Sme’s and globalization
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  • 1. SME’s AND GLOBALIZATION
  • 2. INTRODUCTION
  • 3. Definition of Small MediumEnterprises SMEs are a heterogeneous population of firms whose contributions to the innovation system are wide ranging and include not only based on the new products and services, but also improved designs and processes and the adoption of new technologies.
  • 4. Definition of Globalization Globalization refers to all the economic activity around the world. Globalization is a fact of life for virtually all manufacturing firms in Northeast Asia. Either firms have new, potentially profitable opportunities in foreign markets or they face new competition from foreign firms in their home markets.
  • 5. IMPORTANCE OF SMEsTOWARD GLOBALIZATION
  • 6. Providing technical innovation Innovation invention and are part of the basics of our economy. Studies show that the incidents of innovation among SMEs workers are significantly greater than among workers in large businesses. Small firms produce two and a half times as many innovation as large firm relative to the number of person employed. According to the U.S office of Management and Budget, more than half the major technological advances of the twentieth century originated with individual inventors and small companies.
  • 7. Providing Employment Small firms have added more than their proportional share of new jobs to the economy. Small firms hire a larger proportion of employees who are older worker, younger workers, woman, or workers who prefer to work at part time. Furthermore, SME provide 67% of workers with their first jobs on the job training in basic skills.
  • 8. Providing competition SMEs businesses challenge higher, established firms in many ways, causing them to become more effective and more alert to consumer needs. Nowadays, SMEs can compete with a large firms in all respects. But a small number of enterprises, each competing in its own particular area and its own particular way, together have desire competitive effects. Thus, several small enterprises together add up to reasonable competition for the no longer small ServiceMaster.
  • 9. Filling Needs Of Society And Other Business By their countryside, huge firms must work on a large scale. Many may be reluctant or unable to meet the special needs of smaller groups of consumers. Such groups create almost perfect markets for small companies, which can adapt their products to these groups and fill their needs profitably.
  • 10. Importance to Big Business Most of the products made by big manufacturer are sold to consumers by SMEs. Small businesses provide big businesses supplies and raw materials they needwith many of the services. Similarly, MCDonalds’s depend on heavily on small agricultural distributors, bakeries and wholesalers to supply many of the ingredients that it needs to make BigMacs. It also hires local maintenance contractors to services its electrical signs and clean its parking lights.
  • 11. Importance to Big Business Small firms also offer a variety of goods and services to each other and to much larger firms. General Motors relies on more than 32 000 companies for parts and supplies and depends on more than 11 000 independent dealers to sell its automobiles and trucks. For example, Sears , Roebuck purchases merchandise from approximately 12 000 suppliers and most of them are small businesses. Large firms normally buy parts and assemblies from smaller firms for one very good reason: It is less expensive than manufacturing that part in their own factories. This lower cost eventually is reflected in the price that consumers pay for their products.
  • 12. CONSTRAINTS OF SMEs
  • 13. Financial Constraints The Census of Establishment and Enterprise 2005 stated that only 16% of SMEs respondents indicated a dependence on financing from financial institutions that is banking and development financial institutions. The study highlight that the main obstacles faced by SMEs when seeking financing from banking institutions
  • 14.  Figure 1 shows the responses of SMEs on the constraints to accessing financing from financial institutions. Constraints of SMEs in Accessing Financing from Financial Institutions 5.90% 5.30% 9.80% Fls deem business plan as not viable Lack of collateral 10.70% Insufficient document to support loan application No financial track record Long loan processing 13.10% 55.20%time Others
  • 15. Technological Constraints In year 2001, Bank Negara Malaysia’s SME conduct a survey which shows that only 5% of the SMEs had fully automated their operations, while 45% were still labor intensive. In addition, the SMEs reported that 48 % low usage of computers in their daily work. SMEs technological constraints lead to low efficiency and production quality. Their capabilities to monitor and respond to new environment and development has been hinders.
  • 16. SME’s Constraint Lack of Training High Cost Infrastructure Operators are not willing to release their staff for  The mainstreams of more than ½ of 1 day for SMEs are still placed on training or even benefit land not designated for themselves of training industrial use. opportunities, which is  The dispersed pattern of they consider it as a SMEs has hindered the waste of resource full realization of because the can not synergies in the industry readily trace the training clusters, and created outcomes directly to the additional difficulties of firm’s bottom line. providing common user facilities, thus its affecting the ability and the SMEs capability to meet the requirement of their
  • 17. Lack of Access to AdvisoryServices To improve their business capability, the SMEs have highlighted that they require advice mostly on marketing, finance business administration and management, accounting,information technology Advisory Services required by SMEs 7% 2% Others 23% 19% Marketing A/C, Finance & Audit Business Admin IT 21% 28% How to fill up loan applications
  • 18. IMPACT OFGLOBALIZATION TOWARDSMEs•Advantages•Disadvantages
  • 19. Impact Of Globalization toSMEs Globalization can give impacts on SME’s and entrepreneurship and can be regarded in a many different ways. The impact of globalization on small and medium enterprises (SMEs) received much attention in international circles in the past few years
  • 20. Advantages of Globalization towardSMEs Greater employment opportunities Availability of Greater Variety of Goods Business Companies Access to Wider Markets
  • 21. Greater EmploymentOpportunities Globalization involves businesses which are carried out around the world. To carry out the business, a sufficient number of workers are needed in every country the business is carried out in. Therefore, this will open up more job opportunities for people in the respective countries.
  • 22. Availability of Greater Variety ofGoods Certain countries provide goods which are only available or mostly available in the country itself only. The goods in different countries can be distributed to other country which does not have the specific goods. And with this, everyone in the world would have equal access for food, medicine and others.
  • 23. Business Companies Access toWider Markets With the business being spread out through many different countries around the world, the market of the company would rise up. The more countries the business is carried out in, the higher the market of the company would increase.
  • 24. Disadvantages of Globalization towardSMEs Larger countries take advantage from lower wage rate and their natural resources Negative Fast Food implications for Chains Indian Women Outsourced manufacturing and white collar jobs
  • 25. Larger countries takeFast Food Chains advantage from lower wage rate and their natural resources Fast food chains like  Agricultural goods are McDonald and KFC also usually the main export of has a related to negative the poorer countries, but effect of globalization as larger countries often they are spreading fast in subsidize their farmers. the developing world. The inequality in trade is People are consuming involved. more junk food which has  In addition, reducing tax an adverse impact in reducing tax sometime their health. just bring the benefit for rich countries than for developing countries like Vietnam.
  • 26. Negative implications for Outsourced Indian Women manufacturing and white Women that get their jobs collar jobs are always paid  Manufacturing work is less, mentally and outsourced to give physically profit to nation like unhealthy, demeaning, or China where they insecure. Women are provide lower cost for suffering two fold. goods and wages. Their domestic  Many employees has responsibilities are not lost their jobs due to alleviated as women in developing countries this outsourcing more into the work force. especially Women work two full time programmers, editors, jobs. They are paid scientists and almost to nothing when accountants because working in a factory they outsources the manufactures to
  • 27. RECOMMENDATIONS Emphasized on providing more information and knowledge to business. SMEs are encouraged to increase their competitiveness in the global market by assimilating IT and knowledge management in their business efficiently and in order to be maintainable in the knowledgebase economy. Government agencies should implement more policies that encourage SMEs to be innovative in their production and marketing of goods and services. Supply chain activities should be perform more efficiently by firms than their competitors in order to bring more value to their customers and increase a
  • 28. CONCLUSIONS SMEs attain considerable growth with the help of government policies and support from other country’s investors in terms of training and funding. There are still many constraints facing the sector, such as costly sources of finance, global competition, quality issue an difficulty in meeting international quality standards, poor business knowledge, lack of international marketing experiences, and unfavorable attitude to training, and low R&D activities