Understanding Small and Medium Enterprises (SMEs) in the Philippines PDF

Understanding Small and Medium Enterprises (SMEs) in the Philippines Technopreneurship JOHNAS E. DALUSONG, M.ED. Small Medium Enterprises (SMEs) Small and Medium Enterprises (SMEs) play a crucial role in the Philippine economy. SMEs are businesses that maintain revenue...

Understanding Small and Medium Enterprises (SMEs) in the Philippines Technopreneurship JOHNAS E. DALUSONG, M.ED. Small Medium Enterprises (SMEs) Small and Medium Enterprises (SMEs) play a crucial role in the Philippine economy. SMEs are businesses that maintain revenues, assets, or a number of employees below certain thresholds. They play a critical role in the economy by contributing to innovation, employment, and economic growth. Definition and Size: In the Philippines, the classification of SMEs is defined by the number of employees and annual sales. According to the Department of Trade and Industry (DTI), small businesses have fewer than 100 employees and annual revenues of less than PHP 15 million. Medium enterprises have 100 to 199 employees and annual revenues between PHP 15 million to PHP 100 million. Examples and Scenarios: 1. Local Eatery: A small family-run restaurant in Quezon City with 15 employees and annual sales of PHP 8 million exemplifies a small business. The restaurant may cater to local customers and focus on community engagement. 2. Handicraft Business: A medium-sized enterprise in Cebu specializing in handcrafted furniture, with 120 employees and annual sales of PHP 30 million, shows how a business can scale up while maintaining a niche market. Characteristics: - Personalized Service: Small businesses often offer personalized customer service, as seen in the local bakery that remembers regular customers’ names and preferences. - Flexibility: They can adapt quickly to market changes, such as a boutique clothing store adjusting its inventory based on seasonal trends. - Limited Resources: Small businesses usually have fewer resources compared to larger firms, affecting their marketing reach and financial stability. Management Functions Management Functions Planning: This involves setting goals and determining the best way to achieve them. For instance, a small IT startup in Makati might plan to expand its services into new markets over the next year, requiring a detailed strategy and resource allocation. Management Functions Organizing: Organizing resources efficiently is crucial. A medium- sized manufacturing firm in Davao City must structure its production line and workforce to ensure timely product delivery and quality control. Management Functions Leading: Effective leadership is vital for motivating employees and ensuring smooth operations. A successful owner of a coffee shop in Baguio City leads by example, creating a positive work environment that encourages staff to provide excellent customer service. Management Functions Controlling: This function involves monitoring performance and making adjustments as needed. For example, a retail store in Manila tracks sales data to identify trends and adjust inventory levels accordingly. Examples and Scenarios: 1. Planning: A small business owner in Iloilo may develop a marketing plan to increase online sales by 20% over the next quarter. 2. Organizing: A medium-sized logistics company in Pampanga arranges its fleet of delivery trucks and warehouse staff to optimize delivery routes. 3. Leading: The owner of a local craft beer brewery in Tagaytay actively engages with employees, offering training and fostering a team-oriented culture. 4. Controlling: A small textile business in Batangas reviews monthly financial reports to ensure that expenses stay within budget. Forms of Business Entities Sole Proprietorship Cooperative BUSINESS Partnership Corporation Forms of Business Entities Sole Proprietorship: This is the simplest form of business entity, where a single individual owns and operates the business. For example, a local tailor in Davao operates as a sole proprietorship, managing all aspects of the business independently. Forms of Business Entities Partnership: A partnership involves two or more individuals who share ownership and responsibilities. An example is a law firm in Makati run by several lawyers who share profits and losses. Forms of Business Entities Corporation: A corporation is a legal entity separate from its owners, providing limited liability protection. A well-known example is Jollibee Foods Corporation, which is incorporated and operates numerous fast-food outlets across the country. Forms of Business Entities Cooperative: A cooperative is owned and operated by its members for mutual benefit. For instance, a cooperative in Bacolod helps local farmers by providing them with resources and a collective market for their produce. Forms of Business Entities Examples and Scenarios: 1. Sole Proprietorship: A freelance graphic designer in Cebu City operates independently, handling all client projects and financial matters. 2. Partnership: A dental clinic in Tagaytay is jointly owned by two dentists who share both the operational and financial responsibilities. 3. Corporation: A large retail chain in Manila, such as SM Retail Inc., is a corporation with extensive operations and multiple branches. 4. Cooperative: A fishing cooperative in Palawan helps local fishermen pool resources to improve their catch and market their products more effectively. Importance of SMEs Economic Growth: SMEs contribute significantly to the GDP of a country by providing goods and services, thus stimulating economic activity. Employment: They create a substantial portion of job opportunities, helping to reduce unemployment and underemployment rates. Innovation: SMEs often drive innovation due to their ability to quickly adapt to market changes and experiment with new ideas. Community Development: They play a vital role in local community development and contribute to regional economic balance. Importance of SMEs Examples Small Enterprise: A local bakery or a small consulting firm with a few employees that primarily serves the local community. Medium Enterprise: A regional manufacturing company with a few hundred employees that sells its products nationwide. Support for SMEs: Government Programs: Many countries, including the Philippines, have specific programs and incentives to support SMEs, such as tax breaks, subsidies, and training programs. Access to Financing: SMEs can often access loans and grants specifically designed for smaller businesses. Business Development Services: Assistance in areas like marketing, management, and technology. Challenges Faced by SMEs: Limited Access to Capital: Smaller businesses often struggle to secure funding. Market Competition: They may face intense competition from larger firms with more resources. Regulatory Barriers: Compliance with regulations can be more challenging for smaller businesses due to limited resources.