Small and Medium Enterprises (SMEs) Definition

• Stack (2015) showed that only one-tenth of the workforce was employed by a multinational enterprise (MNE). Therefore, the question raised is: Where did most of the workforce work?

From the data recorded by the International Organisational of Standardisation (ISO) in 2015, we discovered that, among all businesses worldwide, 90% were SMEs. These SMEs employ most of the world’s workforce. Hence, the global workforce depends most on SMEs, both in finding a job and improving their standard of living.

First, SMEs have many advantages for a business and are proven in generating growth and welfare, creating job opportunities, and pursuing innovation. Moreover, SMEs have less complexity in structure, bureaucracy, and efficiency than MNEs. These aspects make SMEs more appealing for jobseekers and millennial individuals who are always innovative and seek flexibility in working. To argue whether this statement is correct or not, we will examine what the literature states about SMEs more deeply, especially the small businesses in this research.

Osteryoung and Newman (1993) categorised a business as small business based on several variables: number of employees, annual sales, organisational structure, and assets. Each variable has its limitations to be included as a small business. In addition, Storey and Greene (2010), in their book, Small Business and Entrepreneurship, stated that small and large businesses are extremely different in some terms, such as their size, risks, market power, owner motivation, firm strategy, innovation, and financial source. The authors also argued that the other key point that differentiates small businesses from large businesses is the external uncertainty, where a small business is more affected by uncertainty than a large business (Storey & Greene, 2010).

In addition, SMEs are divided into three types of business: micro, small, and medium businesses. The European Commission defined a micro business as a business that has a turnover of less than £2 million, while a small business has a turnover of more than £2 million but less than £10 million, and a medium business has a turnover between £10 million and £ 50 million (Warehouse, 2012). This statement was also added in the report delivered by Organisation for Economic Cooperation and Development (OECD) in 2016, which mentioned that a micro business is a business that employs one to nine people, while a small business is a business that employs 10 to 49 people, and a medium business employs 50 to 249 people. In conclusion, an SME is a firm that is independently run by one person and/or a small group that conducts business activities to gain profit with 1 to 249 workers with a turnover of less than £50 million (OECD, 2016).

References:

• OECD, 2000. Small and Medium Sized Enterprises: Local Strength, Global Reach. [Online] Available at: http://www.oecd.org/cfe/leed/1918307.pdf [Accessed 17 August 2017].

• Stack, S., 2015. Almost One Tenth of WorkforceEmployed in Multinational. [Online] Available at: http://www.independent.ie/business/irish/almost-one-tenth-of-workforce-employed-in-a-multinational-30885652.html [Accessed 19 June 2017].

• Storey, D. & Francis, G., 2010. Small Business and Entrepreneurship. 1st Edition ed. Essex: Pearson Education Limited.