Small and Medium Enterprises (SMEs) Assignment: MGT-308, RU

This assignment delves into the realm of Small and Medium Enterprises (SMEs), crucial for economic development, especially in developing nations like Bangladesh. It begins with a preface highlighting the significance of SMEs in employment generation, poverty reduction, and economic growth, emphasizing their role in achieving Millennium Development Goals. The assignment defines SMEs, exploring how their classification varies across countries based on factors like employee count, annual sales, and assets. It presents the SME definitions in Bangladesh, as per the Ministry of Industry and Bangladesh Bank, including criteria for small, medium, and micro-enterprises in service, business, and industry sectors, also considering women entrepreneurs. Furthermore, the assignment provides comparative definitions from the USA, EU, UK, Kenya, China, Egypt, and India, showcasing the diverse approaches to SME classification globally. It underscores the importance of SMEs, their contribution to GDP, and their impact on innovation and diversity. The assignment aims to provide a comprehensive understanding of SMEs, their characteristics, and their role in socio-economic development, making it a valuable resource for students studying entrepreneurship and SME management.

Small and Medium Enterprises (SMEs)
An Assignment
1 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.
SMALL AND MEDIUM
ENTERPRIZE
Assignment on “Entrepreneurship and
SME Management” (Course: MGT-308)
SUBMITTED TO-
MD. EMRAN ALI
Professor
Department of Management Studies
University of Rajshahi
Rajshahi-6205.
SUBMITTED BY-
ASHIQUE MAHMUD AMIR
ID: 1610434163
BBA 3rd Year 2nd Semester
Department of Management Studies
University of Rajshahi
Rajshahi-6205.
Email: [e-mail]
Voice:[phone]

Small and Medium Enterprises (SMEs)
An Assignment
Preface
The role of Small and Medium Enterprises (SMEs) is indispensable for overall
economic development of a country particularly for developing countries like
Bangladesh. Since this sector is labor intensive with short gestation period, it is
capable of increasing national income as well as rapid employment generation;
achieving Millennium Development Goals (MDGs) especially eradication of
extreme poverty and hunger, gender equality and women empowerment. SME
sector has played a vital role in economic development of some prosperous
countries of Asia. Our neighboring countries have also given due importance on
SME. Terming SME as ‘employment generating machine’ they stressed on SME
development for higher economic growth, narrowing the gap of income inequality
and poverty alleviation. The present government has also put much emphasis on
the development of SME sector considering it as ‘the driving force for
industrialization.
By the end of the assignment, we will be able to assess the over- all concept
of SMEs in Bangladesh, its classifications, features, policies and supports
taken by the Govt. of Bangladesh, difference between SMEs and large scale
business, its importance in socio- economic development, its role,
significance in specific sectors etc.
Hope the assignment helps to study all about the SMEs in a brief by the
grace of Almighty Allah.
2 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
SME stands for Small to Medium Enterprise. Moreover, what exactly
an SME or Small to Medium Enterprise depends on who’s doing the defining.
Depending on the country, the size of the enterprise can be categorized
based on the number of employees, annual sales, assets, or any combination
of these. It may also vary from industry to industry (as it does in
Bangladesh). Small and medium-sized enterprises (SMEs) or small and
medium-sized businesses (SMBs) are businesses whose personnel numbers
fall below certain limits. The abbreviation "SME" is used by international
organizations such as the World Bank, the United Nations and the World
Trade Organization (WTO).
Small to medium enterprises (SMEs) make up the vast majority of
businesses in most countries. SEMs contributed 46 percent of the private
nonfarm GDP in 2008 (the most recent year for which the source data are
3 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.
SMEs (Small to Medium Enterprises)
---Definition---

Small and Medium Enterprises (SMEs)
An Assignment
available), making them hugely important for economic growth, innovation,
and diversity.
According to Bangladesh,
Existing definition of SME is recommended by Better Business Forum and
accepted as a uniform one by Ministry of Industry and Bangladesh Bank.
Criteria of the definition of SME are given below:
Definition of Small Enterprise
Small Enterprise refers to the firm/business which is not a public limited
company and complies the following criteria:
Serial No Sector Fixed Asset other than Land
and Building (Tk.)
Employed
Manpower (not
above)
1 Service 50,000-50,00,000 25
2 Business 50,000-50,00,000 25
3 Industry 50,000-1,50,00,000 50
Moreover, Bangladesh Bank has reset the definitions of small and medium
enterprises (SME) as per the National Industrial Policy Order 2010.
4 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
The redefinition was done for the benefit of banks and financial institutions, a
Bangladesh Bank circular on Monday said.
MEDIUM INDUSTRY/ENTERPRISE
In manufacturing, medium industry/enterprise would be those with assets
worth Tk 100 to 300 million (minus land and factory building, and including
replacement value) and/or 100 to 250 workers.
In service industry and in business, medium enterprises will be those which
employ 50 to 100 and have assets (defined as above) worth Tk 10 to 150
million.
The circular said if a business fits into any of the criterion for a large
industry, it will be considered a large industry though its other characteristics
may be that of a medium one.
SMALL INDUSTRY/ENTERPRISE
In manufacturing, small industry/enterprise would be those with assets worth
Tk 5 to 100 million (defined as above) and/or 25 to 99 workers.
In service industry and in business, small enterprises will be those which
employ 10 to 25 and have assets (defined as above) worth Tk 500,000 to 10
million.
MICRO INDUSTRY/ENTERPRISE
In manufacturing, micro industry/enterprise would be those with assets
worth Tk 500,000 to 5 million (defined as above) and/or 10 to 24 workers or
less.
5 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
In service industry and in business, micro enterprises will be those which
employ 10 or less people and have assets (defined as above) worth Tk
500,000 or less.
COTTAGE INDUSTRY/ENTERPRISE
In manufacturing, cottage industry/enterprise would be those with assets
worth Tk 500,000 to 5 million (defined as above) and/or 10 to 24 workers or
less.
In service industry and in business, cottage enterprises will be those which
employ 10 or less people and have assets (defined as above) worth Tk
500,000 or less.
WOMEN ENTREPRENEURS
If a woman is the proprietor of a proprietary business or the owner of at least
51 percent of a partnership or a private company registered under joint stock
companies, then she would be considered a woman entrepreneur.
The circular said cottage and micro industries would from now on be
included in Bangladesh Bank's SME loan policies and programmes.
Other countries also defines SMEs in regards of their own country policies:
6 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
Definition of Medium Enterprise
Medium Enterprise refers to the firm/business which is not a public limited
company and complies the following criteria:
Serial No Sector Fixed Asset other than Land
and Building (Tk.)
Employed
Manpower (not
above)
1 Service 50,00,000-10,00,00,000 50
2 Business 50,00,000-10,00,00,000 50
3 Industry 1,50,00,000-20,00,00,000 150
According to U.S.A,
In the U.S., the definition of an SME varies by industry, based on the North
American Industry Classification System (NAICS). NAICS is a system
developed by the U.S., Canada, and Mexico to standardize and facilitate the
collection and analysis of business statistics.
The U.S. Small Business Administration (SBA) provides a list of small
business size standards matched to the NAICS codes. To be considered a
small business and be eligible to apply for government contracts and
7 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
targeted funding, a business must be within the defined limits in terms of a
number of employees or revenue.
In manufacturing, for example, an SME is defined as having 500 employees
or less, whereas in wholesale trades it is typically 100 employees or less.
Ranges within sectors can vary quite a bit. For instance, in sector 21, Mining,
Quarrying and Oil and Gas Extraction, a business involved in Copper Ore and
Nickel Ore Mining can have up to 1,500 employees and still be considered an
SME while a business involved in Silver Ore Mining can only have up to 250
employees.
According to EU (European Union),
In the EU, a similar system is used to define Small to Medium Enterprises. A
business with a headcount of fewer than 250 is classified as medium-sized; a
business with a headcount of fewer than 50 is classified as small, and a
business with a headcount of fewer than 10 is considered a micro-business.
The European system also takes into account a business’s turnover rate and
its balance sheet.
8 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
*From the European Commission Definition
According to UK,
There is no standard for defining SMEs in the UK. The most generally
accepted SME classification is the one used by the EU (above). UK
understands and respects the regulations under European Union.
According to Kenya,
9 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.
Company
category
Staff
headcount
Turnover or Balance sheet
total
Medium-sized < 250 ≤ € 50 m ≤ € 43 m
Small < 50 ≤ € 10 m ≤ € 10 m
Micro < 10 ≤ € 2 m ≤ € 2 m

Small and Medium Enterprises (SMEs)
An Assignment
In Kenya, the term changed to MSME, which stands for "micro, small, and
medium-sized enterprises".
For micro enterprises, the maximum number of employees is up to 10
employees. For small enterprises, it is from 10 to 50. For medium
enterprises, it is from 50 to 100.
According to China,
China's definition of an SME varies by industry. Here are some examples:
Industry
Staff
headcount
Revenue
(RMB)
Assets
Heavy Industry < 1000 ≤ 400 m
Wholesale Trade < 200 ≤ 400 m
Retail < 300 ≤ 200 m
Transportation < 1000 ≤ 300 m
Warehousing < 200 ≤ 300 m
Accommodation < 300 ≤ 100 m
Restaurant/Catering < 300 ≤ 100 m
Software/IT < 300 ≤ 100 m
Real Estate Development ≤ 2 b
≤ 100
m
Information Transmission < 2000 ≤ 1 b
10 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
*From the Ministry of Industry and Information Technology, the National
Bureau of Statistics, the National Development and Reform Commission, and
the Ministry of Commerce(July 7, 2011)
According to Egypt,
Most of Egypt's businesses are small-sized, with 97 percent employing fewer
than 10 workers, according to census data released by state-run statistics
body CAPMAS.
Medium-sized enterprises with 10 to 50 employees account for around 2.7
percent of total businesses. However, big businesses with over 50 employees
account for 0.4 percent of all enterprises nationwide.
The data is part of Egypt's 2012/13 economic census on establishments
ranging from small stalls to big enterprises. Economic activity outside the
establishments – like street vendors and farmers, for example – were
excluded from the census.
The results show that Egypt is greatly lacking in medium-sized businesses.
Seventy percent of the country's 2.4 million businesses have only one or two
employees. But less than 0.1 percent – only 784 businesses – employ
between 45 and 49 people.
According to India,
11 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
Under section 7 of the Micro, Small and Medium Enterprises Development
(MSMED) Act, 2006, the Indian government defined the size of micro, small,
and medium enterprises as
(a) In the case of the enterprises engaged in the manufacture of goods
pertaining to any industry specified in the First Schedule to the Industries
(Development and Regulation) Act, 1951, as—
 A micro enterprise, where the investment in plant and machinery does
not exceed twenty-five lakh rupees
 A small enterprise, where the investment in plant and machinery is
more than twenty-five lakh rupees but does not exceed five crore
rupees; or
 A medium enterprise, where the investment in plant and machinery is
more than five crore rupees but does not exceed ten crore rupees;
(b) In the case of the enterprises engaged in providing or rendering of
services, as—
 A micro enterprise, where the investment in equipment does not
exceed ten lakh rupees;
 A small enterprise, where the investment in equipment is more than
ten lakh rupees but does not exceed two crore rupees; or
 A medium enterprise, where the investment in equipment is more than
two crore rupees but does not exceed five crore rupees.
12 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
Businesses that are declared as MSMEs and within specific sectors and
criteria can then apply for "priority sector" lending to help with business
expenses; banks have annual targets set by the Prime Minister's Task Force
on MSMEs for year-on-year increases of lending to various categories of
MSMEs
According to Switzerland,
In Switzerland, the Federal Statistical Office defines small and medium-sized
enterprises as companies with less than 250 employees. The categories are
the following:
 Microenterprises: 1 to 9 employees.
 Small enterprises: 10 to 49 employees.
 Medium-sized enterprises: 50 to 249 employees.
 Large enterprises: 250 employees or more.
According to South Africa,
In the National Small Business Amendment Act 2004,micro-businesses in the
different sectors, varying from the manufacturing to the retail sectors, are
defined as businesses with five or fewer employees and a turnover of up to
R100,000 ZAR. Very small businesses employ between 6 and 20 employees,
while small businesses employ between 21 and 50 employees. The upper
13 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
limit for turnover in a small business varies from R1 million in the Agricultural
sector to R13 million in the Catering, Accommodations and other Trade
sector as well as in the Manufacturing sector, with a maximum of R32 million
in the Wholesale Trade sector.
Medium-sized businesses usually employ up to 200 people (100 in the
Agricultural sector), and the maximum turnover varies from R5 million in the
Agricultural sector to R51 million in the Manufacturing sector and R64 million
in the Wholesale Trade, Commercial Agents and Allied Services sector.
A comprehensive definition of an SME in South Africa is therefore any
enterprise with one or more of the following characteristics:
 Fewer than 200 employees
 Annual turnover of less than R64 million
 Capital assets of less than R10 million
 Direct managerial involvement by owners.
According to Poland,
The SME sector in Poland generates almost 50% of the GDP, and out of that,
for instance, in 2011, micro companies generated 29.6%, small companies
7.7%, and medium companies 10.4% (big companies 24.0%; other entities
16.5%, and revenues from customs duties and taxes generated 11.9%). In
14 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
2011, out of the total of 1,784,603 entities operating in Poland, merely 3,189
were classified as "large", so 1,781,414 were micro, small, or medium. SMEs
employed 6.3 million people out of the total of 9.0 million of labor employed
in the private sector. In Poland in 2011 was 36.2 SMEs per 1,000 of
inhabitants.
According to Mexico,
The small and medium-sized companies in Mexico are called PYMEs, which is
a direct translation of SMEs. But there's another categorization in the country
called MiPyMEs. The MiPyMEs are micro, small and medium-sized businesses,
with an emphasis on micro which are one man companies or a type of
freelance.
We get a good knowledge about which countries defines SMEs in which
criteria.
There are mainly two category of SME Business .They are given
below:
15 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.
Classifications of SMEs

Small and Medium Enterprises (SMEs)
An Assignment
1. Manufacturing sector
2. Non-Manufacturing sector, divided as: Services Whole selling Consulting Research & Development Manufacturing sector:
Talk about any industry, they cannot be said as complete even if one of their
aspects is ignored. Small and Medium Enterprises may be small but as a
whole, they have a huge impact on the industry!
Small and medium size enterprises in manufacturing have become a driving
force for economic growth in Bangladesh. It is estimated that half of total or
50% of manufacturing exports of Bangladesh are accounted by the SME
sector. The impetus of large scale industry is definitely more than of an SME,
but the number of SME’s in India is far greater than large scale industries
which derive its importance.
SME’s are either suppliers or manufacturers of finished goods. They are
dispersed in different areas and are linked to each other to carry out the
manufacturing process. On the other hand, large scale industries mostly
16 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
carry out the whole manufacturing process under their roof, from managing
supplies to getting the product ready. This makes SME’s to connect with
several other SME’s and create a chain between them. Many large scale
industries also depend upon SME’s for their supplies. Non-Manufacturing sector
For non-manufacturing activities (such as trading or other services), the
Taskforce defines:
An enterprise should be treated as small if it has less than 25 workers, in full-
time equivalents;
An enterprise would be treated as medium if it has between 25 and 100
employees;
From both definitions above, land and structures, once again, are excluded. Services
The 2016 WTO Public Forum staged at the end of September in Geneva with
the theme of ‘Inclusive trade’ lifted the lid on the hurdles that SMEs face in
trying to turn entrepreneurial ideas into viable businesses. However, the
services sector offers new hope to small businesses in LDCs (least-developed
17 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
countries) where weak manufacturing potential is a constraint to further
development.
Technological advances are having a profound effect on how and where
people work. In an international context, technology is a key driver of the
global value chain (GVC) phenomenon, whereby traditional production
processes are carved up into ‘tasks’ and outsourced to entities with distinct
cost advantages in different parts of the world. Value chains favor
specialization, thus creating opportunities even for small businesses with
limited production capabilities but with a product or service that could
contribute to the value addition process.
However, the services sector (including ICT, financial services, transport,
energy and healthcare) could usher in a new era for LDCs, as it is often
easier to transition to varied service delivery than to value-added industrial
output. Globally, services account for two-thirds of employment, 60% of FDI
and nearly 50% of trade (in value-added terms). Importantly, while services
account for 50% or more of GDP in many poor countries, their service
exports are insignificant by global standards. One reason for this is that the
tradeable, high-value service sectors are very skill intensive, which puts
LDCs at a distinct disadvantage. Whole selling
18 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
Wholesale is a highly competitive sector. Joining integrated networks such as
franchise, networks of independent retailers and cooperatives is a way to
benefit from scale provided by the network, while remaining independent.
These forms of cooperation have proven to be a useful means of promoting
and strengthening entrepreneurship in Europe, and supporting the transfer
of know-how and innovation. Consulting
Although the growth of the consulting industry shows positive effects in all
areas of business activities, there still lingers some skepticism versus
consulting, especially in small and medium-sized enterprises that are largely
using outdated management and business administration techniques where
the entrepreneur/owner is at same time the manager who oversees all
business processes in the company having, in most cases, no adequate
knowledge, expertise and experience.
Consulting for SMEs ought to be about creating value. As you would expect,
this requires innovation in the delivery and content of consulting services but
also creativity in how consultants are resourced. Many small consultancies
say: “We will take experienced ‘Big Five’ consultants and provide them at a
fraction of their usual price… We don’t have marble atriums.” This doesn’t
serve the needs of the SME marketplace because most of the ‘Big Five’ focus
19 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
on the top 100 FTSE companies, all with completely different issues to SMEs.
SME Business leaders deserve a more focused consulting service. Research & Development
As India continues to step in a mode of industrial development, it should
consider R&D as a vital game changer in SME sector. Research and
development have a noteworthy part to play with regards to enhancing
individual and institutional execution, and the Indian SME segment is no
special case to this regulation. With expanding aggressive weight, the need
of great importance for the Indian SME sector is to increase worldwide
presentation and familiarity with technological progressions.
Research & Development not only ensures a better understanding of the
market dynamics, but also a firm’s own strengths and weakness to align with
the market forces. By adopting R&D, SMEs can embrace two very critical
aspects – INNOVATION & INDEGINIZATION. These are critical factors for not
only business growth but also for overall economic growth.
20 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.
Prime Features of SMEs

Small and Medium Enterprises (SMEs)
An Assignment
For small and medium-sized enterprises (SMEs), logistics integration is
one of the most significant challenges of modern management. Growing
numbers of SMEs are under pressure from large manufacturing
enterprises (LMEs) to change their traditional management styles, both
operationally and organizationally, replacing them with integrated
systems that help increase the speed and fluidity of physical and
information flows, help synchronize demand with supply, and help
manage transactions more accurately. The recent literature discusses
integrated logistics chain management quite extensively, but most
studies address the issue from the standpoint of large firms. Given the
importance of SMEs in the economies of industrialized countries, and
given, too, that a constantly growing number of such firms will have to
replace their management methods by logistically integrated practices,
the authors of this study believe that it is important to examine the
characteristics and features of SMEs in order to identify those favorable
and unfavorable to logistics integration. The prime features or
characteristics of SMEs are as follows:
Managed by the owners
Conventional approaches to the study of SME finance tend to focus on the
changing financing options and preferences as small businesses move
21 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
through different stages. However, one of the limitations of such approaches
is that they do not explain howsmall businesses make decisions that lead to
their financial structures. This paper suggests that small business owners
deliberately choose how they manage their firms’ finance as a direct
consequence of their personal objectives for owning a business.
It goes without saying that good financial skills are a key mindset and
character trait of successful business people, and while 36 per cent of
respondents agreed with this, no one can perform well in every role. If
financial management isn’t a key strength, hiring someone to perform that
role, or to help with some elements of financial management, could be a
proactive way forward.
Family worker/Fewer hired worker
SMEs create more jobs than large enterprises. If data are corrected for the
so- called population effect, this statement is even better substantiated.
Between 2002 and 2010, 85% of total employment growth was attributable
to SMEs, and SMEs have a much higher employment growth rate (1%
annually) than large enterprises (0.5% a year). 24 Member States had
positive employment growth over 2002/2010. Job creation by the SME sector
was more than proportionate to its share in employment in these countries.
22 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
Three Member States experienced an employment decline in the non-
financial business economy over 2002/2010: the Czech Republic, Latvia and
Malta. In Latvia and Malta, job loss in SMEs was relatively limited in
comparison with large enterprises. The favourable employment development
in SMEs can be observed in most sectors of industry. A clear exception to
this rule is the trade sector, in which employment in SMEs increased by 0.7%
annually, while in large enterprises it increased by an average of 2.2% per
year. This was the result of a strong increase in the number of large trade
enterprises, in particular in sales, maintenance and repair of motor vehicles.
Mostly owner finance
Owner financing is when a property seller finances the purchase directly with
the person or entity seeking to buy it. This type of transaction can be
advantageous for both the seller and the buyer since it eliminates the costs
of a bank intermediary. However, owner financing can create much greater
risk and responsibilities for the owner. Owner financing can also be referred
to as “creative financing” or “seller financing.”
Little emphasize on long term financing
23 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
Discover the vast array of financing options, and what they mean for your
business, available to your small business enterprise.
Whether for long-term or short-term financing—or if you're business is in its
early or late stages—funding options can seem endless.
We've organized the myriad financing options available to small business
owners into a practical guide, allowing you to find the options that best
match your business and its financial needs.
Close labor owner/management relations
Employment relationships in small and medium-sized enterprises (SMEs) are
(re)negotiated in contexts of greater spatial and social proximity between
owner-managers and employees and greater degrees of informality than in
large organizations (Marlow and Patton, 2002; Marlow, Taylor and Thompson,
2010). The progress and development of relationships and practices are not
linear progressions of ongoing negotiation but more ad hoc and
improvisatory, often renegotiating, altering course or shifting focus. As SMEs
grow in size and complexity, owner-managers’ attempts to increase the
degrees of formality governing employment relationships and working
24 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
practices are therefore complex processes with important implications for
the organizations (Bacon et al., 1996). The degrees of formality and
informality can affect not only the policies and practices in operation but also
the ongoing, everyday social interactions and organizational culture. This
therefore has crucial implications for the development and relative success
of SMEs (Messersmith and Wales, 2011; Verreynne, Parker and Wilson,
2011), which play a significant role in the British economy and economies
around the world (OECD, 2012). We present longitudinal, ethnographic
research on three SMEs whose owner-managers sought to ‘formalize’ their
businesses. Our findings suggest humour as an ambiguous medium of
informality in ongoing, everyday employment relationships. Humor
represents an important feature of the employment relationships in SMEs, it
not only resists attempts to functionalize, deploy or constrain it but can also
compound the underlying tensions and ambiguities found in these firms.
Business is housed in small establishment
SME (small-to-medium enterprise) is a convenient term for segmenting
businesses and other organizations that are somewhere between the
"small office-home office" ( SOHO ) size and the larger enterprise . The
European Union has defined an SME as a legally independent company with
no more than 500 employees.
25 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
Rational cost control possible
Small and medium enterprises (SMEs) have limited budgets, resources, and
great sensitivity to costs. When SMEs take the first step into implementing
an enterprise resource planning (ERP) system, they need to think about
many things, foremost the cost of adoption. Most ERP implementations
fail due to inaccurate and optimistic budget and schedule estimations, as
well as, anticipating indirect costs beforehand is problematic. With the
deficiency of a clear model of cost factors for ERP adoptions, ERP adoptions
face a high risk of failure Failures could be caused by several factors, but the
scope of this research is focused on studying the factors that escalate costs.
This could aid SMEs in visualizing the different expected costs, and would
consequently assist in better future cost management and estimations.
There has been plenty of research in ERP; however, a clear gap in ERP cost
management and estimation exists. This paper focuses on identifying direct
and indirect cost factors that influence total costs in the ERP adoption
process.
Local market or limited non-local market
Generally Small and Medium Sized Enterprises (SMEs) confine their activities
to domestic market. Firms that venture out into the international market had
already grown beyond SME stage, i.e. they are fully developed corporations.
26 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
Local market constitutes of the customers who will buy the products/services
in the vicinity of where they are produced. ... Local market is the most
important market for fresh products as well as perishable products.
Self-preservation and effective risk management. Stay in the known market
helps lower the risk and assure successful operations. Going into an unknown
market involves more investment and higher risk. After doing cost-and-
benefit analysis, most SMEs would conclude that it is not worth it. The
market share horizon of SMEs would also maintain a rationale that the home
market is more than we could handle.
Size of investment is relating smaller
A small and mid-size enterprise (SME) is a business that maintains revenues
or a ... Every country or economic organization has its own definition of what
is considered a small and medium-sized enterprise
Refining the recommendations made in the 2010 stocktaking report, IFC
developed a comprehensive SME Finance Policy Guide intended as a
reference point for governments and regulators to underpin the development
of Financial Inclusion Strategies and SME Finance Action Plans. The guide
aims at covering all the focal areas of the Subgroup (women-owned SMEs,
SMEs in the agricultural sector, SMEs in LDCs); fed by a wide consultation
process, it set out models and presented good practice for policy and legal
reforms, financial infrastructure, and public interventions, thereby providing
27 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
a roadmap for planning, assessing and implementing policy and legal
measures to support SME access to finance and laying the groundwork for
future country level engagement.
Volume of sales relatively smaller
Quantity surcharges occur when retailers carry a product in two sizes and
offer a promotion on the small size: the large size then costs more per unit
than the small one. When quantity surcharges occur, sales of the
large size decline only slightly even though the same quantity can be
purchased for less.
As we hope the preceding discussion makes clear, ,what is really at stake in
considering what constitutes an SME is the quality of future discussions and
formulations of SME policy, particular if we are at the point of a significant
debate over the role of SMEs in developing economies. Which businesses, we
should ask, are most likely to grow, reduce poverty, promote economic
stability and, ultimately, undergird political stability? We believe these
constitute the relevant SMEs, and these in turn are the SMEs that should be
supported.
SME business owners might be pursuing fewer growth opportunities;
SMEs might be losing market share to larger businesses or are being
acquired; or
28 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
SMEs are selling increasingly fewer higher value added products/services
than their larger counterparts
Mostly handicraft with no use of electricity
In the general discussion there have been several attempts to come up with
a clear definition of the term ‘productive use’. While in some cases
productive use is mainly defined through income generating activities that
are directly positively affected by the use of electricity, others draw a much
broader definition by including the use of electric energy for education and
health or other welfare related activities.
Legal information/Formalities
In industrial policy-2005, it has been declared that Government is going to
formulate a separate ‘SME Policy’ that will carry all types of guidelines &
strategies to strengthen this sector. Industrial policy-1999 included only 16-
thrust sector while Industrial policy-2005 carries 21 & most of these business
are in operation as SME in our country. So, extending the scope of thrust
sector also opens a new door for SME.
Export Policy 2003-2006 also identified 5 highly prioritized sector & most of
them are still considered as SME in our country. The current export policy
claims to provide special support to these highly priority area.
29 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
There is no denying of the fact that developing countries of the world are
now recline under the brunt of acute shortage of capital & alarming problems
of unemployment. From this universal realization today, Small & Medium
Enterprises (SMEs), with their inbuilt attributes of low capital intrusiveness &
enormous employment generation potentiality are considered as propelling
agents to break the vicious circle of poverty. The growing recognition of the
social & economic value of small & medium enterprises (SMEs) throughout
the world, has led to a major growth of in many special programs &
institutions, most of which have been established in developing countries like
Bangladesh during the last couple of decades.
After a many experimentation of development policies over the last few
decades to alleviate poverty in most developing countries, financing SMEs is
now considered as a “new paradigm” for bringing about development &
eradicating acute poverty. It is said that the global economy of the
21st century will be dominated by small & medium sized players.
30 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
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.
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
31 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.
Significance/ Importance/ Role of SMEs

Small and Medium Enterprises (SMEs)
An Assignment
UNDP were focused on supporting the micro-enterprises which usually have
less than 5 employees. Between these two extremes, lie the SME businesses.
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
32 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
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.
In the manufacturing industry they produce goods by using skills developed
historically and accumulated by individuals; Produce products whose row
materials and goods are limited in terms transferable time (foods, etc.);
Operate fields in which are many processing and manufacturing methods
and whose economic efficiency can be enhanced by specializing them in the
areas of expertise (parts and supporting industry for autos, home electric
appliances …); Produce product whose market size is too small for big
companies to enter; Operate in markets where innovative entrepreneurs
take risks, commercialize new technologies and develop new business.
33 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
In Distribution Industry they operate in order to distribute a variety of goods
efficiently from the manufacturers to consumers and for the reason and need
that the existence of many SMEs having businesses tie-ups is essential.
In the Services Industry they operate in the presence of many services
provided both to businesses and individuals where due to constrain of time
and distance, a large number of SMEs are needed to provide them.
SMEs play a big role in the vitalization and development of national
economies because they are creating job opportunities, promotes stability
and development of regional economies, produces much of the creativity
and innovation that fuels economic progress, promote the competition and
cooperation and produce high value added products. Large number of people
relies on the small and medium enterprises directly or indirectly. They play a
big role with their contribution in labor absorption, poverty alleviation and
revenue generation. The critical importance of this sector warrants much
more attention by all the stakeholders which includes government agencies,
academia and multinational companies because of their vested interest.
34 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
Throughout the world, one finds the SMEs to be the employee, the customer
and the supplier who provide goods and services to the local market. They
also provide the majority of entrepreneurship in any economy.
SMEs are the starting point of development in the economies towards
industrialization. Most of the current larger enterprises have their origin in
small and medium enterprises.
The extra growth over the past several years throughout the industrialized
countries has been due in large to the growth of SMEs. There is a growing
recognition that the market economy starts by establishing small and
medium-sized enterprises, and then it is developed by developing the SMEs
dynamically. Entrepreneurs establish companies, start business, acquire or
change management resources, accumulate them and expand their
business. These activities of SMEs represent a big driving force behind the
development of a national economy.
Examples of the above can be found in developed or in developing countries.
The case of High-tech companies in the Silicon Valley in US shows that these
companies were established as venture companies by engineers and
35 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
researches in the field of information technology and later they have become
big businesses in only few years. They are playing today a big role in
enhancing the competition in US and raising the economic growth rate of the
country.
Another example of that are the global companies emerged in Japan which
were established initially as small and medium sized enterprises by
engineers after the Second World War and then developed into global big
enterprises such as Sony, Panasonic or Honda.
The achievements by Taiwan are a good example of the role of SMEs play in
a nation’s economy with limited natural resources. Over the last decade,
Taiwan has established itself as a world-class supplier for a wide range of
electronic hardware products. SMEs in Taiwan have been at the heart of this
impressive success. In 1993, SMEs accounted for 96 per cent of the total
number of companies, 69 per cent of total employment and 55 per cent of
Taiwan’s manufacturing exports. Most of Taiwan’s current 400 electronic
companies started as small businesses.
36 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
Based on the above statistics and facts, we can say that SMEs play a key role
in the economy of the countries as they represent the majority of companies
counted, are responsible for a bigger volume of employment and products
generated and are the catalyst of development, innovation and
sustainability.
Achieving economic growth
SMEs are main indicators of a country's economic development. They have a
significant impact on the social development of a country. ... Economic
growth is determined by Gross Domestic Product at current prices
(real GDP). The resultachieved empirically, will be also proved thanks to the
various diagnostic tests.
The importance of the SME sector is well recognized worldwide due to its
significant contribution to
gratifying various socio-economic objectives, such as higher growth of
employment, output, promotion of
exports and fostering entrepreneurship. Recent empirical studies show that
SME‘s contribute to over 55% of
GDP and over 65% of total employment in high-income countries. SME‘s and
informal enterprises, account for
37 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
over 60% of GDP and over 70% of total employment in low-income countries,
while they contribute over 95%
of total employment and about 70% of GDP in middle-income countries
Earning foreign currency
The declining value of your currency can have a positive impact for small
businesses- you may notice an increase in sales worldwide. This is because
customers may find that their money converts to be worth more of your
currency, meaning they can buy more products for the same amount. So you
could find that your exports increase as currency declines. Mobile trading is
becoming increasingly popular because it is convenient and allows you to
receive the latest updates wherever you are.
Imports can be impacted negatively if you are exchanging currency to
complete the transactions. If your currency, for example, the pound, is in
decline but you are paying your suppliers in the same currency you won’t
encounter additional costs, as no money is being converted. However, you
may find that your budget is limited and you can buy less from suppliers in a
period where the currency is in decline.
Resolving unemployment problem
38 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
Small and Medium Enterprises (SMEs) represent over 50% of our economy
and are therefore key players in engendering regional development and
inclusive growth, i.e. ensuring that the benefits of growth go to all cohorts of
society. According to the National Policy Framework for SME Development
(2011), SMEs are enterprises which employ less than 300 employees and
which have an annual turnover not exceeding Rs.750 Mn – this broad
definition also includes micro enterprises. In many fora, SMEs are classed as
“the backbone of the economy” given that they can play a vital role in
employment generation, stimulating innovation and filling in gaps in supply
of goods and services particularly in areas outside traditional commercial
hubs.
However, despite their importance to the economy and potential to contend
with issues such as regional inequalities, SME face various challenges which
prevent them from achieving their fullest potential. Access to finance – and
an inability to borrow from banks due to stringent requirements - is a key
challenge which persists despite policy initiatives by the Government.
Another key challenge is maintaining competitiveness in a globalized world
by being innovative.
Enhancing the living standard of mass people
39 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
In Bangladesh, people exhibit lesser ability in processing capital and
machinery. SMEs are labour intensive but relatively low capital intensive. For
a developing country like Bangladesh, SMEs are a cost effective way towards
the reduction of unemployment. Since Bangladesh has not yet displayed
adequate performance in large-scale industries that are predominantly
owned and operated by public bodies, the country can solve its
unemployment situation by encouraging SMEs. Seasonal and disguised
unemployment can also be solved to a substantial extent by SMEs.
SME can reduce the urban migration in the capital and other major cities,
increase cash flow in rural areas, and thereby enhance the standard of living
of the rural people. SMEs are widely distributed all over the country which
means developing SMEs will play a major role in bridging the urban-rural
income gap and contribute towards inclusive growth. In a way, inclusive
growth can only be achieved through a vibrant SME sector in a country like
Bangladesh.
Reducing gender discrimination (Women entrepreneur)
We know that setting up a business is a key means for women to empower
themselves and break out of poverty. But just as becoming an employee is
harder for women, so is becoming an entrepreneur. Barriers include a lack of
40 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
access to education or training, and limited access to ICT, market
information and finance. Indeed, women-owned SMEs with reliable funding
sources are few and far between, in part because land is often required as
collateral for credit in a region where women make up a small minority of
landholders. Burdensome registration procedures combine with societal
prejudice to frustrate women's entrepreneurial potential.
The good news is that despite these constraints, the number of women
entrepreneurs has been increasing in the Asia-Pacific region. Women
entrepreneurs in ASEAN countries have been particularly successful.
Utilization of unused natural resources
In many developing countries, small and medium enterprises (SMEs) are the
backbone of economic and industrial activity, contributing to approximately
75% of industrial activity. With increasing resource prices and expanding
environmental market demands, continuous improvement of the efficient
use of energy, water, materials, and the safe management and use of
chemicals, will increasingly become key factors in determining the
competitiveness and sustainability of global industrial markets. SMEs
operating under limited technical and institutional capacities require support
to overcome these challenges and to continue to contribute to their national
economies. The challenges of SMEs in developing countries are further
41 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
compounded by the lack of technical capacities necessary to provide support
services to these industries. Over the years, UNEP and UNIDO have been
working to overcome this challenge by promoting the establishment of
National Cleaner Production Centres (NCPCs) and by developing cleaner
production tools and techniques that industries can customise and
implement. The PRE-SME Resource Kit builds upon the lessons and
experiences from the cleaner production activities and presents a
comprehensive technical resource kit that could serve as a basis for the
development and implementation of an integrated and continuous Resource
Efficiency programme in SMEs.
Creation of low cost job opportunities
Aid providers seeking to promote employment often target their aid towards
small and medium-sized businesses. This is because, globally speaking,
these firms are responsible for a large part of employment in the formal
sector, in low-income countries their share of employment is nearly 80 per
cent. Due to the high failure rates and low wages of small and medium size
enterprises (SMEs) focusing on them may not be the most productive use of
aid and argue that firm size alone is too crude a measure to be of much use
42 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
to policy makers. A better alternative would be to use aid to promote the
growth of firms of all sizes.
Increasing per capita income
Development of small and medium enterprises (SMEs) is envisaged as a key
element in this development strategy. For achieving double digit growth in
manufacturing, matching development of SMEs is considered critical.
Enhanced micro, small and medium enterprise activities in the rural and
backward regions constitute a key component of the strategy for rural
development and reduction of poverty and regional disparity (GOB 2011).
Small and Medium Enterprises (SMEs) are treated as the engines of growth
and drivers of innovation worldwide. They play a significant role in driving
economic growth and generating jobs. In Bangladesh, the sector is actually
changing the face of the economy. SMEs are playing a vital role for the
country's accelerated industrialization and economic growth, employment
generation and reducing poverty. SMEs now occupy an important position in
the national economy. They account for about 45 percent of manufacturing
value addition, about 80 percent of industrial employment, about 90 percent
of total industrial units and about 25 percent of the labor force. Their total
contribution to export earnings varies from 75 percent to 80 percent. The
industrial sector makes up 31 percent of the country's gross domestic
product (GDP), most of which is coming from SMEs.
43 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
Increasing PPP(Purchasing Power Priority)
Purchasing power parity (PPP) is an economic theory that compares different
countries' currencies through a "basket of goods" approach. According to this
concept, two currencies are in equilibrium or at par when a basket of goods
(taking into account the exchange rate) is priced the same in both countries.
Closely related to PPP is the law of one price (LOOP), which is an economic
theory that predicts that after accounting for differences in interest rates and
exchange rates, the cost of something in country X should be the same as
that in country Y in real terms.
Contribution in raising GDP
According to Bangladesh Bureau of Statistics (BBS) data, Bangladesh will
achieve a GDP growth of 7.65% in the current FY, exceeding an earlier
prediction of 7.4%. The d There are nearly a million small and medium
enterprises (SME) in Bangladesh. The contribution of these SMEs to GDP is an
estimated 23%. Nearly 80% of all the jobs in the industries sector are offered
by the SMEs. Center for Policy Dialogue (CPD) Research Director Khondaker
Golam Moazzem said: “The BBS data clearly highlights the industries sector’s
huge contribution to GDP.ata also confirmed that the industries sector is the
key driver of this projected growth.
44 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
Exploring innovative marketing of home and abroad
This study addresses relatively unexplored key research questions on
innovation strategies of IoT-SMEs. To do so, we employ an exploratory
research methodology, along with an extensive review of the literature in the
areas of the IoT, SMEs innovation and sustainable growth strategy.
Specifically, we conduct intensive individual interviews to find IoT inherent
innovation attributes and a case study to explore the process of linking these
attributes to innovation-driving paths.
The analysis results reveal that there exist disruptive and open innovation
attributes in the IoT industry that enable IoT-SMEs to enhance their structure
and process related capabilities, to create business models for products and
services and to collaborate with external parties in marketing to enter the
market. We excavate practical insights into driving innovation based on IoT
attributes and suggest enabling paths for pursuing innovation and entering
overseas markets for IoT-SMEs.
Acting as seed bed for new venture
Seedbed refers to preparation of soil for sowing of seeds for a good crop. As
small scale industries provide conductive & favourable conditions for the
emergence & growth of entrepreneurship hence it is treated as a seedbed
for entrepreneurship. As a result small scale industries have achieved an
45 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
impressive growth in the number of units over the period of time . Small
industries units need low capital investment and are labour intensive .more
the small scale entrepreneurs develop more will be oppurtinies for
entrepreneurial career
Making better used locally, available raw materials
Small and medium enterprises (SMEs) are considered to be the mother of
large industries. There are 7.81 million enterprises/economic entities in
Bangladesh. Of these, 0.86 million are SMEs.
The SMEs promote broad-based equitable development and provide more
opportunity for women and youth participation in the economic development
of a country. More than 99 per cent of all enterprises in Europe are SMEs.
The SMEs are playing a vital role in entrepreneurship development,
employment generation and increasing economic growth throughout the
world. Governments, therefore, are keen to promote SMEs to facilitate
growth of entrepreneurship and employment generation as well as curb
unemployment.
Equitable distribution of income among the persons and region
A more equitable distribution of income may help accelerate growth and
promote economic development. Equitable doesn’t mean equal distribution
46 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
of income. It refers to the distribution of income that is ‘fair,’ but the concept
of ‘fair’ is subjective.
Distribution of wealth and income is the way in which the wealth and income
of a nation are divided among its population. Or the way in which the wealth
and income of the world are divided among nations.
An equitable distribution of wealth gives all citizens a fair opportunity to
become successful.
Developing infrastructure
Since infrastructure investment is widely recognised as a crucial driver of
economic development, while the quality, quantity and accessibility of
economic infrastructure in developing countries lag considerably behind
those in advanced economies, scaling up infrastructure investment is widely
seen as a key pillar in national development strategies in low-income
developing countries (LIDCs).1 In fact, in recent years, many developing
countries have been scaling up infrastructure investment, mostly through
public spending, but also with a growing participation of the private sector.
The growth dividend and the distributional effect of this investment push
47 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
cannot be taken for granted, as past experiences suggest (see Section II),
and many challenges lie ahead: infrastructure gaps are still large and
bridging those gaps will require tackling several problems, in terms of
additional financing and project selection and implementation.
Change personal consumption
Demographic change is altering the demand for goods and services, even in
the short term. Year after year, the ageing of the population is shifting
consumption patterns. But what does this mean for small and medium-sized
enterprises in Germany? A special analysis of the KfW SME Panel has
revealed that demographic factors have a significant impact on short-term
turnover expectations of small and mediumsized enterprises (SMEs). On
balance, the effects are positive and amount to annual growth contributions
of EUR 24 billion between 2014 and 2016. Thus, roughly one fifth of the
currently subdued turnover growth in the SME sector can be attributed to
demographic change on the sales markets. Ageing and immigration are
proving to be important pillars of growth for SMEs in the short term.
Change the traditional outlooks and values
A strategic approach to how small and medium sized enterprises (SMEs) use
their marketing networks during a time of change in their operating context
is the focus of this article. SME networking is analysed using the structural,
relational and usage dimensions associated with network frameworks.
48 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
Specifically, the paper examines marketing network processes (MNPs) that
are investigated through the use of network behaviour for SME management.
The development of a thematic approach in viewing a network as a strategic
analytical construct allowed these MNPs to be studied in relation to the
specific theme chosen and how they do their strategic marketing.
Increasing savings
So many development projects are being implemented by the government,
donor agencies and NGOs in different sectors of Bangladesh. There could be
a development project to update existing technologies of different SME
clusters for increasing productivity and product quality. Government could
allow sectoral associations to import raw materials with bonded warehouse
facility to facilitate export of SME products producing in different clusters
throughout the country. Government may consider allowing minimum import
duty on raw materials using SME clusters and give protection of SME
products against importing. The central bank have to inspire the scheduled
commercial banks to offer tailor made loan products based on local needs in
different SME Clusters.
49 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.
Difference Between SMEs and Large
Entities.

Small and Medium Enterprises (SMEs)
An Assignment
Subject SMEs Large Entities
Speed of
Decision
Making Process
Speed of Decision Making
Process is SME is
Dynamic
Speed of Decision Making
Process in large business is
Complex
Attitude of Risk
taking
Attitude of Risk taking is
low.
Attitude of Risk taking here is
bigger than SMEs
Management Mainly Owner managed Professional management
Decision
Making
Decision making largely
by the owner
Distributed Decision making
by organizational hierarchy
Understanding
of business
model
In SMEs Understanding of
business model is not
maintained.
In here Understanding of
business model maintained.
Opportunities Little and limited
Personal development
opportunities.
Multiple Career Development
paths and programs.
50 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
Lack of adequate investment
Availability of finance hinders the growth of SMEs in Bangladesh.
Bangladeshi bank considers SMEs as high risk borrowers because of their
inability to comply with the bank’s collateral requirements. Only about 15-
20% of the owners of SMEs own any immovable property. Bankers issue loan
on the basis of ownership of immovable property as collateral risk. As a
result it automatically excludes rest 80% SME’s from the list of privileged
clients of the banks. Whatever collateral SME’s can manage gets used up in
talking the term loan leaving them with no means to seek working capital
loans from banks. Because of low access to institutional financing SME’s rely
on inefficient financing services from informal sources.
51 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.
Problems/ Constraints/ Hindrances of
SMEs in Bangladesh

Small and Medium Enterprises (SMEs)
An Assignment
Lack of modern technology
An ‘attitudinal barrier’ was found to be the biggest obstacle to SMEs forming
and developing an online presence, caused by a lack of awareness about the
benefits and opportunities available. The ‘barrier’ is especially evident in
attitudes towards social media with a relatively small 36% currently on a
social media platform. However, those that do use these channels have said
that they have been beneficial in promoting their goods and services, as well
as boosting direct sales.
Owners of small and medium businesses often hesitate to roll out new
technologies because they lack the expertise and staff to properly manage
them, but IT is universally understood to be a great enabler for businesses,
regardless of size or sector. Technology allows you to do everything from
organising, promoting, understanding and expanding your business on an
unforeseen level, facilitating worker mobility and increasing your client and
market reach many times over. In fact, SMEs who embrace technology have
been found to grow two to three times faster.
52 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
High rate of interest on bank loan
SMEs all over the world have been playing a crucial role in promoting
economic development as well as industrial production. SME financing has
been identified as a major obstacle to SME growth. Unfortunately, the issue
seems to be as unresolved as it always has been. Though the majority of the
issues are with the SME themselves, the banks also have major issues in
designing financial products for the SMEs. This study tries to find out the
underlying problems from the bank’s perspective. The major findings are
related to the high interest and loan duration rates, reasons for SMEs
relatively informal way of doing business in contrast to bank’s formal
procedures and prerequisites, bank’s relative inexperience in this field. They
are also related to the bank’s lack of perspective, the viability and benefits of
cluster unity, approach to informal loan takers and non-usage of modern
technology and accounting procedures. The recommendations were provided
based on the analysis and findings.
Irregular and inadequate supply of power
Electricity provision has been marred by low generation, poor supply and
frequent power outages. The situation compel firms to adopt strategies to
cope with this poor public supply of power for their business. To this end, this
study analysed the effect of power supply on the performance of SMEs: a
53 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
comparative analysis between two regions where Small and Medium firms
are located. The study uses the current World Bank 2013 Enterprise Survey
on which consist of 710 firms. The study employs both chi-square and t-test
to do pattern analysis. In addition, ordinary regression analysis (OLS) was
employed to regress firm performance variable on electricity supply variable
and other covariates. The results show that, the presence of power outages,
thus, the number of times power outages experienced and hours of power
outages negatively affected firms performance (profitability).
Poor physical infrastructure
Inadequate supply of necessary utilities like electricity, water, roads and
highways hinder the growth of SME sector. Moreover unfavorable
geographical conditions increase the transportation cost
Infrastructure is one of the most critical factors for economic development
because it interacts with the economy through the production processes and
changes in the quality of infrastructure available for production will greatly
impact the production and performance of an organisation’s levels of output,
income, profits and employment creation in the economy. This is because of
its direct link with the productivity (Adenikinju 2005; Kessides 1993). Despite
the direct link between the availability and quality of infrastructure –
electricity, portable water and poor road maintenance to economic
54 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
development (Oseni & Pollitt 2013) – the availability of infrastructure in most
developing countries especially in the sub-Saharan African region leaves
much to be desired (World Bank 2013, 2014). The gap in the availability of
infrastructure in Nigeria has greatly impacted on the production processes in
the manufacturing sector, especially the ability of the SMEs to compete in
the global market.
High transportation cost
To determine the impact of transport cost differentials on performance of
SMEs, to establish the relationship between transport infrastructure
development and performance of SMEs, to determine the impact of transport
insecurity on the performance of SMEs and to assess the impact of
enforcement of public roads and access act on performance of SMEs. The
study employed a descriptive survey research design. The target population
comprised of 3000 traders in Kibera involved in general retail businesses.
The researcher selected the sample from the population by considering the
10 villages in Kibera to be clusters for the purpose of this study. The study
then used simple random sampling to pick a sample of 350. The researcher
analyzed data using both descriptive and inferential statistics. Data was
analyzed using statistical packages. Based on the findings of the study, it
was concluded that there is significant relationship between transportation
55 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
factors (of cost of transport, infrastructure development, and transport
related insecurity, enforcement of roads and access act) and performance of
SMEs. The study recommends that further related studies on the impact of
transportation on the performance
of SMEs should be done.
Poor information about market opportunities
A key challenge often seen by market systems development practitioners is
that of ‘information asymmetries’: a situation where costumers lack
information on the products and services available as well as their prices,
while investors, service and product suppliers lack information about
demand for their product, particularly among poor populations. This can lead
to exploitative situations that tend to benefit the relatively rich and powerful
and do not adequately serve the poor. For example, this may be the cash is
land tenure systems, where farmers have limited information on how much
land is supposed to cost or whether or not land is even for sale.
Inadequate availability of raw materials
In Bangladesh scarcity of raw materials hinder the ability of SME to be export
oriented and limits its ability to reach more advanced stages of international
business.
56 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
Lack of skilled technicians and workers
The labour market experienced a significant revival,” said Michal Batis,
Grafton branch manager in Bratislava. Under the influence of new
investments and projects, regions reported higher demand for specialists for
technical positions, IT, HR, accounting, administrative workers with a good
knowledge of languages, and workers to take care of clients - among other
fields.
“There is a significant lack of IT specialists, especially developers of concrete
programming languages, but also technical specialists and qualified
manufacturing workers,”
Lack of research and development facilities
These are very commonly perceived and also perhaps generally encountered
difficulties of operation of the SMEs. However, a close scrutiny and careful
interpretation tends to reveal that lack of institutional credit, non-
availability of working capital, low levels of technology, low productivity, and
lack of marketing facilities and market access problems are the major
bottlenecks to SME growth in Bangladesh. In the recent years, domestic law
and order conditions, unreliable power supply and stiff competition both in
57 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
domestic and international markets seem to have been the added
dimensions to the SME operational bottlenecks. However, systematic and in-
depth studies based on sufficiently large samples are needed to precisely
identify the operational woes of the different categories of the SMEs.
Absent of effective and transparent legal system
The absence of an effective and transparent legal system discourages SMEs
in exploring into risky ventures of business.There are a number of
unnecessary formal requirements to start and run business that create high
compliance costs and become barriers to SME development, growth and
market entry.
Difficulties in accessing technology
Most SMEs will face financial hardship during their business life, especially as
they are starting out. Because of this, gaining access to the most efficacious
technologies may prove very difficult. By comparison, larger companies have
a lot of financial wiggle room, and acquiring the latest technologies is much
more viable. While SMEs may benefit from downloading inventory software,
for example, if finances are already an issue this can be burdensome if the
58 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
technology is expensive. Independent research firm Ipsos has found that 9
out of 10 small business owners identify the costs of maintaining and
upgrading technology as their biggest challenge. Likewise, only 46% of these
business owners feel that their budget has the capacity to allow them access
to the same technologies as larger companies.
Credit constraints
Employment decisions of small- and medium-sized enterprises (SMEs) have
been affected by credit constraints in the wake of the Great Recession.
Variability in banks’ financial health is used as an exogenous determinant of
firms’ access to credit. Estimates suggest that SMEs borrowing money from
pre-crisis less healthy banks were significantly more likely to be affected by a
credit constraint and, in turn, to adjust their labour input downwards than
pre-crisis clients of more healthy banks. Yet, findings also indicate that
employment consequences of credit shortages have been essentially
detrimental for SMEs experiencing a negative demand shock or facing severe
product market competition. Finally, results show that credit-constrained
SMEs adjusted their workforce significantly more at the extensive margin
than their non-constrained counterparts, but also that they relied more
intensively on temporary layoff schemes.
Low access to business services
59 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
For SME, owing a retail space is very expensive in the major cities in
Bangladesh. As a result many customers are not interested to buy products
and services from SMEs. Because they can’t judge the quality until they
physically examined the product. Most of the cases SMEs in Bangladesh are
not able to use the Integrated Marketing Communication (IMC) tools. But
these tools play the role of important stimulus to motivate the customers
and retain them. The country does not have enough marketing capability
and resources to invest in marketing.
Constraints of quality of human resources
Human Resource Development (HRD) in small and medium-sized enterprises
(SMEs) is a significant area of scholarship. However, the cumulativeness of
research on HRD in SMEs remains relatively low when compared to HRD
generally. This paper reports a systematic literature review (SLR) to
synthesise research in this area. A disciplined screening process resulted in a
final sample of 117 papers published in 31 journals from 1995 to 2014. The
synthesis of these empirical and theoretical studies revealed that: (a) the
literature utilises a narrow range of theoretical and conceptual perspectives;
(b) HRD is being investigated across a variety of SME contexts, themes and
units of analysis; (c) researchers define HRD in multiple ways and use a
60 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
diverse set of measures of HRD activity; (d) there is significant potential for
future research across the SME and HRD disciplines, SME settings and
beyond existing theoretical perspectives. We offer suggestions for further
advancing the development of this area of research in terms of theory,
content and methodology.
Rapid changes in policy environment
Scholars and policy makers now have started to see entrepreneurship as
panacea for inclusive growth. Entrepreneurships are most widely popular and
discussed area. Study on small and medium sized enterprises (SMEs) has
been maturing for the last decade as it has been regarded as significant
player for the social development along with the economic development. In
Bangladesh, SMEs account for a large proportion of the total establishments
in various sectors. Considering the importance of the SME sector in
Bangladesh, this study intends to explore and sketch-out the landscape of
current SME setting in Bangladesh. With this aim the study has extensively
carried out literature review, observed and understood the secondary data
obtained from various organizations, and finally presented a policy driven
recommendation (micro and macro level) which would enable to develop the
SME sector in a developing country like Bangladesh.
61 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
Bangladesh govt. policies and support of SME’s development The limit of refinance amount for cottage and micro industries
have been refixed at the 10000 to tk. 5000000. The lower limit of SME’s credit under the refinance facilities has
been reduced to tk. 50000 Clashers based financing to SME’s has been exelarated. Non- banking financial institutions are developed advised to
formulated a cluster development policy. NBIF are advised to consider reasonable grace period on SME
sector while formulating their SME policy. In addition to SME and special program department and SME
monitoring cell has been established in every branch of
Bangladesh Bank and financial institutions as well. Three stage SME monitoring cell is working I Bank and financial
statement. Govt. has recently set up the SME foundation as a non profit
organization under private management comprising all SME
62 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
related trade bodies and associations. The foundation is working
as facilitation for the promotion of SME in Bangladesh. The ministry of industries set up the SME cell, a high power SME
task force and SME advisory panel for the development of SME’s. Ministry of industries with the support of SME foundation is now
excluding the SME policy, strategy regarding the capacity of
development tax intensive, loan facilities marketing, networking
and so on. The second poverty reduction strategy paper is being developed,
recognizing the role of SME’s as critical for increasing for the
growth of national economy and eliminating poverty. The SME foundation has emerged as a critical facilitating
institute to financial institutions regulatory bodies, trade bodies,
entrepreneurs for it pro active role in creative public private
partnership. The SME foundation has succeeded in bringing SME stockholders
to a common platform to find out the challenges looming large
for SME’s and to design a framework to face them.
63 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment SME foundation has already set up and institutional leakage with
the pederations, chambers of commerce and industries technical
and management educational institutions. The foundation is offering business support service for existing
and new entrepreneur. SME’s are getting benefited having
guidance for promotion of their existing business and initiating
new wants. For the inclusion of the publication and marketing knowledge
based goods and creative writing as an eligible section for
financing, relevant policies of the small enterprise sector
refinance skill where amended. For the inclusion visually empired person and other disable
entrepreneurs as eligible for financing, relevant policies for small
enterprise sectors refinance skill within where amended. Expending finance to the women entrepreneurs in cottage,
micro, small, and medium, sector by extending credit facilities
amounting 2500000 against personal guaranty and new
entrepreneurs in cottage , micro and small sector by relating
coliteral fee financing up to 10000000 or new entrepreneurs. Cottage, micro, small and medium enterprises has been re
defined in line with the national industrial policy 2016 and
64 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
turnover for trading concern has been added as an additional
criteria for sector determination. Maximum credit limit for CMSME’s have been determine and
trading industry has been removed from medium category.
65 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
SMEs sector can bring great benefits to developing countries however
emerging economies private sectors tend to be dominated by large
enterprises or micro-enterprises which employ 5 to fewer people creating
substantial barriers to SME growth.
SMEs face and bureaucratic practices which solidify the dominance of large
corporations in the formally regulated economy. This factor creates
incentives for entrepreneurs to operate informally out of government’s
regulatory reach.
Majority of SMEs refuse to utilize the organization’s environment standards
because of inadequate support, time consuming, paperwork burdens and
general distrust of external intrusion. Government regulations which are
designed for big corporations cannot be fit to the small corporations
therefore limiting their ability to follow and implement them.
66 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.
Challenges for SMEs Growth

Small and Medium Enterprises (SMEs)
An Assignment
SMEs are significantly underfinanced mainly caused by the logistical
difficulties related to lending money to small business. Banks tend to offer
loans to SMEs at unfavorable terms because of high fix costs related to
transactions.
SMEs have a greater risk of failure particularly because the company
directors have less experience, education or business experience.
In addition, future development of SMEs and their contribution in the national
economy is closely related to globalization and its effects. Globalization,
aided by rapid developments in information and communication
technologies, improved transport facilities, behind the border regulatory
reform, and tariff reductions affect SMEs and large multinational enterprises
differently. The current phase of globalization, characterized by the
globalization of production processes, has required important modifications
in the relationships among partners throughout the value chain.
Participation in global value chains can bring stability to SMEs and allow
them to increase productivity and to expand their business. This is often
accomplished by the upgrading of their technological and human capital, as
67 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
a result of their greater exposure and facilitated access to information, new
business practices and more advanced technologies. Co-operation with a
network of upstream and downstream partners can enhance a firm’s status,
information flows and learning possibilities and increases the chances of
success of small firms in the value chain.
However, SMEs’ involvement in value chains usually entails greater demands
on their managerial and financial resources, and pressures on their ability to
upgrade, to innovate and to protect in-house technology. SMEs may be
limited by their inability to undertake R&D activities and training of
personnel, and to comply with the growing number of requirements of
product quality standards demanded by others.
Insufficient working capital can also be a barrier to SME participation in
global value chains, in terms of their ability to upgrade technologies and
services. Cash-flow can also be affected adversely through delayed
payments from international partners. Moreover, in order to upgrade its
position in the value chain, a small firm may need to take-on a larger and
more complex set of tasks: for example, in addition to manufacturing a
product or providing a service, it may involve contributing to the product
development, organizing and monitoring a network of sub-suppliers,
68 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
implementing internal systems of quality control and assuring compliance to
an increasing set of standards, and ensuring delivery and quality at
competitive costs.
Summary
SMALL and medium enterprises (SMEs) are treated as the engines of
growth and drivers of innovation worldwide. They play a significant role in
driving economic growth and generating jobs.
In Bangladesh, the sector is actually changing the face of the economy. SMEs
are playing a vital role for the country's accelerated industrialization and
economic growth, employment generation and reducing poverty.
SMEs now occupy an important position in the national economy. They
account for about 45 percent of manufacturing value addition, about 80
percent of industrial employment, about 90 percent of total industrial units
and about 25 percent of the labour force. With the proper help from the
Govt., SMEs can change an economy of a country like Bangladesh.
69 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.

Small and Medium Enterprises (SMEs)
An Assignment
1. https://www.investopedia.com/terms/l/law-one-price.asp
2. https://www.thebalancesmb.com/sme-small-to-medium-enterprise-definition-2947962
3. https://plandiv.portal.gov.bd/sites/default/files/files/plandiv.portal.gov.bd/notices/
afbffe34_be4c_417d_b36c_ecf8db4614fc/ToR%20final%20SME.pdf
4.
5. http://www.industry.gov.lk/web/images/pdf/framew_eng.pdf
6. http://www.toponlineforexbrokers.com/mobile/
7. https://www.ukessays.com/essays/economics/smes-role-in-national-economies-
economics-essay.php
8. Bank for International Settlements, IT innovations and financing patterns:
implications for the financial system, Basle, February 2002.
9. Bank of England, Finance for Small Firms – An Eleventh Report, April 2004.
10.Bell, Richard. “The Halfway Proposition – A strategy for Reducing Africa’s
International Internet Costs” published in 2003.
11.Berggren B., Olofsson C. and Silver L., “Control Aversion and the search for
External Financing in Swedish SMEs”, Small Business Economics, Volume15,
2000.
12.Berger Allen and Greg Udell, “A More Complete Conceptual Framework for
SME Financing”, paper presented at the World Bank Conference on Small and
Medium Enterprises, held in Washington, DC, October 2004.
13.Cressy R. and Olofsson C., “European SME Financing: An Overview”, Small
Business Economics, Volume 9, 1997.
14.Cull Robert, Lance Davis, naomi Lamoreaux, and J. L. Rosenthal, “Historical
Financing of SMEs”, paper presented at the World Bank Conference on Small
and Medium Enterprises, held in Washington, DC, October 2004
15.Dutch national Committee for International Cooperation and Sustainable
Development (nCDO) “Meso-finance seminar” 2006.
70 | Ashique Mahmud Amir
BBA 3rd Year 2nd Semester
Dept. of Management Studies, RU.
References