Rationale for SME's to expand and opportunities and challenges for global growth

An SME is a small or medium-sized enterprise. According to the EU, definition of an SME is a business with fewer than 250 employees, and a turnover of less than €50 million. Within this umbrella there are three different categories: medium-sized, small, and micro-businesses. These categories are defined by turnover. SMEs make up around 99 per cent of all the businesses operating in the UK, and are therefore enormously important to the UK economy. Millions of people work in SMEs, and they are generally seen as the key engine of growth and sustainability. (Simply Business, 4th December 2018) 

Below is a table of the criteria that a business meets to have SME status in Japan from: SME support Japan (2019).

	Manufacturing and Others	Wholesale	Retail	Service
Capital	300 million yen or less	100 million yen or less	50 million yen or less	50 million yen or less
Number of Employees	300 or less	100 or less	50 or less	100 or less

In terms of pre-expansion, small businesses know they are ready to expand if they:

• Have a global product or service that they can offer- this can help a small business to differentiate themselves from competitors and allow them to compete. If they have a unique product or service they will be able to stay in the running in the international market. 
• Have managerial, organisational and financial resources to expand- these are highly important factors as if they simply don't have the resources to expand they are going to fail on a global scale which can damage the reputation of the business.
• If there is a country in which they feel comfortable in doing business- if an SME does advanced research into a country they would like to operate in they can reap the benefits of being in a different country where they know what is required of them in order to succeed.

Invest NI provide support to businesses who are thinking of expanding and aid them in successful competition. They work directly and indirectly with businesses in Northern Ireland through providing information, advice directly through a range of information services such and provide support to those who want to set up their own business or provide support to those small businesses that want to expand. (InvestNI, 2019)

The business provides debt and equity investment such as:

• NI small business loan fund- £5 million fund that provides unsecured loans to individuals, private companies and SME's.
• Growth loan fund- £50m fund that provides unsecured loan finance to SMEs that can demonstrate strong growth and export potential.
• Development funds- Two £30m equity funds designed to help SME's in NI accelerate their growth. (InvestNI, 2019)

Example of a UK SME

First Derivatives (FD)is an example of an SME in the UK. FD  is a leading provider of products and consulting services to some of the world’s largest finance, technology and energy institutions. FD is the developer of the world-leading database technology kdb+. The business was first set up in Newry in 1996 where it has established its research and development centre, its Capital Markets Competency Centre and its near-shore support facilities. (FirstDerivatives, 2019) The Company has continued to expand its service offering and now has operational bases in Europe, North America, Asia and Australia to service its global client base. It is recognized as one of the fastest growing capital markets service providers in the world. FD now employs over 2,400 employees worldwide. (First Derivatives, 2019) FD has been able to achieve this global growth through having a unique service offering as they hold their position in the niche market in terms of domain knowledge of capital market assets as well as expertise in leading financial systems. (First Derivatives, 2019) FD also provide great investment in their employees ensuring they are well trained and looked after in order to maintain their global position and continue growth. 

SME's in Japan

SME's make up a huge part of all business in Japan. Atsushi Toyonaga, CEO of SME support in Japan stated, "The 3.5 million SMEs account for 99.7% of the total number of companies in Japan and, needless to say, they are essential in sustaining our economy."

The image below gives a depiction of the ratios of SME's in comparison to large enterprises in Japan and it is clear to see that the presence of SME's is taking over. 

image obtained from: (SME support Japan, 2019)

Example of an SME in Japan

Toyota motor corporation is an example of an SME in Japan that has since grown to be a huge global player in the automobile market. It began in 1933 as a Japanese manufacturer founded by Toyoda Sakichi and released the first model, 'AA Sedan,' in 1936. The company faced difficulties in the economy as a result of the aftermath of world war 2 and the company was forced to temporarily suspend its automotive production. (Britannica, 2019)
The factories were then up and running again after a few years and the company began to face competitiveness, in order to compete, Toyota carried out a study of American automobile manufacturers as they had economic superiority. Toyota then implemented changes in relation to technology as they wanted to have the latest manufacturing facilities. Toyota expanded at a rapid rate in the 60s and 70s and began exporting in foreign markets and for several years was Japan's largest automobile manufacturer and in America gained recognition for its low-cost, fuel-efficiency and reliability. (Britannica, 2019) The company maintained significant growth and has led them to be where they are in the market today, competing with the leading car manufacturers in the world. 

Opportunities and challenges for global growth
Communication and transport provide great opportunities for SME expansion in terms of accessibility around the globe. It has become increasingly important for companies to expand globally in order to take advantage of cheaper production costs in order to aid boosting their exports into different markets in a more efficient way. However, before setting up in a new country it is important to know all the facts or else risks will be encountered.

With regards to Japan and SME's, there has recently become a huge opening in Japanese markets for health care real estate. This is down to the fact that the demographics are causing an ageing population as birth rates decrease. The graph below shows how deaths were always on the rise and at one point the birth and death rates were at an equilibrium however birth rates has had a rapid decrease over the years which has caused the ageing population.

There are some issues with regards to the older population as there will be more costs associated ion the economy due to more pension pay outs as well as increases in tax. As well as this SME's as a result, could find it hard in terms of expansion as they may simply not be able to have a skilled-enough workforce to cooperate with them due to less newly-qualified employees/graduates coming through due to the low birth rate. (Viktoriya Kuzina, September 2019)
However, it is apparent in Japan that there is a need for more healthcare practices, especially for assisting the elderly with support service availability. Japan will, sooner or later, have to face the reality of providing healthcare, housing and facilities to the elderly.

Technology has aided small businesses and has helped to give them the ability to compete on a global scale. Small businesses can create websites and provides quick and easy ways to sell across national borders as well as the internet being a huge social platform to show what they have to offer in terms of advertising and what's even better is some websites are free to use such as Facebook, Instagram and Twitter. 

With expansion comes risks. Some threats for SME's can include language barriers and communication issues as some countries will not all speak English and this can make things difficult in terms of making business agreements and general processes of the business. 

In terms of tariffs, SME's can face challenges in relation to costs with leaders adding tariffs. Tariffs essentially mean there will be higher costs associated with imports and exports. When an SME faces tariffs, their only choice would be either to source cheaper materials to cover costs of the products they are manufacturing or else they will have to put the selling prices of their products up. This can affect consumers in terms of their spending as they may look for competitors who sell similar products at a lower price therefor they will not be able to effectively compete if their products are not easily differentiated.