This Preliminary outcome is unique to the Business planning topic and connects directly with the dot point
"success and/or failure" under
"Small to medium enterprises". This means that your notes should primarily encompass the factors contributing to both the success and failure of SMEs, which can be done as follows.
Success:
There are five factors that contribute to the success of SMEs:
- Flexibility: Due to the small size of the business, the owner can generally adapt fairly quickly to changes in the external environment. This is also consistent with quicker decision-making given that there are fewer levels of management.
- Focus on market niche: Small businesses have the ability to direct their efforts towards a few key customers or a particular market segment, which provides SMEs with the opportunity to become more specialised and become capable of delivering at a high standard.
- Reputation: An SME can develop a good reputation for the quality of its goods and/or services since it is responding to the needs of a narrow niche market.
- Entrepreneurial ability: Of course, the people in SMEs are very important in terms of the success of the business. People are obviously different and this extends to the attitudes and personalities of owners, some of whom will display enthusiasm, while others will be motivated by the challenge of potential business failure. One aspect to note is that the majority will be highly motivated and optimistic.
- Access to information: The main people of SMEs must ensure that they have access to information regarding profitability, the quality of goods and services as well as the performance of employees. Better decision-making can be achieved by having access to accurate and up-to-date information.
The following figure may be helpful in remembering those factors:
Failure:
Essentially, an SME is considered to have failed when it is:
- Unincorporated and declared bankrupt: a legal process of distributing among the creditors the property of a business or person who cannot or will not pay their debts.
- Incorporated and either forced into liquidation or voluntarily closes down because it cannot pay its debts and faces a cash flow problem.
However, if a business owner decides to cease business operations due to ill health, or because of any other reason that is not linked to financial problems, then the business is not described as a failure.
There are several factors that can contribute to the failure of SMEs, some of which include:
- Lack of information
- Insufficient funds
- Insufficient sales
- Increasing competition
- Problems at leadership level (e.g. inept decision-making) or management level (e.g. inaccurate record keeping)
As for the type of questions that can assess this outcome/dot point, this type of information has the potential to be assessed under virtually any type of question, including multiple-choice, short answer and questions requiring a long response. They can also be based on a stimulus or directly assess your relevant knowledge. Consider the following examples:
"Describe ONE factor that contributes to the success and ONE factor that contributes to the failure of SMEs."
"Anthony recently established a small to medium enterprise (SME). Not long after its establishment, his business achieved tremendous success.
Describe TWO possible factors that contributed to the success of Anthony's business."
I hope this helps!
