Business Planning (3)

SME

• Small to medium enterprise consist of small to medium businesses, that contain between 1-200 employees

Characteristics of SME

1. Personalised service

2. Closely controlled by Owner

3. Bulk of capital provided by Owner

1. Personalised service

• SMEs often know their customer personally and build strong relationships

• They can tailor products or services to suit customer needs

Eg: A local cafe remembers a regular customer and prepares it as soon as they walk in

2. Closely controlled by Owner

• The owner is directly involved in the day-day running of the business

3. Bulk of capital provided by Owner

• The money used to start and run the business comes from the owner

The roles of SME

• Empllys about 68.3 percent of people working in the private sector

- 44.2 small

- 24.1 medium

• Generates an increasing share of Australias exports as they sell more of the G/S to other overseas countries

• provide a wide range of products and services that large business rely on

• Earn more profit and pay more taxes then large businesses

Economic contribution of SME’S

Economy

• A system used to determine

- What to produce

- How to produce

- Whom production will be distributed to

4 contributions SME's have towards economy

1. Gross domestic profit

2. Employment

3. Balance of payment

4. Invention and Innovation

1. Gross domestic profit

Economic growth

• When a nation increases the real value of goods and services over a period of time

simple terms, it means the economy is getting bigger and producing more.

Gross domestic product: meaning

• The total monetary value of all goods and services produces in Australia in over 1 year

Higher GDP= Higher economic growth

What role do SME’s play for GDP

• Provide a wide range of goods and sevices, contributing to 55.8 percent of Australias GDP

2. Contribution to Employment

• Employment keeps the economy healthy

• SME’s creates millions of jobs and represents about 68.3 percent of total private sectot employment

• Improves peoples standards of living through employment, while also generating tax revenue for public services

3. Contribution to “Balance of Payment”

Balance of Payment

• A record of a countrys trade and financial transcations with the rest of the world, for over 1 year

SME’s role in Balance payments (exportation)

• SME’s Australian exports are experiencing rapid growth, faster then large exporters which leads to an improvement in the balance of payments.

• SME’s earn 50 percent of export revenue

4. Contribution to Invention and Innovation

Invention and Innovation (meaning)

Invention: Creating something completely new

Innovation: Improving an existing product

SME’s role for Inventiin and Innovation + Challenge and Solutin

• Investing in Research and Development, which increases productivity, competitiveness and economic growth

• Challenge: Obtaining Finance

- Have limited funds and assets

- Are considered higher risk by lenders

• Solution: Venture capital, investors provide funding

Describe the role of a venture capitalist.

How do SME’s enter global markets?

A venture capitalist provides funding to new or growing businesses with high growth potential in exchange for part ownership (equity).

2 key factors that cause SME to Global Market

1. Trade agreements

2. E Businesses

4 ways SME’s can enter global markets

1. Selling directly to customer

2. Use a local distributor

3. Form a joint venture

4. Sell through website ( E business)