Role of SMEs in Pakistan
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Transcript of Role of SMEs in Pakistan
Role of SMEsB Y: A L I R A Z A QUR E SHI
Definition of SMEsA generalized definition small and medium size
firms.
• Small: Among 10 to 35 employees and productive assets ranging 2 to 20 million.
• Medium: Among 36 to 99 employees and productive assets range of rupees 20 to 40 million.
History of SMEs
• Small business was discovered about more than 4000 years ago.
• HAMMURABI, the king of Babylon introduced the first 300 business laws.
• These laws known as Code of HAMMURABI.
• The time when the SMEs was discovered on 28th October 1998 4:10 PM.
Role of SMEs in PakistanPakistan has emerged as the second rapidly growing economy in Asia after China. Even though the large scale manufacturing registered 15.4% growth but small and medium enterprises (SMEs) is the core issue in the country’s progress and especially for the prosperity of masses that are surviving with low scale income due to which Pakistan ranks 135th out of 174 countries oh Human Development Index. The assessment of the role of SMEs in Pakistan is of vital importance.SME produces the income stream for masses located in the countryside and the capitalists associated with this activity that is generally medium or small as the name suggests. SMEs will be the main source of poverty reduction in Pakistan that will create the value and innovation for the country in the days to come. The thing that really needs serious attention is to remove the unnecessary bureaucratic procedures.
Scale of SMEsA business in which minimum one and maximum 9 human
Resources involved engaged that is called Micro business or
entraprices. If in any business 10 to 35 peoples are engaged or
employed with 2 to 20 million working Capital involved these
kinds of business is Called Small Scale that also Shows if less then
2 million working Capital is involved it Count in micro business at
the Same time if the business is employing 36 to 99 H.R with 22
to 40 Capital that business is Called medium Scale businesses.
According to the Published definition of Smeda March 2008 but
here in Pakistan we have multiple Concept of SMEs some
Institutions 250 HR Count as SME.
Structure of scale of SMEs
Micro Small Medium
Diagram of Scale of SMEs
Medium
Economy
MicroSmall
Graph of Scale of SMEs
20-40M
2-20M
Less than 2M
Finance
Micro
Small
Medium
1-9 10-35 35-99
It is the process of estimating and generating finance that is required and estimated the
contribution of each source.
Sources of startup Capital/Financial
Structure of Sources of startup Capital/Financial
Primary Secondary
Self
Family
Friends
Loan
Banks
Partnership
Diagram of Sources of startup Capital/Financial
Business
Financial
Sources
Primary
Self
Family
Friends
Secondary
Partnership
Banks
Graph of Sources of startup Capital/Financial
SoSC
ECFES ( Expected Capital From each source )
Partnership
Banks
Loan
Friends
Family
Self
Par
tner
ship
Sel
f
Fam
ily
Fri
en
ds
Lo
an
Ban
ks
Where SMEs Operate?
SMEs operate in all five sectors of Economy
• Agriculture Sector
• Industrial Sector
• Service Sector
• Infra-structure Sector
• Communication Sector
Sectors of SMEs
Sector of SMEs
Agriculture Sector
Communication Sector
Service Sector
Industrial Sector
Infra Structure Sector
Structural Representation
Agriculture Sector
Industrial Sector
Service Sector
Infra Structure Sector
Communication Sector
Economy
Diagrammatical Representation of SMEs Sector
0
A
I
S
I
C
1 2 3 4 5
Graphical Representation
Provincial Share in the SME Sector
• The number of SME in Pakistan is estimated to be 3.2 million, with the SME sector's contribution to the national gross
domestic product GDP
• Being 40%. With a share of 30% in Pakistan’s total exports.
There are two of closing the Business or Course:
Business Shutdown/closing
BUSINESS FAILURE
Main reason financial loss to a
creditor
1. Ineffective & inefficient
management.
2. Inadequate financing.
3. Industry weakness. (Internal &
External)
4. Inexperience (Owner,
Management, Employees)
5. Inadequate Management
(limited management not on the
bases of business requirement)
BUSINESS TERMINATION
No longer exist for any reason
1. The owner may have an
opportunity to sell his or her
business to some one else for
healthy profit.
2. The owner may be move on to
new business or to retire.
3. The market of Business Product
or Service may have changed.
4. The owner decided it was more
attractive to work for some one
else.
5. In cause of losing control on
business or dependent on others
for management, & financial
matters.
Structure of Business Shutdown/closing
Termination Failure
Shift
SellingBank Default
High Payable
Owner Death
Owner Change
Lack of employee
Depending on Single Idea
Fraud
High Receivable
Financial losses
Delts
High Credits
Diagram of Structure of Business Shutdown/closing
Depending on single idea
Lack of Employee
Owner Change
Owner Death
Selling
Shift
Fraud
Bank Default
High Receivable
High Payable
Financial Losses
High Credits
Delts
Graph of Structure of Business Shutdown/closing
+-
BT BL
BF
No Profit No Loss
Shift
Selling
Owner Death
Owner Change
Lack of Employee
Depending on single idea
Ba
nk D
efa
ult
Hig
h P
aya
ble
Fin
an
cia
l Losse
s
Hig
h C
red
its
De
lts
Fra
ud
•Legal and commercial arrangement concerning the successful business of a
franchisor.
•Use of franchisor’s trade name format system and/or procedure under license.
•Means to raise capital and expand quickly
•Assistance to franchise
• Marketing, management, advertising, store design, standards specifications
•Payment by franchise by way of royalty license fee or other means.
What is Franchising?
Singer Sewing Machine – first franchise (mid-19th century)
Automobile (e.g. Ford), petroleum products (e.g. Shell), soft drinks (e.g. Coca Cola)
Food and restaurants (e.g. McDonald’s, Starbucks)
History of Franchising
Singer Sewing Machine
McDonald’s
Automobile Industry
History of Franchising
3 main types of Franchise:
Product distribution franchise;
Business format franchise;
Management franchise.
Types of Franchising:
StructureFranchising
Product Distribution Business Format Management
Franchiser Franchisee Franchise Franchising
Classification
Domestic International
Home Country
Host CountryKinds
Product Distribution Franchising
A product distribution franchise model is very much
like a supplier-dealer relationship.
Typically, the franchise merely sells the franchisor’s
products. However, this type of franchise will also
include some form of integration of the business
activities.
Examples of famous product distribution franchise:
Product distribution Franchises
Produces the syrup concentrate
Sells the syrup
concentrate
FRANCHISEE Produces the final drink
Retail Stores
Restaurants & F&B OutletsVending Machine
Operators
Product Distribution
Franchises
In a business format franchise, the integration of the business ismore complete.
The franchisee not only distributes the franchisor’s products andservices under the franchisor’s trade mark, but alsoimplements the franchisor’s format and procedure ofconducting the business.
Business Format Franchising
Famous Examples
Outlet in Sale, Australia
Outlet in Marseille, France
Business Format Franchising
Management Franchise
A form of service agreement.
The franchise provides the management expertise,
format and/or procedure for conducting the business.
Famous Examples
Leveraging on a recognized brand name
Enhancing business image
Ensuring consistent quality
Attaining higher productivity/better motivated staff
Access to good locations
Economies of scale
Reducing risks of failure
Why is franchising important to
SMEs?
Franchising is classified according to its Function Into
Following two categories
• Domestic Franchising
•International Franchising
Classification of Franchising
Franchising
InternationalDomestic
Home Country Host Country
Structure of Classification
Franchising
Domestic International
Diagrammatical Representation
Franchiser Franchisee Franchisor Franchisy
Merits and De-MeritsEstablish
Market Name
T H R
Time Saving
Environment
Technology Formation
License Fee
Sharing Profit
No Name
Local Business Effected
No Innovation
Dependent
Thanks