Drivers Influencing SMEs in the UK Term Paper Example | Topics and Well Written Essays - 2500 words - 1

Drivers Influencing SMEs in the UK - Term Paper Example To begin with, the UK is a developed country that is considered economically stable and highly competitive in the global market. In fact, in 2008 it was ranked in terms of nominal Gross Domestic Product (GDP) in the European region. In addition, it is the sixth largest economy globally in terms of Purchasing Power Parity (PPP) (Excellis Business Consulting, 2009). The country is a member of some of the most prominent organisations in the world including the European Union (EU), North Atlantic Treaty Organisation (NATO), Organisation for Economic Cooperation and Development (OECD), the United Nations Security Council, World Trade Organisation (WTO) and the G8 (Excellis Business Consulting, 2009). The country’s population was slightly below 50 million according to a census conducted in 2008 and ranked third in the EU (Excellis Business Consulting, 2009). The UK remains one of the proficient players in the global economy after recovering from the economic and political effects of the two world wars. Manufacturing is a key component of the UK economy however, it can be noted that it only accounted for approximately 13 percent of the output in 2003. The industry also contributes nearly half of the exports and ? 150 billion annually (Excellis Business Consulting, 2009). This trend has led to the increased levels of transfer of the UK manufacturing base and foreign ownership. In recent times, UK based companies are no longer the leaders in the manufacturing sector. Nevertheless, the UK still ranked sixth worldwide with regards to Gross Value Added (GVA) and manufacturing output (Excellis Business Consulting, 2009). Most conventional manufacturing companies have evolved into new activities such as silicon design, silicon design, in-flight refueling systems, and Bluetooth technology. Other manufacturers have engaged in the development of state of the art technologies in nanotechnology, information technology, and communication. In 2006, 25 percent of the exports were in the high technology class compared to 22 percent in the US and 15 percent in France (Excellis Business Consulting, 2009. Globalisation has both positive and negative impacts on SMEs. It poses numerous challenges such as increased competition and exposes the economy to pressures in the global economy such as recessions (Beise, 2004). Globalization allows for the free trade and global companies can trade in the UK market resulting in increased competition (Dicken, 2007:5). This affects the viability and competitiveness of SMEs. Owing to the fact that SMEs are in search of uncontested market space, globalization leads to an increase in the number of players in the market and this increases the level of competition faced by the SMEs thereby negatively affecting profitability. Through globalization, the global economy is viewed as one entity hence if there is an economic crisis in one economy it is likely to have a ripple effect on other economies. This means that SMEs are more e xposed to global economic crises owing to the rising trend of globalization (Dicken, 2007:5). These are the negative impacts of globalization on SMEs.