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ISSUES AND POLICY DEVELOPMENT FOR SME – II

This lecture deals with the policy-making issues on short and medium term basis. The importance of these issues is self evident in this lecture. This lecture reflects issues where we feel we may achieve strong impacts in the short and medium-term, i.e. until 2011. They should therefore become major topics of our deliberation and shape the formulation of our SME policy.

Issues in Policy Development (Short and Medium-Term Issues)

Business Environment

The large size of the SME sector limits the ability of the Government and business support institutions to achieve competitive coverage by support programs. This is a fundamental reality in most countries of the world and it is why policy framework and regulatory measures are of tremendous importance when SME promotion is concerned. It is agreed that only appropriate policy tools and regulations than with support programs can achieve much more. Likewise, SME development is hampered more by inappropriate regulations than compensated by means of appropriate support programs.

Most of the developed nations therefore have mechanisms in place to revert the biases against small firms. For instance, the United Kingdom introduced the “Think Small First” initiative, which requires all Government organizations to assess the impact of their actions on small business prior to implementation. Furthermore, participation of small business in government procurement is being facilitated as a matter of routine.

The result of such policies is that (unfortunate) surprises to small firms are less frequent. It is made sure that businesses potentially affected are consulted and informed of any forthcoming policy shifts so as to avoid negative impacts. They are also allowed an adequate grace period for the adjustment of economic activity and there is no retroactivity of new regulations. Besides this, special attention is paid to minimizing the room for bureaucratic discretion while developing policy rules or procedures. All such mechanisms are missing in present policy or legal environment in Pakistan. The absence of a specialized, uniform legal framework for the development of SME hampers SME operations8.

Read more: MGT601 - SME Management - Lecture Handout 10

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NEW VENTURE EXPANSION STRATEGIES AND ISSUES

LEARNING OBJECTIVES

1. To explain the methods for expanding the venture.
2. To discuss the types of joint ventures and their uses.
3. To discuss the concepts of acquisitions and mergers.
4. To discuss the appropriateness and uses of leveraged buyouts.
5. To discuss the different types of franchises.
6. To identify the steps in evaluating a franchise opportunity.

JOINT VENTURES

with the increase in business risks, hyper-competition, and failures, joint ventures have increased. A joint venture is a separate entity involving two or more participants as partners. They involve a wide range of partners, including universities, businesses, and the public sector.

Historical Perspective

Joint ventures are not new. In the U.S. joint ventures were first used for large-scale projects in mining and railroads in the 1800s.The largest joint venture in the 1900s was the formation of ARAMCO by four oil companies to develop crude oil reserves in the Middle East. Domestic joint ventures are often vertical arrangements made between competitors allowing economies of scale. The increase in the number of joint ventures has been significantly throughout the 1990s.

Read more: MGT602 - Entrepreneurship - Lecture Handout 43