We explain what SMEs are and the things they can afford thanks to their sales. Also, its main advantages and disadvantages.
What are SMEs?
SMEs or SMEs (acronym for Small and Medium Enterprises) are understood as for-profit organizations that is, entrepreneurs, who operate independently and have a high predominance in the market, but without being part of the large capitals that direct it. These limits are, of course, set conventionally by the jurisdictions of the different countries.
The distinctions between small, medium and large companies have to do with the number of personnel they hire, the amount of money they manage and the segment of participation in the local market that corresponds to them.
In this way, States can organize and personalize their monitoring, benefit or taxation mechanisms, to collect taxes from wealthy companies and benefit small or insurgent companies, promoting economic growth and combating oligopolies.
SMEs play a vital role in the economies of different countries usually employing almost 70% of private workers from countries belonging to the Organization for Economic Cooperation and Development (OECD). This is because their size and sales volume allows them, among other things:
- Offer personalized products instead of massively standardized ones, like large business chains.
- They are subcontracted by larger companies to carry out jobs that would take up a lot of their staff.
- They allow the emergence of alternative forms of organization, such as cooperatives, which require a small number of members.
See also: Microenterprise
Advantages and disadvantages of SMEs
Small and medium-sized businesses have the following benefits and drawbacks:
Advantages:
- find novel market niches Especially if they advance at the pace of technological innovations and the new needs of the global world.
- Adaptation capacity By having smaller structures, they can be more productively flexible, and that is often the difference between weathering a crisis or collapsing in it.
- offer direct care They may have a less anonymous and standardized relationship with their customer than massive corporate chains.
- Rapid emergence The growth of young SMEs is usually rapid during their early stages, as they appropriate a market niche that does not represent worrying competition for older companies.
Disadvantages:
- Difficult financing As they have fewer assets and are generally young and not very stable projects, they tend to have more difficulties when it comes to finding the financing required to innovate or grow.
- Labor rigidity They tend to prefer employees with prior training, since they do not have the capital and structures for their training, which makes them more picky when hiring.
- Low innovation Since they do not have large amounts of capital, it is more difficult for them to invest in research and innovation, although they can quickly take advantage of outside innovations.
- Little access to large markets Although globalization seems to call this into question, the truth is that the largest companies dominate the international market and do not always allow SMEs to compete on equal terms.
