Small-Medium Enterprises Development Assignment Sample
Small Medium Enterprises (SME) are the companies, which are running their industries with not more than 500 employees. This definition is complex in China. In China, this depends on the category of the industry and the employee’s numbers, also their total assets, and annual revenues. There are more than 139 million SMEs present in the country of China. The main aim of these SMEs is to focus on employment and poverty, and also it has a huge impact on the country’s economic rate, and SMEs help to shape innovation. “State-owned enterprises (SOEs)” have been involved in the reforms of the economy. Chinese SMEs are constantly increasing the economic growth of China. SMEs output also contributed to the “Gross Domestic Product (GDP)”, GDP has been increased up to 60% GDP rate of China and also increased the employment number up to 82%. There are more than 42,000 medium and 2,327,000 small enterprises present in China.
For this study, the “RedRock” company is taken. This is an SME company, which helps in business by introducing new technologies, like mobile, and digital technologies. This company was established in the year 2005, and it is located in Bristol. The United Kingdom. This is a part of the “Employment Service Industry”. Here, they have not more than 50 employees and they are generating $29.31 million in sales. In this company, all are welcome to reach their goals or else for their jobs. As per the opinion of RedRock, “their company values are a direct reflection of their people and the principles they hold”. They have a very good correlation with their values and their business qualities. This company is at the top position of China’s SME list (Zhan and Chen, 2021). They are very responsive, agile, and they also can create tailored solutions. The focus is on hard work and determination for being successful. From this agility, transparency, accountability, and risk management techniques comes. For delivering purposes, they are concerned with their client’s business goals and also find out the IT roadmaps for establishing the best approach of delivering for their clients. They mainly focus on three core values for the management of their clients;
- Excellent teams
- Client enablement
RedRock consultancy recognizes its responsibilities towards the environment and they are committed to reducing their activity’s impact in nature by improving and reviewing the performance of the environment. RedRock Consultants says that their main aim is to reduce the bad impacts of their activities on the environment. And to improve the awareness of their employees, maintain the money values, and adopt the best practices as their development tools (Farooque et al. 2019). As this is a technological company, so if they are willing to increase their business, in that case, they can easily open their new business in China, as China’s SMEs records are also very good.
China is one of the top countries in economic rate. Before starting a business in China, one should understand their customers. For a great start, the business culture of China is very unique. There are so many advantages of starting a new business in China, here five of them are discussed:
- Governmental policies: Chinese governments are very much active and helpful entrepreneurially for starting a new business in China, it can be either an international or local company (Giyanti and Indriastiningsih, 2019). This can be helpful for many people, who are thinking of starting a new business in China, they can incubate their creative ideas because of these favourable policies. Because of these measures, China has become the best country for local entrepreneurship. Because of these policies, foreign industries can also get their supplies very easily, and the transportation cost is affordable also. Their taxation policies are also very unique from the other countries. China’s inland regions have very less tax rates for foreign companies than the coastal ones. Tariff policies of China for importing and exporting products are affordable by the companies (Su et al. 2018). China’s road and ports transportation is very good, for this the exporting and importing products must be very convenient.
Figure 1: Chinese SME adoption
- Entrepreneurial environment: Because of the favourable policies, finding an investor and a local business partner is very easy in China (Li, 2019). Its business ecosystem is very much facilitative and the youths are empowered by this.
- Skilled-talent abundance: Chinese professionals are very much talented and competitive. Many skilled professionals have been produced by the local universities of China. It is an advantage for the international graduates, who have the opportunity to settle down in China. Many professionals are now using English and Mandarin as their professional languages (Liu, 2018). It is a great attraction of China, because of what the SME companies are interested in to start their business in China.
- Growth opportunities: The terms and policies of China are constantly changing. Some of the companies are yet not regulated, which means that there are still many employment opportunities. Operating a business in their digital health sectors and internet finance is easy. “Minimal regulation” can allow the entrepreneurs to experiment more and execute it more flexibly.
- Stability: Social, economic, and political stability is a major factor in the success of China. These three are the main and important elements for a guaranteed healthy environment of business (Lu, 2020). Their markets can be predictable, this is a great advantage so that the business predictions and future of the business can be predicted easily.
As per the theory of FDI, this can be classified into two parts; one is export-oriented FDI and market-oriented FDI. In the context of market-oriented FDI, the main factor is the growth and size of China, which can attract their FDI. And the main factor of export-oriented FDI is cost-competitiveness. In China all these factors are present.
Growth and size of Chinese prospect and economy: The main target of market-oriented FDI is to supply services and goods to the local market. This kind of FDI can exploit new business markets. China has a large market, higher economic development, and quicker economic growth so that there are many opportunities. These factors are very important in market-oriented FDI. Even though these factors are related to the export-oriented FDI also, the size of the country is important because greater economies can provide a greater scale economy. China has a 1.2 billion population, with a huge consumption potential. China’s economic scale is expanding constantly. But the GDP of China is still very low, the economic growth and increased power of purchasing can improve the reduced GDP of China, and because of this China is considered as a more attractive place for market-oriented FDI.
Financial, technological, and physical infrastructure: Roadways, railways, and waterways are affecting the decision for selecting the place (Reardon et al. 2021). Also, the telecommunication service affects the FDI. A high level of telecommunication service can reduce communication costs and save time. Also, the technological infrastructures have an impact on FDI. Recently, China’s market has been upgraded. In Particular, high-tech development is speeded up. The current technologies can attract FDI.
International markets access: China has accepted the “export promotion development strategy”, this is a proven example of success. In collaboration with the policies of export promotions, China has executed “economic reforms and open-door policies”. They are focusing on reducing the tariff barriers. China also implemented and formulated a set of policies for encouraging traditional trade. The policy of import substitution can be used for the promotion of FDI. In the context of accessibility into the international market, this country has many merits. “Export-oriented FDI” targets to utilize the specific resources at a very low cost in the foreign countries and after that, the products are sent to the home countries or the 3rd countries.
Economic policies: China is very much focused to maintain the “economic growth policy”. In 2020, China was expected to have a record of 7.3%-8.6% growth rate. As per the “Chinese government’s tenth Five-year plan (2001-2005)”, the economic growth rate of China will be more than 7% and China’s GDP rate in 2003 was US$1 300 billion and in 2005 it was US$1 500 billion.
FDI has a huge impact on the economy of the country (Yi, 2017). From the last 2 decades, China has already attracted many FDI inflows and these FDI firms have become an important part of the Chinese economy.
- Impact of FDI in international trade
- The competitive advantage of china: As per the economic theory, china’s main strength belongs to its international trade, which is mainly concentrated on the production of toys, shoes, sports goods, etc. And its weakness is placed in its technology and capital-intensive goods, such as engines, plastics, and textile products, machinery, etc. The specialization shifts can change the position of China in international trade (Couper, 2019). China still has the largest share in the market, especially in traditional industries, also it has increased its market shares in the world market.
- Impact on trade growth of China: In between 1992 to 1998, the rate of foreign trade expanded exponentially, then they exported double products and imported more than 75%. “Foreign Invested Enterprises (FIE)” is responsible for the improvement of the export performance of China. Between the years 1992 to 1998, the exports of Chinese products rose to 2.5%, because of less domestic demand (Munawar, 2019). FIEs also headed the growth of import products and the shares of the imported products doubled. As the other Asian countries have followed a trade policy, China has also adopted a trade policy. China also has followed a trade policy that includes preferential treatments, like fiscal and tariff exemption, in both the export and import sectors policies.
- Domestic effects
- FDI- a capital source: From the 80s period, FDI has been a strong source of capital formation. The FDI and GDP ratio has increased from 1983 to 1991, the value was 0.31% and 1% respectively. FDI inflows are responsible for the increase of “domestic gross investment”. When the rate of “gross capital formation” and GDP was increased by the share of FDI inflows, then only 60-70% of FDI inflows was utilized in “fixed capital investment”.
Figure 2: Stock performance
- FDI can create jobs: In the Chinese economy, FDI’s impact is very prominent, as in the places where the capital is less but the labor is more, in those places employment opportunities are very much important. In the FDI sectors both the cases of urban and total employment have increased. There more than 4.80 million employees are employed in foreign companies. Maximum opportunities for employment are created by the FDI inflows. And FDI firms can also increase the employee’s skills.
Figure 3: Revenue chart
- FDI pays more wages: Chinese FDI organizations have paid more wages to their employees than the domestic sectors, like a bonus, salaries, wages, and non-monetary and monetary fringe benefits. These wages are offered in all sectors only except the sectors of coking and petroleum refining (Ding et al. 2019). FDI sectors of China have a record of higher labor productivity and have more capital intensity than the competitors they have. Sometimes foreign organizations can feel the requirement of buying laborers or attracting more workers from their competitor companies.
In this study, the RedRock Company is taken for the analysis, it is a small-medium enterprise and they are proud to be it. It has its branch in Boston, UK but for more development, they can start a new business in China, as China is very much progressive in this context. Their governmental policies and also their infrastructures are very good, which provides a positive environment for starting a new business. And the other advantages of starting a new SME in China are also discussed in this study. As China is selected here for starting a new business, so its FDI analysis is also done. FDI firms’ impact on the business market, and its related factors, which have a huge impact on the Chinese market, all are discussed elaborately. FDI’s effect on the economic rate of China is analyzed in this study. FDI has both international and also domestic advantages in the Chinese market. FDI has the potential to increase the capital of the business and also can reduce the unemployment rates.
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