Academic journal article Economics & Sociology

Significant Attributes of the Business Environment in Small and Meduim-Sized Enterprises

Academic journal article Economics & Sociology

Significant Attributes of the Business Environment in Small and Meduim-Sized Enterprises

Article excerpt

ABSTRACT. Aim of following contribution is to define and quantify selected attributes of the business environment in Small and medium-sized enterprises (SME). In this context, our own research was prepared and gradually implemented, where the intensity of individual business risks, status, motivation, feelings of entrepreneurs in SME segment, relationship to the bank, state, society, and business optimism in the Czech Republic and Slovakia was analyzed. Due to the global financial crisis, conditions for SME business have worsened. Average decrease in the profitability amounted in 10.44% in the Czech Republic, and in Slovakia 12.01%. The most important business risk for SME is the market risk (lack of market space for the realization of own production). In the Czech Republic 79.44% and 80.49% of Slovak entrepreneurs reported market risk as a key business risk at present. The perception of entrepreneurs by the society and by the state is not good in both of countries. In the Czech Republic and in Slovakia, lots of firm owners have met with corruption and cronyism. Despite the deterioration in the business environment, Czech and Slovak entrepreneurs are very optimistic. Results of our research confirmed that there is necessary to form complex conditions for business development of small and medium-sized businesses in both countries.

JEL Classification: L26, O16, G21

Keywords: small and medium enterprises, business risks, status, motivation, feelings of entrepreneurs.

Introduction

Small and medium-sized enterprises (SME) have become an increasingly important component of economic development representing a substantial proportion of the national economies all around the world (Karpak and Topcu, 2010). In this context, Henderson and Weiler (2010) indicate that SME can be characterized as major engine of economic growth.

SME have specific features and fulfill important tasks in the economic system. SME have significantly contributed to an employment and GDP, help to create more intense competitive environment which has a great importance in relation to prices and quality of products and services. SME helps with their flexibility to fill the market space and they are bearers of important innovations.

Share of SME in total number of active enterprises in the Czech Republic in 2012 was 99.86%. Share of added value in 2012 was 53.81%. Share of SME's employees in total employment in business sector in the Czech Republic in 2012 was 59.43% (Ministerstvo prumyslu a obchodu Ceskej republiky, 2013). In Slovakia, share of SME in total number of active enterprises was 99.2%; in total employment was 59,5%. Share of added value was 55.6% and share of SME in profit before taxes was 51.6% (Národná agentúra pre rozvoj malého a stredného podnikania, 2013).

SME segment has its own characteristics and disadvantages, which are transformed into business risk. This risk can be divided into market risk (lack of market space for the realization of own production), financial risk (poor access to finance businesses), operational (risk of failure to deal with the processes in the production of goods and services), personal risk (risk due to poor staff) and other risks.

Important factor today, that has influence on existential ability of SME, is narrowed market space due to the causes of the global economic crisis.

Business activities are significantly determined by the environment of the company, which forces it to use a particular method of behavior, to use the choice of particular business goals and ways of achieving them. In this context, the very important role is played by social environment and political and legal environment that is created by the state authorities.

In this context it's considered to be very important to investigate the position of SME in the socio-economic system, because it can be presumed that the positive perception of these companies by social environment can positively stimulate their financial performance and accelerate the positive impact of these companies on the whole society. …

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