2.4. Competitive advantage
and the small firm sector
The fact that many small businesses do survive, and some
manage to grow, suggests that they must have some edge over their larger
rivals. The following are key competitive advantage that small firms might
hold.
a. Flexibility: small firms are more able to
respond to changes in market conditions and to meet customer requirements
effectively.
b. Quality of services: small firms are more
to deal with customers in a personal manner and offer a more effective
after-sales services.
c. Production efficiency and low overhead
costs: small firms can avoid some of the diseconomies of scale that
beset large companies. A small firm can benefit from: management that avoids
waste, good labor relations, the employment of a skilled and motivated
workforce, lower accommodation costs.
Small business, does however, suffer from a number of
significant limitations.
2.5. Promoting small and
medium enterprises
SMEs can play a much bigger role in developing national
economies, alleviating poverty, participating in the global economy and
partnering with larger corporations. They do, however, need to be promoted.
Such support requires commitments by and between governments, business and
civil society. (http/www.wbcsd.org/web/development.htm)
2.5.1. The government
contribution
Like bigger companies, SMEs require a favorable institutional
framework. Most are overlooked by policy-makers and legislators, who tend to
target larger corporations. SMEs often miss out on tax incentives or business
subsidies.
They suffer more than big companies from the large burden and
cost of bureaucracy, as few SMEs possess the necessary financial or human
resources to deal with this. (http/www.wbcsd.org/web/development.htm)
Build capacity
Governments can contribute to capacity building through the
provision of vocational training, by creating municipal-level agencies for SME
start-up development and management, such as «Enterprise Advice
Bureaus», and by encouraging SMEs to engage with large corporations.
(http/www.wbcsd.org/web/development.htm)
Implement inclusive reforms
Governments need to create the necessary enabling frameworks
and relax the burden of regulatory measures. They must simplify business
registration procedures and paperwork to make them cheaper, simpler and
speedier. Efforts are also required to tackle corruption.
The World Bank report quoted below notes «reform expands
the reach of regulation by bringing businesses and employees into the formal
sector.» The same report also concludes that the greater a country's ease
of doing business, the greater the number of jobs created in the formal sector
«because the benefits of being formal (such as easier access to credit and
better utility services) often outweigh the costs (such as taxes).»
(http/www.wbcsd.org/web/development.htm)
Provide financial and tax
Incentives to encourage SMEs to join the formal sector,
governments need to provide tax incentives for SMEs and subsidies similar to
those available to large corporations or micro entrepreneurs, and to make
provisions for start-up funds for SMEs.
(http/www.wbcsd.org/web/development.htm)
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