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

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.

In this article there were examined the current status of SME in the Czech Republic and Slovakia, business risks, position, motivation and feelings of entrepreneurs.

This article has the following structure. In the theoretical part the major attributes of the business environment in the SME segment are presented. In the next section there are introduced objectives, methodology and resources of information, which were used. In chapter 3 are presented results of our own research, and short discusion. In the very end, the basic recommendations for theoretical sector and the economic and political practices have been formulated.

1. Theoretical background

According to Fetisovová et al. (2012), financial and economic crisis had serious implications on the performance of small and medium-sized companies in the European Union. Gross production of SMEs within countries of EU27 by 5.5% in 2009 was decreased. Insufficient effective demand was the most urgent issue for 29% of these SMEs. Authors report that the demand on domestic markets of E27 will continue to be weak.

Particularly important problem of SME is a financial gap, because many of these companies have very limited access to external financial sources. Even before the economic downturn some small businesses were having trouble accessing the funds necessary for growth and innovation. As the consequence of the financial crisis, banks in many countries even less willing to lend to businesses, which further escalates the problems companies facing (European Commission, 2011). …

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