Home Latin America I 2003 Real Tools for SME – They are not Small Big Businesses!

Real Tools for SME – They are not Small Big Businesses!

by david.nunes
Adilson Antonio PrimoIssue:Latin America I 2003
Article no.:5
Topic:Real Tools for SME – They are not Small Big Businesses!
Author:Adilson Antonio Primo
Title:CEO and Chairman
Organisation:Siemens Mercosur (Argentina, Bolivia, Brazil, Chile, Paraguay and Uruguay)
PDF size:124KB

About author

Adilson Antonio Primo is now the CEO and Chairman of Siemens Mercosur – a region encompassing activities in Argentina, Bolivia, Brazil, Chile, Paraguay and Uruguay. He has been with Siemens since 1977, having begun his professional trajectory in the area of power transmission and distribution. After occupying several positions in this area, he was named General Manager of the Power generation division and, later, general manager of Siemens’ regional offices in Salvador and in Rio de Janeiro. Between 1999 and 2001, he served as General Director of Siemens’ Industrial Division and then as Chairman and CEO of Siemens Ltd. iIn Brazil. Mr. Primo graduated as an Electrical Engineer from the Escola Federal de Engenharia de Itajubá. Mr. Primo has been active in a wide variety of industry organizations, having served as the chairman of FICAP, of SINDICEL- the State of São Paulo Association for the Electrical Conductor, Wire Drawing and Non-ferrous Metal Lamination Industry, and also of the Brazilian Copper Association – ABC. He is the vice-chairman of the Brazilian Electrical and Electronics Industry Association – ABINEE.

Article abstract

In Brazil, more than 98% of all companies are Small and Medium Enterprises; they create 53% of all jobs, but pay only 16% of total salaries. By encouraging the development of Brazil’s SMEs we can help resolve the country’s problems of unemployment, income distribution and economic growth. SMEs lack financial resources, qualified human resources and access to technology. Digital inclusion, access to telecommunications and IT, with help from both government and private enterprise, can help these companies survive and grow.

Full Article

Among the harsh problems to be faced by the new Brazilian government, the two most complex are the country’s perverse income distribution and its high unemployment rate. These are linked to the need to significantly increase both the economy’s rate of growth and the country’s exports. One way that can contribute significantly to the solution of those problems is to encourage the development of Small and Medium Enterprises (SME [1]). SMEs are the major source of employment worldwide. For this reason the World Bank, which has a department to foment that segment, allotted US$1.5 billion to them during the last year. That huge investment tries to minimize the poverty in which more than three billion people worldwide live today, by project financing, training and service provisioning for the strengthening and growth of SMEs. Here in Brazil, as in most of the world’s countries, the SMEs represent more than 98% of the total number of companies. Also, they employ 46% of the economically active population a recent survey has shown a rise in this percentage to 53%. That percentage is also not very far from the European average number [2], where 39% of employees work for SMEs. Unfortunately, the similarities stop here. In most countries worldwide, the group of SMEs represents a solid base for exportations. In Brazil, according to BNDES data [3], they contribute only with 2% of total exportations, which is very low, regardless of the evaluation criteria used. This scenario also reflects the distortions created by Brazil’s unfortunately concentrated income distribution. Despite the fact that 98% of all companies are SMEs, they are responsible for only 16% of total salaries. The average salary paid by a large company is 7 times greater than that paid by a SME. That situation will only, can only, change with a great jump in the productivity of the SMEs. What are the major obstacles that keep SMEs from performing better – more expressively and more efficiently Again, let us take the international examples as a base: In a survey [4] carried-out by the European Community, the major problems faced by the SMEs have been evaluated. The report especially highlighted three problems: – The difficulty of obtaining access to financial resources – The lack of qualified human resources – The access to and qualification in new technologies The Brazilian situation is similar, but worst. There are many things to do, in addition to implementing the series of measures of excellent quality which are already in progress, but which may and must be intensified. Considering the access to financial resources, the initiatives more succeeded in world use micro-credit solutions promoted by partnerships between financial institutions and local qualification companies. A special highlight must be mentioned, the volume of R$ 30.26 billion in credits granted from 10/1999 to 08/2002, by 4.48 million of credit operations by partners in Brazil Entrepreneur programme. The lack of qualified human resources is one of the greatest Brazilian challenges. Great progress has already been made by the former government, but we still have a great mountain to traverse: we have significantly increased the number of children enrolled in public schools, but we still need to make huge quality gains in our elementary and mid-level schools. A significant and exceptional programme must be mentioned here: more than 6 million people have been trained all over the country by the Brazil Entrepreneur programme, between 1999 and 2002. The new government has a great opportunity to use the resources of the Telecommunications System Universalization Fund – FUST, which has been built up by a tax upon the income of the operating companies. It is possible, not only to enhance the telecommunication infrastructure of teaching institutions, but also reduce the digital divide, making feasible their connectivity to the Internet information universe, by the provisioning of Broadband accesses. Other enhancement opportunities are also present in the technical qualification field, enabling the access to new technologies. A survey performed by Siemens, with more than 3,000 companies in the country, revealed that less than 10% of SMEs polled use call center systems although such systems can enable significant revenue gains by the enhancement of the relationship with their customers. The same survey showed that less than 5% of SMEs polled used videoconference systems, which not only reduce dramatically the travel expenses, but also increase the labor force productivity. Due to Brazil’s continental dimensions, remote teaching solutions provided have great potential to be used interconnecting remote locations to the major Brazilian and international teaching centers. Additionally, the WBT (Web Based Training) platforms provide for interactive and flexible teaching. Here also, the government, via technological development support funds such as FUNTTEL [5], can encourage the Brazilian industry to develop products and applications focused upon this segment, which has specific needs, many times not well identified, or even addressed by private enterprise vendors. In the specific case of Brazil, we still have some additional problems, also not so easy to solve: – The lack of information and access to markets, including the international ones. While in Europe, by the end of 2000, 50% of all SMEs already had access to Internet, in Brazil, to this very day, that number is very small. The causes are known: – Digital divide – in many cases, the employees of SMEs are not familiarized with Internet, because they have never accessed the worldwide network. According to ITU data [6], less than 9% of the Brazilian people access the Internet, figures considered very low when compared to European indexes (18%) and even with the average number in the Americas (22%), clearly influenced by the number of internauts in USA (where 50% of population access the worldwide network). – High Internet access cost – though more than 50% of Brazilian internauts use free accesses, the telephone costs still represent a major expense, especially for those located outside the great urban centers. ANATEL [7] estimates that more than 85% of Brazilian cities do not have Internet service providers. This greatly discourages the free and full utilization of network, due to high, long-distance, telephone costs incurred for Internet connections from those locations. ∑ High cost of PCs – The cost of a PC is one of the major obstacles lying between the SMEs and their access to the Internet. A solution has not yet been found to effectively substantially contribute to a decrease in that cost. At the moment, according to the ITU, Brazil has, approximately, only 6 computers for every 100 inhabitants, while the average number in American countries is 27 per 100 inhabitants and in the European countries, 18 per 100. Clearly, the solution for all the difficulties pointed out here will not be found immediately. Probably, each problem will be solved gradually after a series of developments moving in the right direction. We still have a long way to travel, although the first steps have already been taken. We must continue, but more rapidly, along the path. The measures to be adopted must enable the rapid development of our SMEs. The efforts to help SMEs should be given a higher priority than those for the rest of society. The need for speed, to help SMEs rapidly, is determined by the high “death” rate of these companies; close to 13% of them into bankruptcy every year. In comparison, the same index for large corporations is approximately 4%. The mission to develop our SMEs is so big and important that we cannot expect that the government alone will carry it out. Private enterprise, with the third sector, which has showed encouraging proofs of competence and creativity, must also do their part. The experience that we accumulate in Siemens, after so many years of presence in Brazil, has showed clearly that a SME cannot be treated as a “small big company”. The applications for this market segment must combine competitive costs with operational simplicity, with no impairment to the level of quality level, and use the most up-to-date technology. When we reached that goal, the market will always respond positively. We can mention some recent examples of products for this market that meet the cost, simplicity, quality and technology criteria include: – A micro PBX [8] with a built-in modem for broadband access to Internet. – Several specific applications for SMEs, which serve as, a small-scale relationship centre, providing professional level customer contact services and controls.

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