28 May, 2024 0 comment

Small Giants: Strategies to Raise the Productivity of Micro and SMEs

Micro, small and medium-sized enterprises (SMEs) are the backbone of the world’s economies. These organizations account for more than 90% of all businesses, approximately half of the value created and more than two-thirds of business employment. However, one of the major barriers they face is productivity, which on average is half that of large companies.


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Micro and SME Productivity Challenges

Micro and SMEs vary enormously in size and economic activity, from just one self-employed person to a software company with 250 employees. This wide range means that strategies to improve productivity are equally diverse and adapted to different economic and sectoral contexts. These companies need to be studied in detail in order to identify specific opportunities for increasing productivity. Since it is possible to boost prosperity in the long term, micro and SMEs play an essential role in this process, especially at a time when global trade patterns and geopolitics are being reconfigured.

The Importance of Micro and SMEs in the Global Economy

In the global context they create significant economic value, contributing around half of global GDP. This contribution varies from country to country, being over 60% in countries such as Portugal, Israel and Italy. In addition, these companies are also major employers, accounting for approximately 40% of total employment and 70% of employment in the corporate sector. In emerging economies such as Kenya, this impact is even more pronounced, with Micro and SMEs employing 80% of the corporate workforce.


fonte: Mckinsey and Company


Strategies for Success

Micro-enterprises, in particular, have lower productivity rates compared to other SMEs. This means that, in terms of added value per worker, they are even further behind large companies. In emerging economies such as Kenya, Brazil and Mexico, this disparity is even more pronounced. On the other hand, in more advanced economies such as Portugal, Poland and Israel, micro-enterprises also face significant challenges, but have more opportunities to improve their productivity through effective policies and structured support.

Digitalization: An effective strategy for increasing productivity involves digitalization and the adoption of new technologies. Digitalization allows them to improve operational efficiency, reduce costs and gain access to new markets. Investing in technology can be challenging for small businesses due to the initial costs, but the long-term benefits are significant. Government support, through subsidies and funding programs, can be crucial in this process. Training and skills development: another vital strategy is to invest in employee training and skills development. Continuous training and professional development programs can significantly increase productivity by enabling workers to adapt to new technologies and more efficient work processes. Collaboration and Business Networks: Micro and SMEs can also benefit from collaborating with other companies and joining business networks. These partnerships can provide access to resources, knowledge and markets that would otherwise be inaccessible. For example, partnerships with large companies can help them integrate into global value chains. Access to finance: access to finance is another crucial factor. Many companies face difficulties in obtaining credit, which limits their ability to invest in technology and expand operations. Improving access to finance, through financial institutions and support programs, can help overcome this obstacle.

In short, by supporting these companies, we are investing in a more robust and resilient economic future for everyone. Increasing productivity is essential to strengthening the global economy. Through strategies such as digitalization, skills development, business collaboration and access to finance, micro and SMEs can not only reduce the productivity gap with large companies, but also make a significant contribution to sustainable and inclusive economic growth.

We can therefore say that size doesn’t matter when it comes to the future, it doesn’t matter if you’re big, small or even micro, a company’s mission isn’t just measured by data and numbers. Results are a consequence of a greater purpose, of a vision that brings together and unites the various stakeholders. Take the story of Rui Nabeiro and Delta: in 1961, in the village of Campo Maior, in a small 50m2 warehouse, he started his own business by roasting 30 kilos of coffee a day. And that’s how the coffee brand best known to the Portuguese was created.


Article by Sérgio Almeida, in partnership with Vida Económica.