What are SMEs?

We explain what SMEs are and the things you can afford thanks to their sales. In addition, its main advantages and disadvantages.

  1. What are SMEs?

It is understood by SMEs (acronym for Small and Medium Enterprises), for-profit organizations , that is, entrepreneurs, that operate independently and have high market dominance, but without being part of the large capitals that They run it. These limits are, of course, set in a conventional manner by the jurisdictions of the different countries.

The distinctions between small, medium and large companies have to do with the amount of staff they hire, with the money they handle and with the segment of participation in the local market that corresponds to them.

In this way, states can organize and customize their monitoring, benefit or appraisal mechanisms, to collect taxes from wealthy companies and benefit small or insurgents, promoting economic growth and fighting oligopolies.

SMEs play a vital role in the economies of different countries , usually employing almost 70% of private workers in countries belonging to the Organization for Economic Cooperation and Development (OECD). This is because their size and volume of sales allows them, among other things: 

  • Offer customized products instead of mass standardized, such as large business chains.
  • They are outsourced by larger companies to perform jobs that would occupy a lot of their plant staff.
  • They allow the emergence of alternative forms of organization, such as cooperatives, which require a small number of members.
  1. Advantages and disadvantages of SMEs

The growth of young SMEs is usually fast during their early stages.

Small and medium enterprises have the following benefits and disadvantages:

Advantages :

  • They find new market  niches  . Especially if they keep pace with technological innovations and the new needs of the global world.
  • Adaptability . By owning smaller structures, they can be more productively flexible, and that is often the difference between circumventing a crisis or collapsing in it.
  • They offer direct attention . They may have a less anonymous and standardized relationship with their client than the massive business chains.
  • I rise fast . The growth of young SMEs is usually fast during their early stages, as they appropriate a niche market that does not represent a worrying competition for larger companies.

Disadvantages :

  • Difficult financing . Having less assets and usually being young and not too stable projects, they tend to have more difficulties in finding the financing required to innovate or grow.
  • Work stiffness . They usually prefer employees with previous training, since they do not have capital and structures for their training, which makes them more fussy when hiring.
  • Low innovation . Since they do not have large capital quotas, it is more difficult for them to invest in research and innovation , although they can quickly take advantage of outside innovations.
  • Little access to big markets . While globalization seems to question this, the truth is that larger companies take over the international market and do not always allow SMEs to compete on equal terms.

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