Small and Medium Sized Enterprises and Their Effect on the Economy Sample Essay

This study talks about a topic that affects the whole economic system in all states. Small and medium -sized endeavors ( SME’s ) play an effectual function in work outing many economic jobs such as unemployment. Therefore. SME’s are at the bosom of economic growing.

The intent of my study is to demo how SME’s assist the economic system in get the better ofing some jobs. Besides. this study discusses some SME troubles and their solutions.

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This study has three chapters. The first chapter consists of background. The 2nd chapter is about SME jobs. The last chapter discusses a existent life illustration of a little concern in Saudi Arabia.

I. Background

This chapter defines SME’s and explains their importance.

A. Definition of SME’s

The SME definition is different from one state to another. In Saudi Arabia for illustration. little houses are identified by the Saudi Chambers of Commerce as houses which have 10-25 staff and whose assets are SR one million. On the other manus. the houses that employ 25-100 staff and their assets are SR 5 million are called medium- sized houses. ( 5:197 ) The definition of SME’s in the UK is as follows: the endeavors that have less than 50 workers are little endeavors whereas the endeavors that employ more than 249 workers are medium- sized. ( 1:1 )

B. SME’s Importance

The consequence of SME’s on the economic system appears in many dimensions. Governments face several jobs related to unemployment ; SME’s can work out these jobs ( 6:1 ) . In Saudi Arabia for illustration. SME’s comprise greater than 90 per centum of private houses ( 2:1 ) .


A. Park Problems

SME troubles are assorted among the economic environment ; there are common jobs in all states. The chief trouble is the funding issue i. e. financess are deficient. As the Saudi Arabian General Investment Authority ( SAGIA ) remarks: “A deficit of paid- up capital and recognition makes SMEs vulnerable to fluctuation in supply and demand. ” Another challenge is the failing of human resources that leads to the deficiency of of import informations needed to do determinations. Besides. SME’s face more and more jobs such as the deficiency of new engineering. ( 3:1. 2 )

B. Problems in Saudi Arabia

The jobs of SME’s in Saudi Arabia are more than in the other states. This subdivision focuses on two chief issues.

a. Womans

Some people thought that Islamic ordinances. that prevent the association between males and females. are the chief obstruction that face businesswomen in Saudi Arabia and that is perfectly incorrect. The misinterpretation of these ordinances causes this job. However. there are many existent obstructions halting Saudi Businesswomen from taking their economic place. One of the barriers is the deficiency of immediate communicating between businesswomen and authorities bureaus. Another obstruction is the funding issue. It is more aggravated in the state of affairs of businesswomen than business communities. The absence of concern preparation plans for adult females is besides one of these barriers. ( 5:206 )

B. World Trade Organization ( WTO )

The Saudi economic system is affected by the accession of the land to a WTO. As a consequence. SME’s face more and more challenges because of WTO ordinances which need a suited environment to be applied. ( 2:1 )

C. Solutions to Saudi Problems

Some jobs related to businesswomen have been mentioned in the old subdivision. The authorities tries earnestly to happen solutions. As an illustration. women’s subdivisions have been instituted in some ministries. Besides. developing plans have been established by the Chamber of Commerce. ( 5:206 ) Government supports are needed to get the better of other jobs. Besides. the intercession of the private sector. which includes big houses and commercial Bankss. is really of import. One of the suggestions to better to SME’s in Saudi Arabia is to make an official authorization that concerns all SME facets. for case. developing the relationships between SME’s and a private sector or authorities bureaus. Furthermore. other bureaus that should be established are those that provide accounting services. selling and managerial support and fiscal audiences. SME’s will be able to accomplish their economic function whenever these factors are available for them. ( 2:1. 2 )


This chapter talks about a existent life illustration of a little house in Saihat in the eastern state in Saudi Arabia.

A. General Background

This house was established in 1991 and its activities include transporting different types of edifice stuffs such as steel. sand. concrete and blocks. Another activity is pulverizing old edifices. The scope of its activities is bounded to Dammam. Qatif and Al-Khober. ( 4 )

B. Manpower

When it was get downing its activities it had merely 16 employees. Two of them were comptrollers. 8 were drivers and 6 were labourers. This concern has developed and expanded through 15 old ages. The figure of employees doubled more than at that place times. so it is now 56 employees. They can be divided into five classs in footings of their occupation descriptions. Two of them are comptrollers. two are mechanics. 30 are drivers. the figure of labourers is 21 and there is one lineman. ( 4 )

C. Transporting Equipment

The enlargement of the concern includes the figure of trucks. Fifteen old ages ago. the figure of trucks was merely 8 while the house owns about 26 trucks now. The house has different types of trucks. Some of them are used for transporting sand and concrete whereas the others are used for transporting blocks and cement. ( 4 )

D. Technology

When the house was established. it has a little office. telephones and a facsimile machine. It used a primary manner to record by utilizing books. Fifteen old ages subsequently. an obvious alteration occurred and the house has developed. Now. it has a bigger office. three computing machines. four pressmans and a barcode machine. Besides. the cyberspace is used and the books have been replaced by a computing machine plan. Furthermore. every worker has a nomadic phone so reaching them will be easier. ( 4 )

E. Business Problems

The house faces many troubles. The chief trouble is recognition gross revenues. it represents two tierce of the house gross revenues. So. the house has two picks. It either continues sale by recognition but with hazard of non having money back. or it cuts covering with recognition but with the monetary value of take downing income to one tierce. Another job is the dislocation of equipment particularly trucks. Repairing them is really expensive and really of import at the same clip. ( 4 )

F. Current Situation

As mentioned in the old subdivisions. the house has developed and increased the figure of employees and equipment. As a consequence. the incomes have doubled three times and the concern becomes much better than earlier. ( 4 )

G. Business Future

As the director said: “The concern can be improved by increasing the figure of employees and equipment so we can have more orders than now. ” Besides the development can be done by utilizing new engineering such as the cyberspace. Hosting a web site. to heighten the selling issues for the house and to have orders through it. is a good thought. ( 4 )


Although the definition of SME’s differs from one economic system to another. there is no statement about their function on the economic system. SME’s face different jobs such as funding issues. These jobs and their solutions are discussed in this study. Finally. a existent illustration of a little endeavor is explained in item.


1. Bruce. Cathie. “SME Business: In the Net. or Out? Now’s the Time to Choose. ” RedOrbit NEWS. 11 Mar. 2006: 1-3.
2. Bundagji. F. Y. “Small Business and Market Growth in Saudi Arabia. ” Arab News. 24 Oct. 2005: 1-3.

3. Estimo. Rodolfo C. “SMEs Face Problems in Kingdom. ” Arab News. 8 Mar. 2004: 1-2.

4. Al-Mehdar. Mohsen. Personal interview. 14 Apr. 2007.

5. Ramady. M. A. The Saudi Arabian Economy: Policies. Accomplishments
and Challenges. New York: Springer. 2005.

6. Schlogl. Herwig. “Small and medium endeavors: Seizing the possible. ” OECD Observer. Jun. 2004: 1-4.


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