sme’s and globalization

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SME’s AND GLOBALIZATION

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Page 1: Sme’s and globalization

SME’s AND GLOBALIZATION

Page 2: Sme’s and globalization

INTRODUCTION

Page 3: Sme’s and globalization

Definition of Small Medium Enterprises

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.

Page 4: Sme’s and globalization

Definition of GlobalizationGlobalization 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.

Page 5: Sme’s and globalization

IMPORTANCE OF SMEs TOWARD GLOBALIZATION

Page 6: Sme’s and globalization

Providing technical innovationInnovation 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.

Page 7: Sme’s and globalization

Providing EmploymentSmall 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.

Page 8: Sme’s and globalization

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.

Page 9: Sme’s and globalization

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.

Page 10: Sme’s and globalization

Importance to Big BusinessMost 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.

Page 11: Sme’s and globalization

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.

Page 12: Sme’s and globalization

CONSTRAINTS OF SMEs

Page 13: Sme’s and globalization

Financial ConstraintsThe 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

Page 14: Sme’s and globalization

Figure 1 shows the responses of SMEs on the constraints to accessing financing from financial institutions.

5.30%

55.20%

13.10%

10.70%

9.80%

5.90%

Constraints of SMEs in Accessing Financing from Financial Institutions

Fls deem business plan as not viable

Lack of collateral

Insufficient doc-ument to sup-port loan appli-cation

No financial track record

Long loan process-ing time

Others

Page 15: Sme’s and globalization

Technological ConstraintsIn 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.

Page 16: Sme’s and globalization

SME’s ConstraintLack of Training

Operators are not willing to release their staff for more than ½ of 1 day for training or even benefit themselves of training opportunities, which is they consider it as a waste of resource because the can not readily trace the training outcomes directly to the firm’s bottom line.

High Cost Infrastructure

The mainstreams of SMEs are still placed on land not designated for industrial use.

The dispersed pattern of SMEs has hindered the full realization of synergies in the industry clusters, and created additional difficulties of providing common user facilities, thus its affecting the ability and the SMEs capability to meet the requirement of their customers

Page 17: Sme’s and globalization

Lack of Access to Advisory Services

To improve their business capability, the SMEs have highlighted that they require advice mostly on marketing, finance business administration and management, accounting,information technology

2%23%

28%21%

19%

7%Advisory Services required by SMEs

OthersMarketingA/C, Finance & AuditBusiness AdminITHow to fill up loan ap-plications

Page 18: Sme’s and globalization

IMPACT OF GLOBALIZATION TOWARD SMEs•Advantages•Disadvantages

Page 19: Sme’s and globalization

Impact Of Globalization to SMEsGlobalization 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

Page 20: Sme’s and globalization

Advantages of Globalization toward SMEs

Greater employment opportunities

Availability of Greater Variety of Goods

Business Companies Access to Wider Markets

Page 21: Sme’s and globalization

Greater Employment OpportunitiesGlobalization 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.

Page 22: Sme’s and globalization

Availability of Greater Variety of GoodsCertain 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.

Page 23: Sme’s and globalization

Business Companies Access to Wider MarketsWith 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.

Page 24: Sme’s and globalization

Disadvantages of Globalization toward SMEs

Larger countries take advantage from lower wage

rate and their natural resources

Negative implications for Indian Women

Outsourced manufacturing and white collar jobs

Fast Food Chains

Page 25: Sme’s and globalization

Fast Food Chains

Fast food chains like McDonald and KFC also has a related to negative effect of globalization as they are spreading fast in the developing world.

People are consuming more junk food which has an adverse impact in their health.

Larger countries take advantage from lower wage rate and their natural resources

Agricultural goods are usually the main export of the poorer countries, but larger countries often subsidize their farmers. The inequality in trade is involved.

In addition, reducing tax reducing tax sometime just bring the benefit for rich countries than for developing countries like Vietnam.

Page 26: Sme’s and globalization

Negative implications for Indian Women

Women that get their jobs are always paid less, mentally and physically unhealthy, demeaning, or insecure. Women are suffering two fold.

Their domestic responsibilities are not alleviated as women in developing countries more into the work force. Women work two full time jobs. They are paid almost to nothing when working in a factory

Outsourced manufacturing and white collar jobs

Manufacturing work is outsourced to give profit to nation like China where they provide lower cost for goods and wages.

Many employees has lost their jobs due to this outsourcing especially programmers, editors, scientists and accountants because they outsources the manufactures to cheaper locations

Page 27: Sme’s and globalization

RECOMMENDATIONSEmphasized 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 competitive advantage.

Page 28: Sme’s and globalization

CONCLUSIONSSMEs 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