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MGT601 - SME Management - Lecture Handout 38

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Relationship between SMEs and Export Development

While in certain circumstances SMEs enjoys some advantages of flexibility, in general they suffer from structural handicaps in their operations arising from small size, particularly where exports are concerned. Even SMEs that are highly successful domestically, for a variety of reasons, do not find it easy to upgrade production to production for exports.

Problems faced by SMEs in developing countries typically include:

  • Scarcity of capital.
  • Limited and unequal access to institutional credit markets.
  • Irregular access to domestic and imported inputs coupled with higher cost.
  • Inadequate infrastructure facilities.
  • Weak managerial and technical skills.

A large number of SMEs have successfully overcome these formidable difficulties, established a sound base in the domestic market, and may be potentially capable of breaking into export markets. However they may be hampered by a variety of circumstances:

  • Lack of information on possible export market.
  • Absence of guidance on export regulations and procedures.
  • Inability to identify sources of assistance for product development and product upgrading for export.
  • Lack of information on export credit and insurance facilities as well as for export requirements.
  • Lack of information on operation of indirect marketing channels like merchant export houses.
  • Absence of guidance on basic management issues relevant exporting firms.
  • Absence of sound steps that need to be taken to enter in export field.

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MGT601 - SME Management - Lecture Handout 35

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The application of industrial technology, as indeed of all technologies, is a means to an end, the end being the development goals of each country. An appropriate technology path has therefore to be derived from the development goals adopted. Industrial development is a centre piece of the development process. It cannot be viewed only as the means of producing a large variety of goods and services by modern processes and techniques; it must result in adequate employment opportunities, greater income generation and distribution to poorer sections and improvement in the conditions of life for the larger community in developing countries.

Technology is in fact not applied in isolation

Technology is in fact not applied in isolation but as part of the performance of one economic activity or another which contributes to development. in such activity, say industrial development, technology is again applied, not alone, but matching with investment, skills, resources and other related factors, in other words, the application of industrial technology cannot be divorced from the total context of industrial development. When considering industrial technology, and for that matter any technology a balance has therefore to be struck between considering it is the abstract and treating it as totally indistinguishable from the economic activity itself. To strike such a balance between these two trends, either of which by itself is likely to be misleading. There is a close interrelationship between industry & technology in general. Perhaps no other single branch of economic activity influences or gets influenced by technology more than industry.

Within this over-all framework, attention will be focused on certain major elements for purposes of national and international action. The linkage of technology to industrial development and industrial development to over all development goals will be successful only in the context of the formulation of relevant policy measure by national government. Technology policy and planning therefore becomes an important element. The second major element is the development of technological capabilities in each country which is a prerequisite for the selection, acquisition, adaptation, absorption or development of technology. This will involve among other things the building up of institutions and the training manpower.

Read more: MGT601 - SME Management - Lecture Handout 35