In this assignment I am going to discuss the importance of the SME to the modern UK economy. I will examine innovative and non-innovative SMEs to illustrate my points.
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Entrepreneurship, (C03EN1) Module Assignment Autumn Term 2003 Word Count:- 1270 words Tuesday 18th November 2003 In this assignment I am going to discuss the importance of the SME to the modern UK economy. I will examine innovative and non-innovative SMEs to illustrate my points. The importance of SMEs is clear in the modern UK economy. They provide ideas, products/service, jobs and also contribute to the wealth of our economy. SMEs account for approximately £1 trillion of the UK turnover [Small Business Service]. The Small Business Service collated statistics about enterprises based on the number of firms registered to pay VAT. In 2002, 25.2million people were employed in firms with less that 250 employees.[Based on number of employees, SME Statistics 2002] and those firms' combined turnover was £988,985 million [Based on turnover, SME Statistics 2002]. For firms that generally employ less than 250 people each that is an astonishing statistic. That turnover figure alone shows just how important a role SMEs have in our economy. However, when you look at the other side of the coin and see that, when combined, SMEs account for nearly 99% of the total number of businesses trading in the UK, it would seem obvious that they contribute so much.
He has recently launched a dual drum washing machine which spins clothes in opposite directions[Dyson.co.uk] The Dyson example shows how one idea can make a company "famous" even though it has been responsible for many more. The Dyson company has grown over the years due to the popularity of its products. In the current economy, innovation is very important to enterprise and the development of goods/services. Enterprises be them large or small become innovative to try and improve and to attempt to increase profits. 66 percent of enterprises in the UK were classed as being innovation active between 1998 and 2000. The assumption that many of those enterprises would be SMEs, is disproved by the fact that 78 percent of large enterprises are innovation active compared to only 66 percent of small and medium enterprises. [adapted from UK Innovation Survey 2001] The sizeable percentages of SMEs who are innovate shows how important, in an overall context, innovation is to our economy. However we should not discount the importance of non-innovative SMEs. The best way to describe a non-innovative SME would be a business which is based on an existing product or service but the person starting the business see potential in the area they are in.
The volatility of the business world means that many SMEs will fail to succeed but many of these will be replaced by new business. The government is trying to encourage start-ups by putting initiatives in place to try and help new businesses get finance and support if they need it to get them through the difficult early days. The sizeable contribution they make to the total GDP of the UK exhibits how important it is for the government to support these businesses. On a national level, 25 percent of SMEs sell outside the UK [SME Omnibus Survey 2001(wave 1)]. This makes them valuable to the economy in terms of encouraging trade with other countries. With regard to innovative and non-innovative SMEs, both are equally important. It goes without saying that the market place needs innovators or it will go stale but we cannot discount the importance of the coffee shops, the hairdressers as they perform or produce goods that the customer wants and needs. At the end of the day the SME has become a large cog in the machine that is the UK economy. Without these businesses, that machine would run a lot slower. This is a brief statement to clarify that this assignment is entirely my own work and that I am aware of the University's policy/regulations on copying, plagiarism and collusion.
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