Hinhalagoda lekamalage pulsi kavindya sandeepani ariyarathna

1.1.2. Reasons for Choosing SME 
One of the chief virtues in today's Globalised SMEs is their flexibility, which is the 
ability to respond to market needs, regardless of the geographical limitations and to deliver 
competitive, high quality products and services. SMEs focus on developing new products or 
services in order to be successful, and as a result, they are better able to react to changing market 
demands.Small and medium-sized businesses play a critical role in building a country's 
economy. Small and medium-sized businesses encourage competition in product design, 
pricing, and efficiency.Large corporations would have a monopoly in practically all activity 
sectors if SMEs didn't exist. Small and medium-sized businesses assist giant corporations in 
areas that they are better able to offer.As a result, SMEs will be dissolved promptly, and large 
corporations will be obliged to engage in more activities, which may or may not be beneficial 
to them. 
In the recent past, Sri Lanka's macro-microeconomic policies have seen significant 
adjustments and transformations.The changes have primarily resulted in economic 
liberalization through outward-looking growth plans and open-market economic policies.Prior 
to these adjustments or alterations, Sri Lanka had created significant welfare state systems, 
dating back to the country's independence in 1948 and even before that, during colonial rule.For 
nearly a century, Sri Lanka has had a unique expertise in designing and implementing rural and 
agricultural development strategies, policies, programs, and projects.A completely free 
education, free healthcare, and food subsidy schemes, as well as the establishment of new land 
settlements and irrigation systems, have all been implemented as key social and welfare-
oriented agricultural and rural development initiatives. 
SMEs grow more efficiently activities such as sourcing raw materials and distributing 
final goods made by large corporations. Most of the current larger enterprises have their origin 
in small and medium enterprises. SMEs are different However, SMEs have their significant
effect on the income distribution, tax revenue, and employment, efficient utilization of
resources and stability of family income. SMEs have a propensity to employ more labor-
intensive production processes than large enterprises. Consequently, they contribute 
significantly to the provision of productive employment opportunities, the generation of
income and, eventually, the reduction of poverty. SMEs play significant contribution in
the transition of agriculture-led economies to industrial ones furnishing plain opportunities
for processing activities which can generate sustainable source of revenue and enhance
the development process. SMEs shore up the expansion of systemic productive 

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capability.from large scale enterprises in three main aspects; uncertainty, innovation and 
evolution.below are some of the major reasons why people tend to choose SMEs as their 
opportunity for a better lifestyle, hence to get a better future. 
1. SMEs are independent entities which are managed solely by owners. 
Small businesses lack management structure, control remains with owner or small group 
of people.limiting control can avoid conflict and enable to business to make effective decisions 
and avoid meetings and procedures in a large management structure. On the other hand one 
owner may not be skilled or experienced in every element of business, lacking in knowledge 
can have a negative effect on business. Also most owners of small business learn on the job and 
acquire their skills and knowledge through experience from self employment.Business owner 
may have deep knowledge within their field, however lack a broad, objective view of the 
business, hence more people are needed to bring in new experience and talent. 
2. SMEs are financed or capital is provided by the owner or small group of owners. 
There are two main sources of finance for the SMEs namely Internal Sources and 
External Sources.Internal Sources refer to the personal savings of the Businessman,the relatives 
and friends.Most of the SMEs start small with personal savings and sometimes with a couple 
of close friends starting on a business idea. There is a risk of losing the money , if the business 
idea doesnt go as planned as well.Sometimes even among friends they tend to sign a mutual 
agreement for the benefit of all parties incase the businss plan doesnt work out as expected. 
The External sources include Grants, Bank overdrafts and venture capitals.grants are offered 
mostly by local councils, local authorities and government facilities that fund SMEs.Most of 
the time their intentions are to motivate people to engage in SMEs to boost the economy of the 
area and to later boost the economy of the country.Bank overdrafts are a good source of income 
as a short-term funding for the business.Venture capital, which is also known as private equity 
finance, invest large sums of money in return for a share in the firm’s equity and also expect a 
good return on their investment. 
3. The Business tends to be local and business operations take place (Mostly) on a local or 
national level. 
The small and medium Enterprises are consisting of a business community that ranges 
either to a small area like a district or a province, and medium enterprises can also exand its 
business in to a national level as well.If the business is showing development that can expand 

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internationally, then naturally the number of employees, the assets all the criteria which makes 
it a part of SME changes and presses it to become an industrialized company. 
4. Employees of the business live local within the community. 
SMEs main charateristic is the limit of employess which does not exceed either 25-
50(small enterprises) and 50-250 (medium enterprises). And for a business that runs at least 
five days a week, have to have a employee based at least on the same geographic area.(Unless 
its a remote working experience).The employees must work in a nearby area which is closer to 
reach for work, and it also helps to maximize the efficiency of the work as well. 
5.The Engaging with the community is high thus allowing more interactions to build a customer 
base compared to large businesses. 
From Small Businesses awards to a exuberant client base, little businesses are by no 
implies the lesser substance basically since they aren’t as enormous as large businesses. It’s a 
long-standing issue that the greater a company gets to be, the less human it appears. A small 
business doesn’t have genuine commitments like a board of executives and numerous territorial 
supervisors to reply to, meaning they are more able to think outside the box and on their will. 
6. Size of the Business is measured in terms of sales volume, profit, growth, number of 
employees , core competences,resources and capabilities. 
A micro business has no more than 10 employees and a turnover of under €2 million.
A small business has no more than 50 employees and a turnover of up to €10 million and a 
medium business has no more than 250 employees and a turnover of less than €50 million or 
€43 million or less on the total balance sheet.Most of the time, the business do an analysis on 
the number of employees needed to maximise the service offered or to produce any product and 
soon start to act on it.Hence large organizations have a disadvantage as the higher the number 
of employees, higher the amount on expenses. 

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