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Large enterprises can prosper when given the right conditions and access to free markets, but SMEs have a wide range of unmet demands. Many SMEs struggle to obtain the skills and resources that would increase their productivity because of their small size, including brilliant personnel with the most recent understanding of technology, finance, and managerial techniques.
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Additionally, a large number of SMEs are fledgling businesses, which when paired with their modest size renders them a weaker competitor for established market players, both in terms of capital access and for clients who could view small suppliers as being too risky. In many OECD nations, niche market actors like crowdfunding platforms and venture capital firms are still in the early stages of growth and frequently unable to meet the demands of SMEs.
Given the difficulties SMEs face and the scale of the opportunity, the majority of G-20 nations have established a national organisation solely or mostly devoted to fostering their expansion. However, running these government organisations is difficult due to the same factors that have made it difficult for markets to satisfy SMEs’ needs: their small size and variety of situations. They should concentrate on encouraging three specific traits of a strong and effective SME ecosystem: enhancing SMEs’ business confidence, facilitating SMEs’ growth in general and for high achievers, and enhancing SMEs’ competitiveness.
Small and medium-sized businesses (SMEs) typically fall into one of six categories: innovative start-ups in the early stages, well-established start-ups, growing medium-sized businesses, stagnant or struggling medium-sized businesses, locally oriented small businesses, and unofficial microbusinesses. While it is important to take into account the needs of each SME subsegment as a whole, we think that SME-development organisations should concentrate their limited resources on those that have the greatest chance of making a difference and develop programmes that are tailored to their particular circumstances.
The medium-sized business segment is frequently given emphasis. Despite accounting for only 2% of all businesses, medium-sized businesses in most countries account for 30% of GDP and employment, according to research from a number of academics.
170,000 small and medium-sized firms in the United States shipped goods worth close to $180 billion to TPP nations in 2014. Less than 5% of all U.S. companies export goods, despite the fact that 98 percent of American exporters are small enterprises. By selling American goods and services to the 95% of consumers outside of our borders, small businesses have a great untapped potential to boost revenues and sustain jobs.
Nearly two-thirds of net new jobs in the private sector during the past few decades have come from the 30 million SMEs in the United States. Compared to similar companies that don’t export, SMEs that do so typically develop even faster, add more employment, and pay higher compensation. T-TIP will enhance already strong U.S.-EU SME cooperation and help SMEs on both sides of the Atlantic seize job-supporting trade and investment opportunities.
Most American businesses, including SMEs, don’t export goods directly to international markets. A research conducted for SBA Advocacy found that in 2002, fewer than 2% of all American businesses exported directly. Additionally, SMEs’ economic activity from exporting goods was less than that of larger companies. As previously mentioned, based on Census data for direct merchandise exports, exports generated only 3.8 percent of SME GDP in 2004—less than one-third of the 11.5 percent that exports contributed to large-firm GDP. A recent study found that while few businesses export, the ones that do are typically bigger and more successful. Different marketing channels are used by producers, service providers, and farms to supply foreign markets. They can sell directly to foreign customers or use export intermediaries (such as wholesalers, transportation companies, brokers, or processors) who use their products/services in their sales abroad.
SMEs are sometimes described as being “resource-constrained” in comparison to larger companies, which limits their capacity to export. SME’s are more prone to experience resource shortages in terms of money and people, which prevents them from taking advantage of opportunities abroad. For instance, SME exporters may face significant challenges due to reasons including a shortage of employees, an inability to satisfy quality requirements, a lack of financial support, and inadequate market knowledge. Exporting is frequently seen as a risky endeavour that can be expensive for the company; in order to succeed, a small business must gather enough resources to reduce the greater risk of conducting business abroad.
Among the biggest challenges in the informal sector is ensuring that SMEs have correct and complete information regarding the process, benefits, and penalties. In 2013, The “Colombia se formaliza” program reached 80,000 entrepreneurs a year, raising awareness and offering personal assistance to formalize their business operations, with 40 percent accepting to formalize.
Governments can assist SMEs in maximising potential for growth and productivity enhancement. Unlocking SME growth is a difficult task, though. Despite the fact that we provided many examples of successes, some endeavours have been less successful and call for caution. The projects with the most potential can be found by carefully weighing the advantages, disadvantages, and dangers. Most significantly, all governments should be paying attention because of the potential for SME growth and higher productivity.
In order to fulfil government regulations, such as paying taxes, certain SME-development organisations have developed a platform—typically a website—that serves as a one-stop shop for all government services, programmes, and data. Some websites have additional functionality, including marketplaces for business opportunities, access to data, and links to financial institutions, advisers, and legal services.
Author: Tanya Saraswat, a student of Narsee Monjee Institute of Management Studies (NMIMS), in case of any queries please contact/write back to us via email to email@example.com or at Khurana & Khurana, Advocates and IP Attorney.