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04.25.06
Principles Of Productivity And Operations Management For Small And Mid-size Business
 By
Ezra Bar
For this article, I selected a sector that has not been covered by authors and could hardly be found in books for Operations Management. I find this topic's importance and significance to the global economy, and the Western, in particular, very high.
Authors and advocates (e.g., Schroeder, 2004) dealt with the large enterprises, from both the manufacturing and service sectors; the smaller firms, known as Small Business, Minority Owned Business, SME (Small and Medium-size Enterprise), or SMB (Small and Medium-size Business), have been virtually ignored by them.
Definition and Characteristics
A Small and Medium-size Enterprise is defined differently, according to the purpose of each definition; the "UK Department of Trade & Industry" (2001) suggests that it is mainly because of the wide diversity of businesses. The UK Department provides a basic definition of SME, one that was used by the Bolton Committee in its 1971 Report on Small Firms: "a small firm is an independent business, managed by its owner or part-owners and having a small market share".
The UK Department also comes with statistics and hard numbers for its definition; however, I'll use a more updated, and broader definition of SME, which is given by "EU Commission" (2003):
The category of SME is made up of "autonomous enterprises" which employ fewer than 250 person and which have an annual turnover not exceeding EUR 50 million, and/or an annual balance sheet total not exceeding EUR 43 million. An "autonomous enterprise" is any enterprise that is not classified as a "partner enterprise"... or as a "linked enterprise".
Partner enterprise is an enterprise (upstream enterprise), that holds, either solely or jointly, 25% or more of the capital or voting rights or another enterprise (downstream enterprise). [In the US it is normally called "small business" and depending on who owns it, perhaps a" minority owned business".
In the US, minority owned businesses often get breaks on public projects and contact awards; for example they can get a 5% higher score because of their minority status when being evaluated for public contracts in some cases.]
Exceptions are public investment corporations and venture capital companies that can hold more than 25%, provided the total investment is less than EUR 1.25 million. A "linked enterprise" is an enterprise that has a majority of shareholders' or members' voting rights in another enterprise... or has the right to exercise a dominant influence over another enterprise.
Within the SME category, a small enterprise is defined as an enterprise which employs fewer than 50 persons and whose annual turnover/ balance sheet total does not exceed EUR 10 million.
Within the SME category, a micro-enterprise is defined as an enterprise which employs fewer than 10 persons and whose annual turnover/ balance sheet total does not exceed EUR 2 million.
This distinction is strongly correlated with the firms' organisation. Schlenker and Crocker (2003) suggest that micro-enterprises are more often a mixture of sole traders or sole proprietor organisations, which tend to behave as consultants rather than as corporate bodies. Small enterprises more often than not, begin to behave like corporate bodies, with a corporate culture and a clear division of responsibilities.
Medium sized enterprises often mirror their corporate counterparts with a distinct corporate culture and a dedicated IT function. The primary purpose of these firms, they suggest, is not to maximize revenues, but to generate an income for their owners; "they are more concerned with "quality of life" issues than stock value... only 3 per cent of all SMEs actually wish or are able to grow, in terms of either employment or turnover".
Click here to continue reading this article.
About the Author:
Ezra Bar, MBA, PhD Student, is a Business Consutant and Academic Mentor for MBA and Engineering Students.
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