SMEs

Question 1

Roles of an SME

Answer 1

To create employment, produce 50% of the products produced each year, account for 20% of money spent, provide a wide range of products large business use, pays more taxes than large businesses

Question 2

Economic contribution:

Gross domestic product

Answer 2

The total money value of all good and services produced in Australia over a one year period
- SMEs contribute to the GPD by about 50%

Question 3

Economic contribution: employment

Answer 3

SMEs employ about 7.5 million people, SMEs have become the major generator of new jobs which then supports the economy.

Question 4

Economic contribution: balance of payments

Answer 4

BOP is a record of a country’s trade and financial transactions with the rest of the world over time, usually one year.
SMEs often export good more often than large businesses

Question 5

Economic contribution: invention and innovation

Answer 5

SMEs are the main source of these.

Finding new ways to do things has resulted in improved efficiency and increased productivity

Question 6

Success of SMEs:

Being motivated, having a positive attitude, thriving on potential failure, enjoying the process of solving a problem

Answer 6

Entrepreneurial abilities

Question 7

Success of SMEs:

SME operator must have information regarding profitability, the quality of products and services, and the performance of employees.
Accurate up to date information will allow the SME owner to make better decisions

Answer 7

Access to information

Question 8

Success of SMEs:

The small size of the business allows the owner to adapt quickly to changes in the external environment.
Because there are fewer levels of management, decisions can be made quickly.

Answer 8

Flexibility

Question 9

Success of SMEs:

Small businesses can concentrate on their efforts on a few key customers or a specific segment of the market. This provides the opportunity for the SME to become more specialised and able to deliver a high level of service

Answer 9

Focus on market niche

Question 10

Success of SMEs:

Because the SME is servicing a narrow market niche, it can develop enviable reputations for quality and service

Answer 10

Reputation

Question 11

SME failure:

And SME is classified as a failure when it is-

Answer 11

• unincorporated and declared bankruptcy
• incorporated and either forced into liquidation or voluntarily closes down because it cannot pay its debts and faces a cash flow problem

Question 12

Failure of SMEs:

Reasons for failure

Answer 12

• failure to plan
• lack of information
• leadership crisis
• inaccurate record keeping
• failure to delegate
• complacency
• incorrect marketing strategy
• poor location
• lack of financial planning

Question 13

Definition of an SME

Answer 13

By the number of employees, type of ownership, sources of finance, legal structure, market share, management structure