Small and Medium Enterprises (SME) s are companies that have a limited annual turnover or an employee’s count below a particular number. The reason we didn’t mentioned the numbers is that it’s not possible to define it in a straight forward manner as many countries have different criteria’s for a company to be classified as an SME.
A simplest idea will be to imagine an enterprise which not as big as the companies that we know about or see on TV or read about in papers.
In India, companies are divided into four categories according to their investments in machinery and plant. Accordingly companies are classified as micro, small, medium and large. The first three categories together are called SMEs. On the other hand, in European countries the divisions are based on the number of employees, size of asset and yearly turnover.
With so many definitions and parameters being followed in different countries, sometimes it becomes hard to understand the importance of a SME. The truth is, with maximum numbers of companies being SME; these companies play a vital role of building a country’s economical structure. Small and micro business also helps to prevent poverty as it brings economical support for people with less money to invest in a business. Most of the goods that we find in market with affordable price tags are actually produced by SMEs.
An SME can be set-up in a place where there is a shortage of raw materials and workers. As these companies can be built with fewer resources in the beginning, they play a vital role of developing an area’s economy and industrial base. An SME with fewer employees can be managed easily with a small management team.
- Unfortunately SMEs too have their share of drawbacks like.
- They have less technical manpower, unsettled financial strength, no technological transfer, less money for research and development, lack of employee supports and no structural policy or labor laws.
- The government has many facilities for SMEs but most of the time, because of less technical knowledge; the management doesn’t get to know about them.