.
A prerequisite for job security is the

continued existence of the enterprise.
The risk of enterprise death is much higher in SMEs. Roughly half of all start-ups die within 5 years, and SMEs constitute a large majority of this group.
SMEs and micro enterprises in particular are less likely to hire workers from temporary work agencies than large enterprises are (EIM, 2011).

19

show a preference for fewer formal training activities. The most

common training methods within SMEs are on-the-job training and self-directed learning. Somewhat less common is the provision of training courses.
For large enterprises, the most common training methods are on-the-job training and internal and external training courses.
Enterprises with higher shares of full-time workers, highly educated employees or young employees are more likely to provide training. This is also the case for larger enterprises and innovative enterprises.

20

recruiting new employees (for example, demanding a degree indicating that

a certain educational level has been obtained), owner-managers from micro and small firms will more often rely on informal, word-of-mouth recruitment methods.
For these persons, the actual level of an applicant's motivation, knowledge and skills may be more relevant than the presence of a particular diploma or certificate.

21

of older employees (aged 50 years or older) and the

lowest share of young employees (aged younger than 25 years) of the three size classes.
Small and medium-sized enterprises employ the highest share of employees aged 25-50 and the lowest share of older employees.
Large enterprises employ the highest share of young people.

22

workplaces: a review
24

the genesis and the existence of the company. Possible consequence:

owners identify and are identified with their business in a way that does not exist in larger companies
These persons determine the company goals and are usually being replaced with their agreement only. This in turn means that the rate of succession is low
Often there is no separation of business and private life

25

mainly management and leadership mistakes are the reasons causing insolvency

in small companies.
SMEs orientate themselves to quick adaptation of changing business conditions.
Besides lacking resources, SMEs are said to be short of management time and of management skills.
Sometimes the lack of planning and strategy is compensated for by optimism in the company’s own strength in conjunction with flexibility and responsiveness.

26

SMEs. This is mainly explained by a lack of time;

missing expertise with such tools is also rather likely. Empirical studies have shown that this situation is likely to change once the company starts growing.
The coincidence of ownership and management induces the fact that decision-making primarily lies in the owners’ hands.
From outside the firm, many owners are suggestive of being very restrictive with respect to the disclosure of information about their companies. This is supported by lower accounting standards and consequently, very low or none financial reporting rules, which in turn make it more difficult for external persons to analyse a company’s condition.

27

firms are ‘born small and stay small’
Only a small proportion

of new and small firms make significant contributions to economic development
Attitudinal, resource, operational and strategic barriers (i.e. market failures) to firm formation and growth
Universal national support schemes to SMEs (or ‘blanket policies’), ‘targeting’ support, ‘picking winners’, ‘avoid losers’, and / or provide ‘customised support’ to each ‘type’ of entrepreneur or firm

28

want to grow their ventures
Only a small proportion of

small firm owners have the inclination or expertise to grow their ventures
Owners do not have the aspirations or management skills required to grow a firm
Growth may attract attention from competitors who may bid to take-over the business
Many entrepreneurs are concerned with maintaining their independence (Birley and Westhead, 1994)
Desire to run the firm to a point (‘comfort zone’) which allows owners to maintain control and ownership

29