- Definition of SME’s
SMEs, or small and medium-sized enterprises, are defined differently around the world. The country a company operates in provides the specifics on the defined size of an SME. The sizing or categorization of a company as an SME, depending on the country, can be based on a number of characteristics (O’ Regan et al., 2004). The traits include annual sales, number of employees, the amount of assets owned by the company, or any combination of the features. The United States also defines SMEs differently from one industry to another.
Definition of SMEs in the United States
As mentioned earlier, the United States adheres to varying definitions for SMEs and guidelines that differ from industry to another. The U.S. also has a specific definition of SMEs based on the industry they operate in. For example, if a company is part of the manufacturing industry, it can be classified as an SME if it has a maximum of 500 employees, but a company involved in the wholesale trade can only have 100. Differences also exist among the sectors of an industry. For example, in the mining industry, companies that mine for nickel or copper ore can have up to 1,500 employees, but a silver mining company can only have a maximum of 250 employees in order to be considered an SME (O’ Regan et al., 2004).
In Canada, SMEs are businesses that have fewer than 500 employees. Businesses with 500 or more employees are strictly considered large businesses. To further break it down, Industry Canada – an organization that works to facilitate economic and industry growth in Canada – deems small businesses as having fewer than 100 employees, provided the company produces goods. The cut-off for small businesses that provide services is 49 or fewer employees Günterberg et al.,2004. Companies that fit somewhere between these employee-count cut-offs are considered an SME.
Another organization, Statistics Canada – which conducts research and collects data related to businesses and commerce in the country – falls in line with the requirement that SMEs have no more than 499 employees. However, it also – based on research and data collected – stipulates that SMEs have less than $50 million in gross revenue.
Around the world, small to medium-sized enterprises make up a significant portion of the total number of global businesses. It is important to remember that while there are similarities, each country – as well as the industries and sectors within them – may have different definitions for an SME Günterberg et al.,2004.
II Importance of SME’s to national economies
All over the world, there is growing evidence that SMEs play an important role in the national economic development of any country. SMEs are becoming more and more a subject of high attention in the developing countries, countries in transition but also in the countries with developed economies Günterberg et al.,2004.
In market economies, SMEs are the engine of economic development. Thanks to their private ownership, entrepreneurial spirit, their flexibility and adaptability as well as their potential to react to challenges and changing environments, SMEs contribute to sustainable growth and employment generation in a significant manner.
Until latest, the private sectors of many emerging economies were missing the middle level of development. Investors, policymakers, and professionals dedicated most of their efforts to big companies of over 500 employees, larger enterprises or multinationals. Large Enterprises and MNCs were target of TAX incentives and subsidies whereas organizations like World Bank and UNDP were focused on supporting the micro-enterprises which usually have less than 5 employees. Between these two extremes, lie the SME businesses Günterberg et al.,2004. In the past, SMEs have been considered as not being the key element to drive the economy therefore it was considered as not worthy to focus the policies of the government to them. However, lately there have been many promising initiatives to support the SMEs operating in crucial segments of emerging economies not only by investments but business leaders as well, leaders who clearly recognize the role of SMEs in building a sustainable economy development.
The SMEs are becoming more and more present in the countries’ economies.
The percentage of that presence is shown below:
Number of companies : More than 99% (Japan, US, Germany, China)
Number of employees: 66% in Japan, 53% in US, 68% in Germany
Value added: 55% in Japan, 51% in US, 455 in Germany
They play a significant role in national economy by providing various goods and services, creating job opportunities, developing regional economies and communities, helping the competition in the market and offering innovation.
Main areas of their presence are manufacturing industry, distribution industry and services industry.
III SME sector in Nigeria
The economy of developed and developing countries depends on small and medium enterprises and these SMEs are improving their business ideas by inculcating e-commerce Payne (2009). Despite the prospective nature of Nigerian SMEs with features of development of economic growth, technology, and creating more job opportunities. Studies have shown that they cannot adopt e-commerce in their businesses because of lack of technological knowhow of manager as well as inadequate infrastructure, ignorance, corruption poverty and security, Humphrey et al,(2003).
According to a survey conducted in 2002 of firms in the auto-components, food and beverage, electronic goods and engineering manufacturing sectors was conducted in Uganda and Nigeria, Oyelaran-Oyeyinka and Lal,. (2004). The goal was to discover reasons that influenced the e-business adoption by SMEs, including microenterprises. The authors found that, overall, adoption level of e-business was higher in the highly skilled sectors of electrical and electronic goods than in the more labour intensive sectors of auto-components and food and beverages. The Nigerian survey covered 105 SMEs and microenterprises (fewer than 10 employees) in the engineering sector. It was discovered that one third of the firms did not use any ICTs at all, primarily those whose managers had a low standard of academic qualifications. Also organisations that implemented e-business at a higher level were operated by managers who had engineering backgrounds, and had more skillful workers (engineering graduates) among the workers. Their assumption was that limited skill levels in SMEs were a key factor for low ICT usage.
The major obstacle for internet uptake in most companies in both developed and developing countries is very similar. European, Latin American, African and Asian companies reported that internet security was a major setback, after which came poor network connections. The finding showed that the reason why most companies haven’t gone electronic not because of technical skills and capacity shortage but because e-commerce depends on the ability to manage the company and the educational level of the possessor; examples from Asia and Africa (Nigeria) showed that firms where owners had received higher education and had management skills were more likely to use up-and-coming equipment.