PART I

SMEs WITHIN MODERN ECONOMY
Chapter 1
SMEs ROLE AND PLACE WITHIN MODERN ECONOMY
1.1. Enterprise – essential c!pnent " ecn!#
We consider necessary to explain certain conceptual terms in order to
better understand the content of White Charter of SMEs.
Generally, by c!pan# r enterprise we understand a group of persons,
organized according to certain legal, economic, technologic and managerial
reuests that concei!e and de!elop complex wor" processes, freuently using
certain wor" instruments under the form of products and ser!ices, in order to
obtain a high profit.
Companies are set up within each acti!ity domain # industry, agriculture,
constructions, transports, trade, communications, scientific research, planning,
education, culture, health, etc. # people that created them meant to obtain
profit. $he company or enterprise has a !ery large domain, not only the
economic field and its acti!ity ob%ect may belong to any field, the final purpose
being represented by profit.
&s a system, the company or enterprise has many dimensions or
$e"inin% "eat&res.
a' $he enterprise is a c!ple' s#ste!, as it includes human resources,
financial and informational materials, each of them being formed up by !arious
elements.
b' $he enterprise is socio(economic system as the employees) groups,
which components are interdependent, underta"e wor" processes generating
new !alues for usage. *uman resources uality of being principal producers of
new !alues confers them a central position within enterprise and this must be
ta"en into consideration because it is essential for the efficiency of de!eloped
acti!ities.
c' $he enterprise is an pen s#ste!, as it beha!es li"e a component of
numerous other systems that ha!e permanent relations on se!eral dimensions.
+ts character as an open system is expressed through input flow # euipment,
row materials, materials, fuel, energy, information, money # and through its
outputs, especially products, ser!ices, and information for systems to which it
belongs. +n the last decades, the international dimension of enterprises) open
character is amplified, as an expression of deepening international wor" di!ision
and globalization of economic acti!ities. ,assing to mar"et economy
significantly amplifies open system character of -omanian companies.
d' $he enterprise is an a$apti(e r%anic s#ste!, as it is in a continuous
change, under the influence of endogenous and exogenous factors, adapting
both to mar"et e!olution and reuests generated by incorporated resources
White Charter of SMEs in Romania 2007
dynamics. $he enterprise is not a passi!e system and, at its turn, influences
through its outputs, certain characteristics of systems that it is related to.
e' $he economic enterprise is a technical)!aterial s#ste!, because
between wor"ing methods, raw materials and materials used inside it there are
certain connections that express by technological dependence between its
subdi!isions, especially between departments with production acti!ities. $his
characteristic expresses especially in industrial companies where sections and
wor"shops are specialized according to technological principles..
f' $he enterprise is a pre$!inantl# peratinal s#ste!. $e ma%ority of
wor"ing processes inside it has an effecti!e character. Managerial processes
with strategic and tactic character, although highly important, still ha!e a
reduced weight at the le!el of trade companies, expressing under the form of
perspecti!e decisions adopted by management)s high department, usually
General &ssembly or &dministration Council.
Enterprise*s special i!prtance results from.
− +t is the principal ma"er of economic substance in any country and
without it contemporary society wouldn)t exist/
− +t offers wor"ing places for the ma%ority of population/
− +ts performances condition economy)s progress and performances in
each country and life standard for the population.
1.+. SMEs – "&n$a!ental ele!ent " enterprises
E!idently, the first approach should refer to SMEs $e"initin. 0arious
approaches exist that come from partially different perceptions o!er company)s
dimension and expressing and uantifying modalities. &s an example,
$echnology +nstitute from Georgia, &tlanta, undertoo" analysis in 12 countries
and issued a synopsis with 23 definitions for small and medium enterprises that
was assumed by World 4an".
5
.
+n our opinion, different approaches for SMEs definition may be systemized as it
is presented in table 5.5.
Ta,le 1.1
Main Apprach T#pes "r SMEs De"initin
1
Employment and Development of Small Entreprises, World Bank, Washington DC, 1978.,

SMEs Role and Place within Modern Economy
6o.
crt.
&pproach category
Criteria 6ame Significant characteristic
5
Economic
domain
Generalizing $hey establish the same
criterion or criteria for SMEs
definition for all economic fields
7ifferentiated
$hey establish !arious criteria
for SMEs definition, depending
on their acti!ity field 8industry,
trade, transports, etc.'
9
6umber of used
indicators Single(dimensional
$hey define SMEs dimension
based on a single indicator,
generally the number of
employees
Multi(dimensional
$hey define SMEs dimension
based on se!eral indicators,
generally the number of
employees, turno!er and share
capital
:rom pragmatic reasons # especially easiness of usage # during the last
years the main trend was to call on %enerali-in% an$ sin%le)$i!ensinal
appraches. SMEs definition depending on the number of employees is
especially used for each acti!ity domain. $his approach was generalized by
European ;nion and in lots of other European countries, including -omania.
We are also going to use this paper. &ccording to this approach, small
enterprise is that company that has up to <= employees. Medium enterprise has
between 23 and 9<= employees. Companies that ha!e o!er 923 employees are
large enterprises. +n certain countries there are also !ery large enterprises,
generally starting with 5.333 or 9.333 employees.
Small and medium enterprises present a series of defining features that
reflect their reduced dimension and its conseuences on concei!ing plans and
operating incorporated acti!ities. &ccording to the opinion of a group of
important specialists that issued under ;6+7> a paper referring to SMEs
5
, their
defining features are those in figure 5. 5.
>ne more feature is recommended to be added to these # si%ni"icant
"le'i,ilit# " SMEs, especially for small companies.
1
E.!. "rôli#h, $.%. &a'raken, C.". (ettmayr, ).&. $i#hler, %an*al for Small +nd*strial B*siness ,
$ro-e#t Design and !ppraissal, ./+D0, 1iena, 1992, p. 7,1.
3
3
White Charter of SMEs in Romania 2007
.i%&re 1.1
Si%ni"icant .eat&res " S!all C!panies
S!all an$ !e$i&! enterprises /SMEs0 represent the !st n&!er&s
an$ i!prtant sectr " enterprises1 ha(in% !&ltiple ecn!ic1 technical
an$ scial "&nctins. &rguments in fa!or of this premises that might surprise
many people are the following.
− $hey generate the largest part of G7, in each country, generally
22?÷=2?/
− $hey offer labor places for the ma%ority of acti!e population/
2
0rientation to'ards
des#entali4ed
prod*#tion and lo#al
markets
!##omplishing
prod*#ts and servi#es
for differential re5*est
!#tivities 6ased on
#entral role of
6*siness men
Features
"re5*ent
s*perposition of
6*siness men and
manager roles
E7er#ising
parti#ipative
entreprene*rial
Calling on strategies
for #ooperation 'ith
other #ompanies
+nvolving pro#esses of
prod*#ts and servi#es
in s*6#ontra#ting
SMEs Role and Place within Modern Economy
− $hey generate in a big proportion technical inno!ations applicable in
economy/
− 7uring the last years, in most of the countries, including European
;nion, SMEs are the only ones that generate labor places/
− $hey present the highest dynamism under the conditions of mar"et
economy, situation confirmed by their number e!olution, turno!er
!olume, occupied labor force that is higher compared to large
enterprises/
− $hey accomplish products and ser!ices at reduced prices compared to
large companies/ the most important factors that determine this
difference are the reduced expenses, superior !olume and intensity in
wor" under the conditions of business man)s permanent presence in
the company and, usually more intense moti!ation of the personnel/
− $hey present high flexibility and adaptability towards mar"et reuests
and changes, fa!ored by reduced dimension, uic" decisional process,
and manager)s in!ol!ement in current acti!ities/
− $hey represent one of the principal sources of state budget incomes
8taxes, 0&$, etc.'/
− $hey offer the possibility for a significant number of people to ha!e
professional and social success, especially for the most acti!e and
inno!ati!e segment that @dragsA the economy/
− $hey ensure the main component of a fa!orable economic bac"ground
for mar"et economy, characterized by flexibility, inno!ation and
dynamism/
− $hey represent the seeds for future large companies, especially in new
domains of economy, its high branches based on techniues and
complex and competiti!e technologies/
− $he actual tendencies of technical, economical and social nature fa!or
setting up of SMEs. We refer to reducing the dimensions of euipment,
informatics, de!elopment of communications and transports, increasing
educational le!el of people, reducing the differences of life conditions
between regions, administrati!e decentralization, aspects that not only
ma"e possible, but also generate high economic performances,
especially through small and medium enterprises.
Stating the importance of SMEs under the contemporary economy
conditions doesn)t mean underestimating large companies) role. Each country)s
economy, in order to be powerful, should ha!e a component of large
companies, especially in industrial and transport field. Economic realities
demonstrate the existence of powerful relationships of complementarities
between large companies, on the one hand, and SMEs, on the other hand. $he
economy is healthier and more performant if it is more stable not only from the
sectorial point of !iew, but also dimensional, obtaining effects with superior
synergies.
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8
White Charter of SMEs in Romania 2007
SMEs present si%ni"icant cn%enital 23ea4nesses5 an$ their
$isc(er# an$ c&nterin% is essential. Without the intention of being
exhausti!e, we present these SMEs @wea"nessesA.
− Small uantity or incorporable resources and reduced reser!es that
they ha!e/
− 7ependence, usually decisi!e of its existence on a single person, the
business man/
− +nsufficient interest for its features shown by en!ironmental factors/
− $echnical le!el is freuently reduced, compared to large companies/
− More @!olatileA stability and permanency because of pre!ious specific
features.
$his nati!e errors of SMEs were !ery well surprised in a synthesis,
comparing them to large companies by *oward Ste!enson
1
, manager of
Entrepreneurial &cti!ities Center from *ar!ard, by saying. B&n ad!antage of big
companies # they ma"e big mista"es, but sur!i!e/ SMEs when ma"e big
mista"es, generally are ban"rupt@.
1
&. Stevenson, +ntreprenorial %anagement and Ed*#ation, Sti-in Seminar, 199.
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