SME (Small and Medium Enterprise), plays a major role in the Malaysian economy. The development of SMEs has received much attention since the implementation of the New Economic Policy (1971 - 1990). It was then emphasised in the Second Long Term Malaysian Plan (1991-2000). A survey done in 1994 found that there were 12,000 SMEs esthablised in Malaysia made up of 88% small enterprises and 12% medium-sized enterprises. These SMEs employed 33% of the workforce in the manufacturing sector.
The importance of small and mesdium-sized businesses in helping the economic develeopment of our nation cannot be refuted. Besides creating job opportunities, SMEs play a crucial role in contributing to the prosperity of big and multinational corporations. They enhance the industry through their crativity and innovation.
Definition
There are several definitions of what constitutes of small business. A small business is sometimes viewed as an enterprise engaged in trading activities or a retail storeselling consumer goods. At other times, it is defined as a businessenttity that is neither owned by the public nor listed on the stock exchange. It is common to define the size of a business based on the annualturn over or sales generated, number of workers employed, paid-up capital or market sized served. The definition differs from one conutry to another to reflect, among others, the economic and the politicalinterests of the nation.
In Malaysia, various agencies adopt different definitions of SMEs depending on their business interests. However one common definition is that provided by the Small and Medium Industries Development Corporation (SMIDEC) which defines SMEs according to two main factors i.e. annual sales turn over and number of full time workers. According to SMIDEC, a medium sized business is :
“A business establishment with an annual sales turnover of between RM10 million and RM25 million and which employs more than 150 full-time workers”.
while a small sized business is:
“A business establisment with an annual sales turnover of not more than RM10 million and which employs not more than 50 full time workers”.
Given this definition, the vast majority of business establisments in Malaysia are considered small. Managing a small business requires a different apprroach as from managing a big or multinational corporation. It offers different and unique chalenges to the manager who is generally the owner of the business.
Characteristics of A Small Business
Although there is no one universally accepted definition of what constitutes a small business, there are several common chareacteristics: ownership, management, resources, organization structure and flexibility of change.
1. Ownership: Privately owned by individual or partners, typically registered as sole proprietorship, partnership ar private limited (Sdn. Bhd.) company.
2. Management: the business is manage and operated by the owner(s). The enterpreneur or founder of the business leads the company, and acts as both manager and worker. The development of the business is determined by the owner. decision making is mostly done by the owner.
3. Resources: A small business often has limited resources. This is especially true for new starts-up due to a lack of track record on the business to convince potential investors and bankers. Thus, it is highly dependent on the ability of the owner to generate resources.
4. Organizational Structure: For a small business, the structure is often flat and informal. The owner has to do almost everything and the workers are normally expected to be able to fuction as generalists since there is no clear demarcation of tasks.
5. Flexibility of Change:
- The business has more flexibility to adept to changes in the environment due to it size and informal structure.
- It is also vulnerable to develop in the business environment. For instance, any changes in technology or government policy might have a great impact on the business because immediate changes normally require additional capital or resources. This might become a constraint to the business to compete and sustain itself in them market.
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