Wednesday, June 4, 2008

SMEs- their role in the global economy (2/2007)

The next decade or two will become known as a period of economic decentralization. This refers to the breakdown of the large corporate organisation for a number of reasons, in such a way as to lead to economic decentralisation. Why should this occur?

The growth of Personal Businesses will increase exponentially over the next few years. These are businesses which have no payroll, which in the USA is already at an incredible 70% of SME’s. What would cause this increase? There are a number of factors.

Baby boomers will be leaving on retirement and taking their skills with them. As they form such a large part of the population they will need to be used as consultants and outsourced operations for larger organisations.

In South Africa whites who believe they have no future in large organisations due to affirmative action legislation, will continue to leave to start new businesses, causing a further skills shortage in these businesses, leading to a similar situation as for the baby boomers.

In developing countries, skills shortages generally due to the skills drain to developed countries, poor education systems, emigration, AIDS, TB will also result in a further move to personal businesses, as those people with skills find themselves in demand. They will quite likely see massive increases in their income streams as a result. Consequently these people will become time shared by a number of companies.

Women hitting their heads on the glass ceiling will similarly move into their own businesses where there are no limitations. Youth want their own business rather than a boss, and also want the perceived benefits of owning their own business, which includes a more relaxed life style and improved quality of life from controlling their own destinies. Emigration and immigration will lead to the further globalisation of SMEs as emigrants and immigrants restore links with the networks in their previous domiciles, and create new business opportunities for themselves, as they generally find it easier to do so than trying to get a job in their new country.

The Internet has made the road warrior SME owner a reality. Similarly it allows and creates further opportunities for economic decentralization within large organisations. Why do banks need branches? Why can we not withdraw and deposit at our local supermarket if we really need cash, especially with Internet and cellphone banking.

SMEs will most definitely play a bigger role in the world economy in the future. The question is whether you will be one of them.

Rob Smorfitt

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