Importance Of SMEs And Entrepreneurship Business Essay

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

Just as the survival and success of any individual depend on his innate capabilities - such as the physiological factors- to cope with the environment and the extent to which the environment is conducive to the development of the individual, the survival and success of a small business firm depend on its innate strength- resources at its command, including physical resources, financial resources, human resources, skill and organization - and its adaptability to the environment and the extent to which the environment is favorable to the development of the organization. Today in the volatile and competitive business environment small firms contribute to a large extent in the development of an economy

Definition of an entrepreneur

Entrepreneur is one who organizes a business or develops an idea and takes responsibility for its operation, and seeks profit as its reward and losses as risks. An entrepreneur is also known as a risk taker; in economics an entrepreneur combines the factors of production such as land labor and capital in a enterprise to produce goods and services. He is also the one who comes with innovation and also always try to generate new ideas that perhaps are not available in the market in which he is operating in and bring changes for the betterment for the whole society.

General economic importance of SME's and entrepreneurship

Generally small firms are very important for the growth of an economy. For example, they invest their capital and also contribute to the development of the country. Furthermore they provide employments and as a result reduce poverty in the country. The small and medium sized enterprises also help people to improve their standard of living as the people are working they are obtaining a salary at the end of the month and their purchasing power will increase thus, they can purchase more goods and services and also be able to purchase luxury products. All these will improve their quality of life.

SME does usually sell a limited range of products in a single market or in a limited range of markets. They are particularly prevalent in activities such as IT, food processing, retailing and financial services.

The rise of entrepreneurship in Mauritius

The Small and Medium Enterprises Development Authority (SMEDA) promotes the Development and growth of the Small and Medium Enterprises (SMEs) in Mauritius. SMEDA provides support to potential and existing small and medium enterprises with a view to enabling them to start new enterprises as, small firms are important for the economy because they provide jobs, diversity and democratize the economy, enable innovation, improve balance of payments through exports etc.

According to SMEDA Act 2009, SMEs should be engaged in any legal business activity having an annual turnover less than Rs50 million. A small enterprise is an enterprise having an annual turnover of not more than Rs10 million while a medium enterprise is an enterprise having an annual turnover of more than Rs10 million but not more than Rs50 million.

Incentives, Facilities and Support Services to Small and Medium Enterprises provided by SMEDA are as follows:

SMEDA offer business facilitation & counseling including business plan preparation, advice procedures to set up registration of the enterprise and also provide information concerning the financial loan scheme.

SMEDA provide support and facilities such as Entrepreneurship Development Training that includes - Entrepreneurship Development Programmes for potential Entrepreneurs and Skills Development Programmes that will promote entrepreneurship in Mauritius. Furthermore, The Genuine Mauritian Product Logo (GMP) - A new logo known as the Genuine Mauritian Product (GMP) will now be used for all "Made in Mauritius" goods in order to protect them from unfair competition and encourage people to buy products made locally offered by SMEDA. The main purpose of GMP is to protect the new infant industries from fierce competition so that they can survive and also expand in the long run. Genuine Mauritian Product label, as the national brand. It is designed to encourage people to produce "genuinely Mauritian" products.

Additionally there are other financial institutions such as Business Development Loan Scheme and the Development Bank of Mauritius (DBM) that gives loan facilities to the entrepreneurs at a preferential rate of interest so that they will be encouraged to invest or for starting a business to promote entrepreneurship as there are many economics advantages arising from this concept of entrepreneurship. There are a number of other positive economic and social consequences arise from entrepreneurship and small firms. For example, if small firms did not exist, a number of market segments would remain unattended (large firms are not interested with 'small' markets). Niche markets appeal to smaller firms, smaller in size and consumer demand could also be fulfilled by the smaller firms through the exploitation of the niche market.

Transitional Support Scheme to finance Small Companies in difficulty or which are preparing for the recovery from the fierce competition is also offered by SMEDA

Purposes of scheme are as follows:

To provide additional financial support:

for the purchase of equipment for modernization of the unit

to meet working capital requirements, on a revolving basis

To restructure existing debts

Additionally, Enterprise Mauritius is a collaborative partnership between industry and government that aims to help businesses in Mauritius expand into regional and international markets, and at the same time develop their internal capability to meet the challenges of international competition.

The National Women Entrepreneur Council (NWEC) has been set up since 1999 with the objective of promoting Women Entrepreneurship in Mauritius. Moreover, The National Empowerment Foundation, is a not-for-profit Government-owned company, and operates under the aegis of the Ministry of Social Integration & Economic Empowerment. Their main purposes are:

enhance employability through placement and training of the unemployed

encourage entrepreneurship, particular among retrenched and unemployed women

The Mauritius Post and Co-operative Bank Ltd (MPCB), Mauritius Business Growth Scheme Office, Ministry of Agro-Industry and Food Security - Food Security Fund (FSF) collaborates and works to promote entrepreneurship in Mauritius. As obviously, without an ample 'supply' of small firms, there can be no future for large firms. Some SME's of today will grow in tomorrow's large firms, while some large firms will inevitably exit the marketplace, e.g. through bankruptcy.

National Empowerment Foundation

Women have always been central to decision making in society. It is clear that women are most affected by unemployment. Women have emancipated a lot and now occupy key positions in many fields. Women can contribute significantly in the economic development of our country The New Micro Enterprises Scheme for Women is also designed by National Empowerment Foundation to provide financial assistance to existing and potential women entrepreneurs.

HRDC and AREU Bid to Improve Employability in the Agricultural Sector

The Human Resource Development Council (HRDC) in collaboration with the Agricultural Research and Extension Unit (AREU) aims at opening up training opportunities at national level in line with Government's policy to promote agro-industry and create more job opportunities, as well as small and medium enterprises in the agricultural sector.

The partnership between HRDC and AREU aims at opening up training opportunities at national level in line with Government's policy to promote agro-industry and create more job opportunities, as well as small and medium enterprises in the agricultural sector all these will help the country to produce more goods and services and produce not only for the local market but could also export its product in many foreign country. These will help the government to generate more revenue through exportation and eventually help to improve its balance of payment and also help to have a good relationship with other countries by serving their markets.

HRDC and AREU work with organizations such as the Mauritius Institute of Training and Development, Mauritius Business Growth Scheme, Development Bank of Mauritius and other institutions. Their approach is to train more members of small business communities to help them grow so that SMEs have greater visibility for their products.

Importance of small firms

Small business development is the backbone of any strong economy. They drive innovation in a way rarely attempted by larger, more rigid organizations, and provide a fantastic source of employment.

No economy can be reliant on large organizations alone. Besides, today's small businesses are tomorrow's multi-national giants, so it essential they are given the help and support when it is needed most.

Small Enterprise to Help Development for All (SEHDA) is a movement based in Mauritius and founded in 2006. It has gained international momentum by promoting development through small enterprise.

SEHDA therefore view it as their responsibility to promote and sustain small business development through the provision of all relevant services. These services cover the entire spectrum of business disciplines, including financial and legal matters, as well as sales and marketing consultancy.

SEHDA is committed to the development of small enterprises throughout Mauritius. A key aspect of this is the regulation of small enterprise registration, but they also aim to enhance their business productivity through research, training and other measures.

The core objective of SEHDA is to develop a culture of small enterprise throughout the economy. Some grow into larger organizations, and others remain modest in size, but all contribute a great deal to the long term strength and sustainability of the economy.

Importance of SME's

An outlet for innovation and entrepreneurial activity

Small businesses are often a vehicle to materialize innovations. Competition further 'pushes' innovations on the market. Consumers also enjoy a wider variety of goods and services at an affordable price.

Provide personal services are able to provide personal services to their customers for example, giving them advice about the product and offering credit facilities.

Helps in the improvement of the standard of living of the society through creation of employment.

His competences contribute to raise the rate of economic growth through increasing the output in the country.

Provide luxury product. Examples include jewellery and leather handbag, for example are often made by small firms employing specialist craft persons.

Equally, it should be recognized that SME's are vulnerable; many are not able to survive due to competitive market forces and there are also many barriers that acts as an obstacle for the SME's to operate successfully.

The fall of entrepreneurship in Mauritius

It is a well-known fact that all ninety-five percent of businesses fail within the first five years of inception

Today we are living in a dynamic market where there are many large and competitive firms are competing with each other drastically, as e result they are providing better quality of products at an affordable price thus, this has made very difficult for the small firms to survive in the competitive business environment thus, only some small and medium enterprises are able to survive the rest infant industries die.

As large organizations are the most powerful organizations they highly invest on research and development and discover new methods of production and also new technologies thus, always introduce new things in the market. They are innovative and remain the leader of the market. On the other hand for the small firms though government and other institution provide financial incentives for them but still they would not be able to invest in research and development and they will lack competitiveness to operate and would not be able to compete with the large firms.

Small and medium enterprise lacks capital and the banks and other financial institution might be reluctant to provide them with loans facilities at a preferential rate as they are too small they does not have goodwill and a solid brand name thus this make their expansion difficult.

As Mauritius is an open economy where there are free international trades. The market is very competitive it is very difficult for the firms to compete with the foreign firms. For example the foreign firms can compete with the local firms by using dumping methods that is they can sell their products below their cost of production thus, making the domestic products more expensive and as a result acquire a large pool of customers in the local market. Eventually this can make the survival of small firms difficult or they can also close down.

Furthermore, the government rules and regulation might act as a barriers to the small enterprise these are called the legal barriers. For example if the government of Mauritius reduces the trade restriction such as quota, tariffs, embargoes on import. The local products might become cheaper than compared to the imported products and this may hamper the success of the small and medium enterprise.

Other legal barriers could be in the form of government policy concerning fiscal and monetary policies. For example if the government follows the monetary policy and increases the rate of interest that means the borrowings becomes expensive and this might discourage the small enterprises to start their business as the cost of borrowing will be higher. Thus, these policies are essential to provide a basis for a stable macroeconomic environment. They also include structural policies that determine the overall economic framework in which the business sector operates, such as those affecting labor markets, tax design, competition and financial markets.

The lack of information on the available institutions is also a barrier for the creation of enterprises because entrepreneurs don't have enough information about the role, services and mission of the institutions that give support to enterprise creation. The limited access to social and business networks and institutions can also be considerate as a barrier to enterprise creation.

We also have the cultural and social factors that cause the small firms to decline 'fear of failure' and a lack of entrepreneurial knowledge could affect the business. For example, creating an enterprise is a very difficult task because it demands knowledge of the legislation, environment, market, institutions, etc. To install an enterprise in a country, the entrepreneurs need to know well the language to have a better implementation and adaptation in the place. The difficulties of language don't help the complete integration of the entrepreneurs and enterprises, specially the micro and small enterprises thus these factors plays a vital role for survival in the long run.

There are many legal procedures that involve before an entrepreneurship can trade. It is very difficult for him to get the trading license and also it is difficult to gain access or entry in the market to operate thus all these are the barriers that affect an entrepreneur to work in a sound environment. Furthermore, today many enterprises fail because the following reasons:

Lack of training

Lack of knowledge and information in the market in which he is operating in.

Lack of experience

Lack of both managerial and technical knowledge

Lack of communication skills

Lack of negotiation skills

Lack of creativity

In the above all these are the characteristics that an entrepreneurship should possess to meet the challenges that is coming from the external market and should always be prepared to meet the challenges. He should know how to manage the resources efficiently and also be able to manage all the risks.

Failure to Change with the Times

The only constant in business is change. The ability to recognize opportunities and be flexible enough to adapt to changing times is a key ingredient to surviving and even prospering in the toughest business climate hence, an entrepreneur should adapt himself with the changes that are taking place in the business environment.

Wrong Motivation

Perhaps the entrepreneur knows that he should motivates his employees to work efficiently in the organization but the entrepreneur chooses the wrong way to motivate the employees and the employee is not satisfied with his work thus, the firm is not able to produce quality products and this might be the reason for his failure.

Poor Management

Many reports on business failures cites poor management as one of the biggest reasons for failure. New business owners frequently lack relevant business and management expertise in almost all business functions and do not have enough capital to hire the necessary people to take care of what they do not know. Unless they recognize what they don't do well, and more importantly seek help, business owners may soon face disaster due to a poor management system.


Apart the failures of the small enterprises once dominated by a few traditional 'actors', the Mauritian economy is now characterized by a variety of Small to Medium firms which result in a more vibrant economic and social climate. Government support to SME's goes in the direction of democratization of the economy by empowering start-ups at the early stages so as to increase their chances of survival. Moreover, the SMS's are the infant industries that will be the large firms of tomorrow, and they will promote the economic growth of the country as a result enhancing the standard of living of its people.



EIILM university course book

Burns, P. (2005). Corporate Entrepreneurship. . Hisrich, R. D. & Peters, M.P. (2002). Entrepreneurship.

Bamford, Brunskill, cain, Grant Economics as level and a level text book.

Holt, D.H. (2001). Entrepreneurship, New Venture Creation.

Kets de Vries. M (1985), "The Dark Side of Entrepreneurship", HBR, Nov/Dec 1985


Martin, Roger L., and Sally Osberg. "Social Entrepreneurship: The Case for Definition." Stanford Social Innovation Review (2007): 28-39.> (8 June 2009), 33.

Honey, P & Mumford, A, 1982 cited in Klitmoeller, S., 2009. Manual on generic design of training programmes . Mauritius: HRDC.

Klitmoeller, S., (2009). Manual on generic design of training programmes. Mauritius: HRDC.