Anda di halaman 1dari 8

CHAPTER 2.

BUSINESS STRATEGIES ON SMES


My research shows that there is limited presence of SMEs in Romania. Typically, half of all
SMEs are reporting not having a business strategy or plan. On closer inspection, when we
speak with the business owner personally, we find out that only 10% of those initially
reporting existence of a strategy can produce the goods. So thats only 1 out of 20 SMEs!

2.1. DRAWING UP OF PLANS, POLICIES AND STRATEGIES WITHIN SMES


The competitiveness of the SMEs sector in Romania is strictly conditional upon the
enterprises capacity to substantiate, develop and implement strategies, policies and plans. For
every company, to grow up and to attract more customers and profit, it is needed a plan of
strategy to keep the track with the nowadays requirements.

In my perspective, from the topics discussed in the previous chapter, and taking into
consideration the numbers, a few SMEs has a long/short plan or a strategy which helps it to
expand.

Table 2.1. SMEs structure, subject to performed predicting activities

The analysis of companies and subject to regional membership (table 2.2) has led to the
following conclusions:

- SMEs, which doesnt have elaborate planning activities, have the high percentages within
the companies from South West Region (58.49%) and more reduced within North East Region
(27.69%);

- the companies which releases the annual plans and policies are more frequently in North
West Region (63.64%), and more rarely within the South East Region (30.14%);
- the organizations that have punctuated the development of strategies / plans 3-5 years,had
recorded the highest value among companies in the West Region (23.08%) and lowest among
those in the South West (2.83%).

Table 2.2. Differentiation of SMEs predicting activities by development regions

2.2. TYPES OF ENTREPRENEURIAL STRATEGIES


Peter Drucker in his book "Innovation and Entrepreneurship" identifies four generic types of
entrepreneurial strategies:

"Throw into the battle all the resources you have"


"Strike where there is no one"
"Use market breaks / niches"
"Change values and features"

1. Throw into the battle all the resources you have - is a less predictable strategy, being
relentless and without mistakes. If it succeeds, the rewards are very high, otherwise
there is no second chance. The strategy is very risky for being used for other purposes
than major innovations.
2. Strike where there is no one this strategy contains two items:
a. creative imitation where the entrepreneur does something different from
the others,but with bringing on something new,an inovation;
b. "Entrepreneurial Judgment" - a strategy that involves, first of all, the
occupation of a "head of a bridge" in a business or a market (poorly
defended),following a sufficient revenue stream, occupying the "bridge" and
then the entire area
3. "Finding and engaging in an ecological breach" - this strategy tends to gain control
over a limited area and make those who practice it immune to competition and
impossible to challenge.
This strategy aspires to gain control in a limited area. It tends to make those who
practice it immune to competition and impossible to challenge.
4. "Changing the values and characteristics of a product" - this strategy is itself an
innovation. It transforms old products into something new, changes utility, value and
economic features.

2.3. ENTREPRENEURS DEVELOPMENT STRATEGIES


In order to achieve a balanced growth, the entrepreneur can adopt one of the following growth
strategies:

o Intensive growth strategies


o Extensive growth strategies
o Diversification strategies

A. Intensive Growth Strategies


Intensive growth can be achieved by increasing the sales volume and the number of
consumers in the existing target market. It focuses on existing exploitation by developing the
current market. Three types of intensive growth strategies are known:

1. Market penetration strategies


2. Market development strategies
3. Product development strategies

1) Market penetration strategy is a strategy in which the enterprise tries to increase the
sales volume by penetrating the market and setting a target through effective
marketing strategies. Here, the whole process of advertising is creating by using an
informational method (product usage information, good product quality and attractive
prices). The advantage of using this type of marketing is attracting those who dont
use the product

2) Market development strategies


Market development can be done in neighboring regions or regions with a dense population
(it can increase product sales),developing the geographical expansion of the company.
3) Product development strategies consist of developing new products, services or improved
products offered to existing customers. Making new products, though more expensive, offers
the benefit of a longer life cycle. Improving existing products may increase sales over a
shorter period of time as the market starts to become saturated.

B. Extensive growth strategies


Extensive growth involves process in which the company's business is expanding within its
own industry. This can be done through a strategy of:

- vertical integration

- horizontal integration

- modular integration.

1. The vertical integration strategy.

A firm can grow by upstream integration, which involves the control of a part or all of the
suppliers or downstream integration, which can be done initially by entering a new business
(purchasing a new supplier or supplying),by controlling the distribution process either by
selling it directly to the consumer (buying a retail store) or by purchasing distributors of the
company's products, providing greater control over product marketing.

2. The horizontal integration strategy is a way to grow the business by including a competitor
or by setting up a competing business.

3. The modular strategy involves concentrating the firm's business on the field where it has
the most competitive advantages. Thus, the company can grow much faster, unit costs will be
lower, and the possibilities of reducing the new product much higher. Because no investment
funds are needed, money can be used in activities with the most competitive advantage.
Moreover, the purpose of this strategy is to maintain good relationships with suppliers and
distributors, because when the company grows fast, they want to meet the growing demands
of the company.
C. Diversification strategies

Ths process imply the expansion of the firm's business beyond the existing market and
the current field of activity. This strategy is used when the entrepreneur has exhausted
all previous growth strategies and now wants to change the direction of the firm due to
unfavorable changes in the market or branch. Diversification can be achieved by:

- By a concentric diversification strategy (when trying to identify new products or


technologies complementing or not the company's activity).

- Through a conglomerate diversification that involves expanding into business totally


different from the essentials.

2.3. EUROPE 2020 STRATEGY

Nowadays, Europe faces a moment of transformation. The crisis has wiped out years of
economic and social progress and exposed structural weaknesses in Europe's economy. In the
meantime, the world is moving fast and long-term challenges globalization, pressure on
resources, ageing intensify. The EU must now take charge of its future, the only solution
being acting collectively, as a Union. Thus, in order to make things happen the EU developed
a strategy to help us come out stronger from the crisis and turn the EU into a smart,
sustainable and inclusive economy delivering high levels of employment, productivity and
social cohesion.

Europe 2020 sets out a vision of Europe's social market economy for the 21st century,putting
forward three mutually reinforcing priorities:

Smart growth: developing an economy based on knowledge and innovation.

Sustainable growth: promoting a more resource efficient, greener and more competitive
economy.

Inclusive growth: fostering a high-employment economy delivering social and territorial


cohesion.

The targets are representative of the three priorities of smart, sustainable and inclusive growth
but they are not exhaustive: a wide range of actions at national EU and international levels
will be necessary to underpin them. The Commission is putting forward seven flagship
initiatives to catalyze progress under each priority theme:

"Innovation Union" -to improve framework conditions and access to finance for research
and innovation so as to ensure that innovative ideas can be turned into products and services
that create growth and jobs.

"Youth on the move"- to enhance the performance of education systems and to facilitate the
entry of young people to the labor market.

"A digital agenda for Europe" -to speed up the roll-out of high-speed internet and reap the
benefits of a digital single market for households and firms.

"Resource efficient Europe" -to help decouple economic growth from the use of resources,
support the shift towards a low carbon economy, increase the use of renewable energy
sources, modernize our transport sector and promote energy efficiency.

"An industrial policy for the globalization era" -to improve the business environment,
notably for SMEs, and to support the development of a strong and sustainable industrial base
able to compete globally.

"An agenda for new skills and jobs" -to modernize labor markets and empower people by
developing their of skills throughout the lifecycle with a view to increase labor participation
and better match labor supply and demand, including through labor mobility.

"European platform against poverty" -to ensure social and territorial cohesion such that the
benefits of growth and jobs are widely shared and people experiencing poverty and social
exclusion are enabled to live in dignity and take an active part in society.

These seven flagship initiatives will commit both the EU and the Member States. EU-level
instruments, notably the single market, financial levers and external policy tools, will be fully
mobilized to tackle bottlenecks and deliver the Europes 2020 goals. As an immediate priority,
the Commission charts what needs to be done to define a credible exit strategy, to pursue the
reform of the financial system, to ensure budgetary consolidation for long-term growth and to
strengthen coordination within the Economic and Monetary Union.

2.4. RECOMMENDATIONS CONCERNING THE DEVELOPMENT OF SMES


SECTOR IN ROMANIA
Measures to be adopted in order to create a favorable business environment are:

Ensuring a favorable and friendly business environment, a stable and predictable


legal framework, based on reducing bureaucracy and tax burden;
The evaluation systematic of the SMEs test for the new regulations and legal
influence their performance;
Continuing the simplification of the administrative procedures, with the reduction of
at least 10% of the number of authorizations, approvals, licenses and permits for
economic agents;
The reduction with minimum 25% of the number of tax payments for entrepreneurs,
which in Romania is the highest in the EU: 3.11 times higher than the EU average

The implementation of the law no. 62/2014 amending the law of SMEs and government
strategy for SME sector development until 2020:

A full application of the principle "Think Small First" - "Regulate first for SMEs", in
the legislative process, in order to achieve the administrative policies and procedures;
The application of the 3 components of smart regulation (smart regulation) at national
level, by:
o Achieving the systematic analysis cost- beneficiary for SMEs, the SME Test,
ex ante impact assessments of all new regulations and their amendments;
o Regular and systematic consultation of the representative organizations of
SMEs;
o Periodic assessment of the results of the implementation of the new
regulations.
The allocation of the share of at least 0.4% of GDP to finance the programs for SMEs;
The operationalization of special funds for SMEs, similar to the ones from EU:
o Seed-capital funds to support the creation of new micro enterprises by young
people;
o Micro-grants funds and micro-credits for the development of crafts and
services in rural areas;
o Venture Capital Funds to finance SMEs / innovative start-ups and projects in
cutting-edge industries, fueled at least in part from European funds and the
ones from the state budget.

The stimulation of the creation of jobs in the private sector, by:

A. The adoption of measures to stimulate the creation of new jobs, the employment of
disadvantaged people and to increase labor productivity, since that Romania register the
lowest level (of 21 EU countries analyzed) of the share of private sector employees in total
population (13.76%), being with 14.73 pp less than that of Switzerland (1st place: 28.49%)
and with 12.82 pp less than that of Denmark (second place: 26.57%);

B. No changes to the Labor Code and Law no. 62/2011 social dialogue with employers'
confederation agreement;

C. 50% reduction in social security contributions for disadvantaged people newly employed
and unemployed;

D. Continuing the flexibilisation of the labor market in Romania.