SME's

Small and Medium Sized Enterprises

Small and Medium Sized Enterprises

Introduction

Small and medium sized enterprises are basically known as the companies having a limited number of employees. It is also known as SME in the European countries as well as by the international bodies, such as the World Trade Organization (WTO), the United Nations, and the World Bank. Most of the economies around the world even have greater impact due to their SME's rather than the large organizations. SME's are also known for their innovation and creativity, as they bank on the entrepreneurial ideas. This is the reason why they increase the level of competition in their respective industries (Thorsten, et.al, 2006).

The parameter for setting the least number of employees for SME's is however a debatable point. Even in European nations, each country is having its own limit for the number of employees in an SME. For example, in Belgium, the limit is 100 employees, while in Germany; the limit of number of employees is 255. The European commission, however, has divided the parameter of limitation in number of employees into three categories. These all categories come under the definition of SME, as per European Commission. These categories are micro-entities, small companies, and medium-sized enterprises. In micro-entities, the limit of number of employees is up to 10. In small companies, the number is up to 50. However, in medium-sized enterprises, the number reaches to 250.

This paper will highlight the criteria for the success of these small and medium-sized enterprises. It will specifically focus on the SME's in the economy of United Kingdom. The paper will critically evaluate all those criterions, and based on those criterions it will identify the potential areas of concern that are impacting the SME's in UK. The paper will also draw attention towards the existing policies of UK government regarding these SME's, and what improvements are required in their existing policies that can help develop the industry even further.

Criteria for Success of SME's

The article has discussed ten different criteria's for the success measure of SME's in the UK. However, the project requires highlighting any six criteria's which have the most significant impact on the success of the SME's. These criteria's are profitability, growth, innovation, firm survival/continuity, satisfied stakeholders, good balance between work and private life, and utility or usefulness.

Profitability

Profitability is one of the most important criterions for the success of the small and medium sized enterprises. This is the basis for those SME's to identify how much they are capable to earn with the existing resources at hand. This is often used by the entrepreneurs for measuring their performance. It allows them to analyze that how much cost is being associated with the entire production process, which includes all the fixed costs as well as variable costs associated directly or indirectly with the production process (Buckley, 1989). It also allows the enterprises to estimate their total revenues that can be generated by selling a specified number of units of the product.

This analysis of cost and revenue helps them in ...