Structure and Culture of Small Medium Enterprises

‘The category of micro, small and medium-sized enterprises (SMEs) is made up of enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding 50 million euro, and/or an annual balance sheet total not exceeding 43 million euro.’ (Definition, 2011) Above explained is the new definition reconstructed by European Commission based on the developments to business environment. This was published in the year 2005 in their website further talking about the importance of SME’s to the European community in the report they issued.

Looking further into how and why SMEs plays a major role in the business environment the report explains that, the 25 million SMEs provides 75 million jobs covering 99% enterprises in 25 European union countries. Nonetheless, SMEs has to face difficulties in capital and other important factors such as investment loans especially during the early stage which makes it less stable and short period existence for these types of businesses. (Introduction, 2011) However, some determined minds working through this field tend to survive the obstacles faced in the early stage and carry on with the other phases. Usually SMEs have less than 250 employees. This small community also has to have an intranet among them to be updated and connected to each another. One of the most common tools is paper based communication.

Paper based communication requires plenty of paper, more procedure, and more time, which is less reliable and difficult to manage. It also has its advantage of having long time proof of records. But that is not the basic factor highly prioritized in today’s business world. As alternatives keeps the place tidy and stores the record internally in any hard disk or any software. Most importantly, company records are much safer where there is more IT involved. Though, communication is a basic factor in every business organization, not every company has established the latest technology of communication.

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Different industries or companies have communication process based on their level. Like, huge companies use modern and efficient and/or costly ways of communication whereas; small and medium enterprises (SMEs) use alternative modes which are cheaper and more procedure involved means of communication. This report is based on SME’s highlighting their ways of communication with their stake holders and most importantly, upon how they can improve the method of communication with lower cost. Instead of complicated communication systems these SMEs also could rely on more efficient ways which is more IT related. Among every possible upgrade the key factor for SMEs would be to analyze and go with the minimal cost plan.

Executive Summary The introduction of the report explains about what exactly are SMEs. This highlights upon the business culture and structure also the methods they could apply in order to upgrade the existing techniques for an easier method of communication. Alongside, coming up with low cost upgrades as SMEs would not have huge amount in their turnover, moreover it would not be valuable for them for spend abundantly on communication within the organization. Hence, I have shared some opinions which they could rely on and at the same time which would fix into their budget.

The report further gives explanations on how the SMEs could grow in its scale by following some method to aware the customers of its existence. And what other IT related yet cheaper ways in which they could keep records like, stock, daily sales and attendance.

As far as record keeping is concern in a business organization, SMEs also needs to maintain daily stock report and sales report in a daily basis in order to avoid stock imbalance. If stock is not handled well as a daily/weekly, at the end of the year, missing stocks would be numerous and mysterious. This is going to be a hard task for the company to investigate specially for SMEs. The options elaborated in the report helps to identify some different techniques which help to standardize the majority of work done within the organization.

The methods are been separately explained on how each can be utilized and the outcome result of it. Most of it talks about the efficient and effectiveness brought by using the methods. Like how to computerized the stock report and the result in quick search of a transaction or any stock details. Also methods on how the SMEs can reach their customers by spending the least amount on advertising.

Structure and Culture of an SME

SMEs are usually sole traders who have no more than 250 employees and less turnover of Rs50 million and below. (Fernando, R. 2003) The organizational behavior within the SMEs is less formal than of a larger organization. There are no specific standard followed by the employees. Where attendance maybe the only effective factor for any employee. These types of businesses are usually referred as bureaucratic organization, where the manager/owner has high authority in decision making in every aspect without any recommendation and knowledge by the staffs. For instance, owner decides how a shift would work; if/whether the interior has to be changed and to recruit more staffs and so on. Also he plays the leadership role in deciding how to contact with the customer. Like, if the purchase bills has to be made or not and if so how; printed receipts or manual.

Taking a look at why smaller and medium enterprises have a less formal routine is due to cost cutting, result in manual work with cheaper materials to work and also they do not keep a record of day to day business other than the cash-flow. Cash flow records are also maintained in a log book where the cashier list down the items sold, each one separately till the end of the day. And what if a customer needs the receipt? They get a manual receipt with company stamped and purchase details hand written by the cashier, costing more time work and procedure. Meanwhile, the owner keeps a record of bulk purchase in his logbook noting it down after every purchase. This kind of record keeping is difficult to maintain if they want to find something quickly. Moreover, human errors and easy going behavior of a staff may lead to mysterious results of stock imbalance.

The external communication; customer communication is preferably poor in SMEs as they do very less advertisements and direct approach to the customers are almost nil regarding its existence. Most of its customers may not know if they have a new stock or introduce a new brand and so on. To be in contact more with the customers is the only way a business can run successfully. But as I have mentioned earlier that SMEs would not prefer any expensive methods of communicating within its organization, below are some upgrades they could bring on in order to connect with the customers and have more efficient way of communicating within the organization. Additionally, some advanced system to keep record.

Improved procedure within the business

Method 1 Though it has been a tradition to SMEs to keep paper records, they could switch to more IT based information storage. The owner could purchase sales software which is user friendly and easy to train cashiers and/or related department like stores. The registration of the software can be made annually with an annual payment method based on the license to use it. Thus, stock can be maintained in this specific platform at the same time encoding items can result for easy access. Sales software would not be of high cost as it has to be paid annually and compared to the ease it makes in maintaining the majority of the work. Thus, the SME’s would save much time on stock maintaining in efficient way which is more effective; most importantly, with low cost.

Method 2 If sales software is considered as high cost per annum simple spreadsheet documentation can be maintained by help of a Microsoft excel expert. Microsoft excel provides a solution to store and calculate the raw data by customized formulas also with the help of the in-built formulas available in the software itself helps to solve minor calculations. It has the potential to create a spreadsheet of raw data into flowcharts, tables and reports to bring a better understanding.

The cells are editable which enables to reenter if any changes have to be made. A sales chart can be made in terms of a day, week, month or a year based on their preference. If a company preferred to list down the sales and the stock details in a daily basis, they could include different days tagged in different tabs. While creating different excel documents for different months. Hence, any record can be searched easily with shortcut keys. Meanwhile the SME can keep a good record also record keeping method would be more efficient.

SMEs connecting with customers The reason behind low interaction between SMEs and its’ customer is also is to avoid expenses while running business. Bad assumption of SMEs is that communicating to the customers through advertisements are overheads to the company, in fact the attraction gained by the customers would only cause them to have more trade and eventually more profit. To obtain these, SMEs can integrate with modern and IT related communication system which would cost them a lower rate.

Method 1 Not only internet can be used as a tool to market but also mobile advertising can be the best and more direct way of approaching to the customer personally. The company can register corporateSMS service from a local telecommunication centre. It helps to forward the same text message with many recipients at the same time. This service can be used to notify the customers for new stock arrivals and so on. News spreads easily, thus a single text message can reach the news to a family and close friends. Overall another 5-10 people would be aware of the news. This makes the direct communication more useful and effective.

Method 2 Online marketing is the leading method in modern community. It has become so common that the SMEs also could hire an UI designer to build a platform for their business on the web. This could provide their information regarding the business and products available. Updating the website helps the customers to be familiar with the present availability. There are many web hosting companies which sometimes charge less than $10 per annum. This is quite very few amounts to spend in order to collect more customer and profit to the business.

Method 3 Why spend a cent when you can advertise for free? The organization can created a web page about themselves on social networking sites, most common; the Facebook. Owning a page does not require any payment. Numerous amounts of people can search and go through the page as Facebook is in fact, the top rated social networking site where over billions of active users login almost daily. Hence, the chance of more people viewing the page is high and meanwhile, they get to know about the location, service and products available in the organization. The page can be more attractive if company could share pictures of products to make it more helpful the buyers. The details like, history of the organization, mission/vision/objectives and how the customers can contact can also be also included as more details in the information tab provided. Hence this method of online marketing can help to reach more customers without costing any.

Method 4 Apart from advertising to the customer, a proof of purchase is required when a customer makes a transaction. In most SMEs a receipt is not provided unless the customer request for it. Hand written slip with a seal of company is how they usually provide it. In my opinion along with sales software they would be able to link to a POS (point of Sales) centre thus a computer generated receipt can be printed through a receipt printer. This method would help both the customer and company to minimize the time of sales.

Recommendation

Based on the methods mentioned above, my recommendation on how the SMEs could manage their stock is by using a sales software as this is a computer programmed method the chance of mistakes are less compared to using an excel sheet to write down the records manually. Plus, the purchase bill or receipt can be automatically printed after every sales entry if required which leads to a more reliable and quick sale.

Thereby, providing the customer a proof and the system detects a sale been done and automatically adjust the balance amount. In the excel sheet this could also be done using the formulas yet it is not reliable if not well maintained. And in most situations daily maintenance cannot be done since the manual work is larger than the automatic level. In case of the sales software technique the normal selling routine goes parallel with the automatic generating of the stock report. It makes the handling procedure much easier and effective.

Talking about the marketing point, since Facebook requires none to create a page in the website, this can be easily done to promote its business. This method is the highest effective way because the website is a well-known platform for almost every region. Hence, people around the world will get to know the company and by chance the SMEs could also grow larger in their business according to the income and time.

The second best choice I recommend is to register with corporateSMS and to directly approach for customers. This could be done by introducing a visitors’ book and recording the basic information of the customer like; name, contact and preferred item. While the company receives new stock they could text specific group of people with common interest of item, thus the same message can be delivered in bulk. This kind of advertising is more direct and effective.

Conclusion Effective communication is the base of the business. If the communication process is reliable then the company can run smoothly. Running a smooth business requires sufficient ways to overcome any conflicts. Any loop holes has to be fixed; starting with the procedure within the company and how to interact with its stakeholders. If a good policy can be retained then the SMEs would also be a well-established part of the society. Rather, having to discontinue soon after starting the business. The success story comes with strong determination; the willingness of a person is all it counts.

The report has been highlighted with few methods to improve the existing nature of the SMEs to produce a better procedure to them for their future. Ways in which they could rely on making more profit by spending a small amount of money. Let me conclude by saying that, in my opinion these methods to upgrade the existing techniques followed by SMEs would help them save more time and minimize errors and mistakes from sales maintaining. SMEs can develop their existing communication process within the organization for an efficient and effective system, where they could easily communicate with its customers also within the business community. The opinions mentioned are of low cost also more efficient and convenient to run a small and medium enterprise for a better communication to the organization.

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