Saturday, May 27, 2017

SMEs in India and Japan

Small businesses are often called the backbone of economies. Relatively low profile and unseen, they play a major role economic growth and prosperity, innovation and job-creation, in most countries.

Governments refer to these small businesses as Small and Medium Enterprises (SMEs). In most countries, they represent over 95% of all enterprises, and a significant chunk of national GDPs.

However, there are also significant differences in the way different countries view SMEs. Take, for instance, a comparison between India and Japan:

As we can see in this table, Japan sets the bar much higher for SMEs. A company with a capitalization of JPY 300 million (USD 4m) and up to 300 employees would qualify as an SME in Japan but would definitely be considered a "big" enterprise in India.

Also, in Japan, many SMEs occupy super-specialized niches that cater to a global market, while in India such companies are few and far in between. Some of these world class Japanese SMEs are:

  • K. Yairi - maker of hand-crafted guitars
  • Roland - manufacturer of electronic musical instruments - synthesizers, electric pianos and drums
  • Shimano - Bicycle components, fishing tackles and rowing equipment
  • Tamiya - Plastic model kits, educational
  • Molten - Sports equipment
  • Olfa - Cutting tool, DIY stuff
Many of these companies are over 70 years old, and have evolved through tough competition in the domestic market. High expectations in terms of quality and price from the customers at home helped them carve a niche for themselves in the global markets as well. Perhaps this is one of the key factors that has, so far, prevented Indian SMEs from creating world class products.


* Indian Ministry for Micro, Small and Medium Enterprises (MSMEs) -

- 23 million SMEs - provide 75 million jobs (two out of every three private sector jobs)
- They represent 99% of all enterprises
- less than 250 employees and less than €50 million annual turnover (or €43 million annual balance sheet).

- 98 percent of all identified U.S. exporters -- supporting nearly 4 m jobs through both direct and indirect exports

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