ASSIGNMENT

(a) Describe what are the problems that might a SME entrepreneur faces.

(b) Case study about a successful SME in Malaysia. (How its early years, what are the challenges, factors of success, future plan)

1.0Introduction to the organization

Small and medium size enterprises (SMEs) are the main developing force of developed marketing economies. They are usually representing the majority of all the enterprises and accordingly they are main driving force of entrepreneurship development and economy as whole. In most of developed countries, percentage of SMEs in total number of enterprises is around 90%, while 60% of available workforce is employed in those firms. If observing this issue trough the scope presented in this paper, it is obvious that

SMEs have large influence on development of modern economies. This is why it is necessary to perform permanent analysis of key problems facing SMEs during their development.

Small and Medium Enterprises (SMEs) play a significant role in the development of the Malaysian economy. However, their contribution to the national economy is still relatively small. Due to this, the government has made the development of SMEs a high priority area with a string of development agendas. Despite this, SMEs are still facing heaps of challenges and obstacles that deter them from further expanding their businesses. Factors involved include low access in borrowing and small capital investment, low access of needed infrastructure, low level of expert abilities and raw materials, low expertise in management and technical knowledge.

The challenges and obstacles faced are highly related to the developmental stage of the companies and it includes lack of managerial capabilities, shortage in financing and human resources. This increases the need for value creation among SMEs to ensure business sustainability which coexists within an environment of good corporate governance. The lack of human resources in SMEs pushes them to outsource to improve their organization. This has encouraged the birth of Small and Medium Practices (SMPs) especially after the bad accountability and internal control in SMEs. SMEs have become the niche market for SMPs.

Generally SMPs are involved in assisting the SMEs in their compliance to accounting, taxation and other regulatory requirements. The lack of expertise becomes advantageous to SMPs to extend their services into advisory and consulting services to cater for the business needs of the SMEs in the ever changing business environment.

2.0Body

2.1Analysis the problem of SME

Financial problem

For many Americans, financial concerns are their number one stress point. Thats comprehensible given the current pecuniary climate, but at the same time, worry doesnt solve much. Taking control of your finances does.

The monetary benefits of dealing with financial problemssaving more, compensating down expensive debtwill improve not just your bottom line but your overall mood

as well. The less you worry about dealing with finances and money issues, the more you can enjoy life.

Make it a group project. Every hard task becomes easier with the support of friends and household, so share your goals. Leaning on your relationships can also help keep you on track. Theres no better stress reducer than spending quality time with loved ones.

Difficulty in acquiring raw material

We also rely on a single supplier for silicone raw materials used in some of our products, including breast implants. Although we have an arrangement through this supplier to transfer the necessary formulations to us in the event that it cannot meet our requirements, we cannot guarantee that we would be able to produce or obtain an enough volume of quality silicone raw materials in a timely manner. We depend on third party manufacturers for silicone molded components. These third party manufacturers must maintain agreement with the FDAs Quality System Regulation, or QSR, which sets forth the current good manufacturing practice average for medical devices and requires manufacturers to follow design, testing and control documentation and air quality assurance procedures during the manufacturing process. Any material reduction in our raw material supply or a failure by our third party manufacturers to maintain compliance with the QSR could result in decreased sales of our products and a diminution in.

Marketing of product

Product marketing deals with the "7 P's" of marketing, which are product, pricing, place, promotion, physical environment, process and people.

Product marketing, as opposed to product management, deals with more outbound marketing or customer-facing tasks (in the older sense of the phrase). For example, product management deals with the basics of product development within a firm, whereas product marketing deals with marketing the product to prospects, customers, and others. Product marketing, as a job function within a firm, also differs from other marketing jobs such as promotiontransportations ("marcom"), online marketing, advertising, marketing strategy, and public relations, although product marketers may use channels such as online for outbound marketing for their product.

To inform these decisions, Product Marketing Managers (PMMs) act as the Voice of the Customer to the rest of the product team and company. This includes gaining a deep understanding ofand drivingcustomer engagement with the product, throughout their lifecycle (pre-adoption, post adoption/purchase, and after churning). PMMs assemble this customer information through customer surveys and interviews, and when available, product usage data. This frequently informs the future product roadmap, as well as driving customer product education to ensure improved engagement.

Product marketing frequently differs from product management in high-tech companies. Whereas the product manager is required to take a product's requirements from the sales and marketing personnel and create a product requirements document (PRD), which will be used by the engineering team to build the product, the product marketing manager can be engaged in the task of creating a market requirements document (MRD), which is used as source for the product administration to develop the PRD.

One issue that faces Product Marketers is that they are chartered with developing much of the content for the various constituents (sales, marcom, customers, blogs, etc.). Creating content tends to be given more value than the actual research and thinking that is behind all the content.

The Technical marketing role is becoming more valuable as companies become more competitive and seek to reduce costs and time to market. Another trend is to have one Product Marketing Manager per group of Product Managers. This is the model that leads to the issue of PMMs being pressured to write content instead of connecting with the market.

Shortage of expert

In the last decade, data breaches and information technologies have forced cyber security into the forefront of American consciousness, despite the fact that it has historically been a postscript for many establishments, organizations, and individuals. Demand for cyber security professionals has increased dramatically in recent years, with government organizations planning to hire thousands of cyber professionals in the near future.

The report provides an optimistic interpretation of the future capabilities of the United States to meet its cyber security needs. Check it out to learn more about the background of the problem, the economic theory behind RANDs optimism, and current initiatives addressing the cyber security disequilibrium.

2.2Describe the problems of SME.

Problems Faced by SMEs

Small and Medium Enterprises (SMEs) are often confronted with problems that is uncommon to the larger companies and multi-national corporations.These problems include the following:

Lack of IT Support

IT personnel are in high demand and are often attracted to bigger companies and MNCs.It is very difficult for SMEs to attract good IT personnel.It is even more difficult to retain them.Moreover, good IT personnel are expensive and may not be affordable by most SMEs.

Lack of IT Literacy

Many of the employees in SMEs started from the ground up after working with the company for many years.Some of them are often holding supervisory and managerial positions. These employees may not be IT literate and often have high resistance to the changes in the working process that they are comfortable with after many years.

Lack of Formal Procedure and Discipline

Most SMEs do not have formal procedure or often these are not documented.Furthermore, there is tendency for these procedures to change frequently.This makes it difficult for third party and newcomer to understand the existing business practices and match them with the IT process.

Uneven IT Awareness and Management Skill

As company grows, new managers are often introduced into the company.There will also be old managers who are promoted from the rank and file.Some of these managers may not been trained in the leadership and management skill.These uneven skill among the managers often caused conflicts during the implementation.

Lack of Financial Resources

As a SME/SMI, financial resources are often limited.This often force company to select a solution, which appear to be cheap initially.However, the hidden costs will start to emerge during implementation.This sometime causes the project to be abandoned or sometime sent the company into further financial crisis.

Lack of Human Resources

Implementations of some bigger scale IT project especially those that involve business process across different departments or require large amount of initial data entries require human resource during the implementation.Some SMEs are often in the stage of frequent fire fighting and shortage of manpower.This makes it very difficult for them to allocate time to carry out implementation.Furthermore, there is always a conflict between getting the daily routing work going and to do the Extra IT implementation.

Lack of Experience of Using Consultants

A good consultant often save time and effort, and help to prevent pitfalls during the IT projects.However, most SMEs are lacked of experience in working with consultants.The lack of knowledge in the field of IT makes them difficult in identifying good consultant for the projects.They often feel that the consultant costs is too high and they can handle it with their own staff.If the company has no staff that are experience and knowledgeable in the IT project, avoiding external help often costs more to the company eventually.

2.3Describe the solutions of the problems

How can SMEs overcome Inherent Difficulties

Clear Vision and Purpose

Set clear vision for the company.Decide what you want the company to be in the pre-determined future.With that, set the vision for the IT project.Define the purposes of the IT project, what it intends to solve or what it intends to improve.

Build up Strong Management Team

This is easier say then done.The definition of a strong management team differs from one CEO to another among the SMEs.This is very much dependent on the background, preference and management knowledge of the CEO will determine what the management team will be.

It is important to specify the company vision, the business objective, define the business plan and then determine what type of management skill will be required in the management team to achieve the company vision.A strong management team with leadership skill and ability to appreciate technology will make the implementation of IT much easier.

Culture of Learning and Sharing

Keeping up with knowledge and seeing the world mattered less in the days of lifetime employment and when technology changed relatively slower.However, due to the rapid changes of technologies, even companies are trying hard to remain successful for more than two to three decades.The job nature of each employee also changes more rapidly.In 1990, Digital Equipment Corp. was the second largest company in the computer industry; a decade later it no longer exists as an independent company.In the early 1980s nothing could stop IBM; in the 1990s it shed more than 100,000 jobs.The once-great British motorcycle industry in non-existence nowadays.

To survive and to be successful, organization must continue to improve and learn.A culture of willingness to learn and share knowledge will make the organization transformation much easier.This will reduce the resistance to change.

Investments in training of management team and staff are necessary.This will open the windows to the other alternatives of operating the business in more efficient and profitable way.

Resistance to changes is one of the biggest obstacles in any IT implementation or organization improvement.Having a culture of learning and sharing of knowledge will help to minimize that effect.The culture of the company can only be molded by the leadership of the top management.The top management has to lead by example and show willingness to change.

Communicate, Communicate, Communicate

By the way, common sense is not so common.If you want your staff to know what you intend to do, you have to communicate to them.Never assume that they can read your mind.The fact is, technology has not advanced to the stage of mind reading.

It is quite common for some top management to ignore communicating their plan or intention to their staff.This may be due to the usual busy work schedule of the top management or the intention to keep their plan confidential.There happen more frequently for top management of SMEs.If the staff do not know the long-term plan and objectives of doing certain tasks, it is very difficult for them to exercise initiative.This in turn, put additional work on the top management to provide closer supervision and guidance.Staff will be less motivated in carrying out the task due to the lack of ownership of the task.If the top management cannot have the basic trust on their staff, it is also very unlikely that their staff will trust them.This distrust will create obstacles to any organization improvement.

Get External Help

Good external advisors or consultants can induce different way of looking at the business and expertise in some specific areas.

It is normally not affordable for SMEs to employ high quality management and technical staff.Besides the salary, experienced management and technical staff are less willing to work in SME due to the limited career advance prospect.Yet, expertise and experience staffs are essential for the growth of the company.How can we overcome this?One of the more common ways is to engage external advisors and consultants on term contract basis to guide and improve specific business issue.This will also offer the existing staff a chance to learn during the process.Once the company grow to a larger size, higher quality staffs will then be easier to attract.Another advantage of engaging external consultants is to take advantage of the government financial assistance on management consulting project for SMEs.

External Financial Assistance

There are many financial assistance schemes available.Some are from the government agencies and some are from hardware and software vendors.SMEs can take advantage of these schemes to minimize their cash flow issues due to the IT project implementation.

3.0Conclusion

Malaysian SMEs have been at the forefront of local economic development, even before the country achieved independence in 1957. What is different now is the development of a serious and concerted Masterplan to ensure the success of the sector.

Over the years, various organisations were created to develop Small and Medium Enterprises (SMEs) in Malaysia. Leading the pack was the Small and Medium Industries Development Corporation (SMIDEC), with its programmes and assistance for SMEs to achieve their funding and development needs.

Things took a turn for the better in 2007, when the National SME Development Council (NSDC) decided to appoint a single dedicated agency to formulate overall policies and strategies for SMEs and to coordinate programmes across all related Ministries and Agencies. SMIDEC which was tasked to assume this role eventually became known as the Small and Medium Enterprises Corporation Malaysia (SME Corp Malaysia) in October 2009. It is now the central point of reference for information and advisory services for all SMEs in Malaysia.

It is without doubt that SMEs play a significant role in the development of the Malaysian economy. However, their contribution to the national economy is still relatively small. Much has been done thus far by the government to address this issue. However quite a few of them are still facing a variety of challenges and obstacles that deter further expansion of their businesses.

At the operation level, SMEs have to contend with hindrances in the form of rising raw materials and input costs, increasing overhead costs as well as cash flow restraints.

SMEs also need to ensure successful development of their human resources, especially in the hiring of cheaper labour from overseas. It has also becoming more challenging for some SMEs as they have been urged to start adjusting and adapting their operations to ready themselves for the inception of the minimum wage for foreign workers, which comes into effect on Jan 1, 2014.

The National Wages Consultative Council (NWCC) had recently issued a statement that SMEs would not have to pay the minimum wage to their foreign workers until after December 31, 2013. In addition, SMEs are not allowed to make any deductions on levies, accommodation and other allowances from the salaries of their foreign workers. The minimum wage for private-sector employees has been set at between RM800 to RM900 per month.

This has put some of the smaller SMEs in a quandary as they would now have to cough up higher wages for their employees. To resolve this issue, SME Corp has continuously advised SMEs to enhance their workers knowledge and skills including their communications skills, increase their competitiveness and embrace innovation as their mantra for continued success as well as increasing worker loyalty to their respective employers.

In addition to this, companies must not limit their market to just Malaysia, alone. Through the use of web marketing, SMEs can grow at a much faster rate by expanding beyond the local market with limited capital outlay. The challenge lies in the ability of the SMEs to learn new skills and embrace technology faster and more effectively.

The Malaysian Innovation Agency Act 2010 was enacted to enable SMEs to embrace this new phenomenon. Furthermore, the Special Innovation Unit (UNIK) was established under the Prime Ministers Department to assist SMEs in innovating for their businesses. UNIK aims to introduce new technologies to SMEs. Already, UNIK has searched universities and research institutes and identified technologies suitable for adoption by SMEs.

In an age of rapid change and development, remaking the business model for SMEs navigating complex growth markets not only involves adequate adoption of technology but also calls for refocusing on talent management and succession planning in deriving critical sources of competitive advantage that cannot be replicated by competitors, both local ones and those abroad.

Once SMEs have expanded globally, they can compete effectively with foreign companies by developing a contemporary image that reflects their product and target markets. Moreover, flexibility, agility, integration, innovation and speed in all areas will be key to developing their brand and expanding their market share.

COURSEWORK

1. Please describe the roles of small and medium enterprises.

Roles of Small and Medium Enterprises (SMEs)

Small and medium enterprises (SMEs) play an important role as the backbone of economic development of a country. They also act as the base to harness entrepreneurship skills of individuals. Figure 2.1 depicts the roles of SMEs in entrepreneurship.

Figure 2.1 Roles of small and medium enterprises

Test ground for entrepreneurs

Small and medium enterprises (SMEs) are test grounds for entrepreneurs. It provides them with entrepreneurial experience before they can enter a certain industry. Working in an SME helps entrepreneurs evaluate their skills and expertise in planning, controlling, leading, and managing a company. The experience gained prepares them for more complex challenges in highly competitive industries.

Source of innovation and creativity

Even though small companies do not have their own research and development departments, they are still able to produce new products due to the creativity of its owners. This is because most of these companies pay more attention to the needs of customers. Furthermore, the owners themselves are innovative and creative individuals who adapt their products in developing something new for their customers.

Career opportunities for productive individuals

Each individual differs in terms of personality and his way of doing things. However, only people who like challenges and like something different are suitable for unstructured businesses such as SMEs. The informal business environment of SMEs creates a lot of opportunities for individuals to apply their creativity. It is so much different when compared to working for a big company, in which tasks are completed based on the direction and specifications set by top management.

2. Please describe the problems faced by small and medium enterprises.

Problems faced by Small and Medium Enterprises (SMEs)

There are several problems that SME entrepreneurs have to face in implementing SME development programmes. The problems faced by SME entrepreneurs are identified in Figure 2.3.

Financial problems

Financial problem is a major problem in the development of SME entrepreneurs in Malaysia. SME entrepreneurs find it very difficult to get loans from financial institutions especially at the growth stage of their business. Evert though loan facilities are provided by financial institutions, the instability of the entrepreneurs' financial position makes it very difficult for them to obtain these loans. Furthermore, financial institutions tend to dive loans to bigger industries which are more stable.

Entrepreneurs have the tendency to give credit to their customers and eventual) have difficulties in collecting the money owed to them. This situation gets then into trouble when they need to increase their capital. Entrepreneurs will not be able to buy the needed supplies for their operations. This will lead to their inability to fulfil customers' demands. Consequently, there is a high probability that they will lose their customers or at least lose their customers' confidence and loyalty toward; their company.

Due to financial problems, SME entrepreneurs are unable to use the latest technology because of its high costs. As a consequence, it is difficult for them to reduce the cost per unit of production and is unable to capitalize on economies of scale.

Figure 2.3 Problems faced by SMEs

Shortage of experts

Malaysian SME entrepreneurs face the problem of not having highly skilled workforce. This is because they are unable to provide suitable compensation packages that will attract individuals to join their company. This contrasts to bigger industries which are more capable of offering attractive compensation packages such as higher salaries, bonuses, incentives, and other benefits whereby SMEs are not able to do so.

SMEs also have high employee turnover rate. This is because some of their employees use SMEs as a stepping stone while waiting for better opportunities. They use SMEs to get the experience needed to join bigger industries, which offer a better compensation packages. This situation makes it difficult for SME entrepreneurs to employ new employees, and even it they do, entrepreneurs need to incur costs to get the new employees trained and adjusted to the new working environment.

Difficulty in acquiring raw materials

SME entrepreneurs also find it difficult to get their supply of raw materials because they have to compete with bigger Firms. Suppliers usually give priority to bigger firms because these industries buy in large quantities. Furthermore, their terms of payment are more secured when compared to SMEs.

Insufficient and inappropriate sites or buildings

SME entrepreneurs also find it difficult to obtain strategic operational sites and buildings. SMEs operate in buildings that are not strategic in the eyes of customers, suppliers, and creditors as these sites do not allow them to increase the size of their operations. In fact, some of them actually operate their businesses in housing areas, if not in their own homes. For example, many fish chips factories in Kelantan and Terengganu are located at the entrepreneurs houses.

This not only causes the problem of limited space for operational equipment and workers' comfort, but also brings about environmental problems to the neighbourhood due to pollution, noise, and other disturbances. Although the local government provides locations which are more suitable, SME entrepreneurs are often faced with problems such as high rentals, insufficient space, difficulties in monitoring operations, and unwillingness of their workers to move to the new location.

Marketing of products

Marketing activities enable SME entrepreneurs to market their products to customers, which consists of wholesalers, retailers, and end users. However, they face problems in marketing their products to these groups of people as they are not financially capable of conducting their own promotional activities, advertising, or packaging when compared to the bigger industries.

Due to this problem, SME entrepreneurs are forced to appoint middlemen to sell, distribute, and market their products. Often, the middlemen manipulate the price of the products by purchasing them From the producers at a lower price and selling them in the marketplace at a higher price.

Most entrepreneurs are aware of this problem, but they do not have a choice as they lack the capital to market their product themselves. Moreover, they need to get the money that they have invested in the business quickly even if it means that the profit obtained is very little or none at all. Although there are government agencies established to deal with the problem of middlemen in SMEs, this activity is difficult to eliminate due to the capital bonds that exist between the middlemen and the entrepreneurs.

Other problems

Besides the' major problems that have been discussed above, there are also other problems which are related to competition, management, and technology. Most of the entrepreneurs who manage their companies do not possess high education and are not well trained. As a result, they are not able to manage their companies efficiently. In addition,4besides the problem of competing among themselves, SME entrepreneurs have to compete with bigger industries which have better skills and capabilities in carrying out production activities.

The level of technology possessed by SMEs is usually a little backward and is not competitive. Although entrepreneurs realize this, they are unable to purchase modern technological and up-to-date equipment due to capital and skills constraints.

Roles of small and medium enterprises

Test ground for entrepreneurs

Source of innovation and creativity

Career opportunities for productive individuals

Problems faced by SMEs

Financial problems

Insufficient and inappropriate sites or building

Marketing of products

Other problems

Difficulty in acquiring raw materials

Shortage of experts

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