Typically, SMEs are relatively small within their given industry, are evolutionary, face continuous uncertainty. On the one hand, SMEs are believed to have an edge over larger firms in flexibility, innovation, and overhead costs, while on the other, they are limited by the amount of market power, capital and managerial resources.
SME contribute to the expansion of private ownership through entrepreneurship, and create employment due to their local presence even in the most rural areas.
SMEs are not in a position to exit from a market when conditions are adverse in order to focus on a different market, hence preserving employment.
SMEs tend to be considerably more creative and innovative than their larger counterparts, given the freedom of expression inherent in most SMEs, which facilitates and encourages creative and innovative behaviour.
SME are close to their markets, have great flexibility which they value, have the capacity to operate on slim margins, and can instigate decisions quickly.
SME have limited financial, human, material and informational resources.
Generally SME do not plan formally, can have a “bad attitude towards detailed day-to-day procedures”, and most significantly have a highly personalised management style.
SMEs typically have limited impact in their given markets, and limited network access.
Many SME owner/ managers experience problems with marketing, government regulations and bureaucracy, capital raising, taxation, and management of the organisation in general.
Employees of SMEs are more highly motivated, carry out a wider range of tasks within the organisation and work more closely with their bosses than employees of larger organisations.
SMEs can be categorised depending on the industry within which they operate, their growth stage, and the owners’ managerial style and/or growth goals – they do share inherent characteristics which impact upon the way in which they operate. These characteristics form a backdrop which, to a large extent, impacts upon the way in which such firms are managed.