A research study on the impact of the global crisis on small and medium enterprises (SMEs)

Abstract

The Maltese economy relies on a large group of firms called SMEs (Small and Medium enterprises), which are considered to be the backbone. Although various studies have been conducted throughout the years, this research treats the subject of SMEs from a different angle. Apart from investigating in detail different types of SMEs from across different sectors of the Maltese economy, the research also aims at identifying various difficulties encountered by management in the day-to-day running of the business. Apart from SMEs, the study further enquires and delves into the management style of larger firms, while common and diverging aspects are compared and contrasted. Other purposes of this study also include identifying how businesses were managed before the crisis, to delve into the opportunities and threats posed during the crisis, and understand managements' outlook for the near future. Interviews were therefore conducted with the aim of analyzing the impact of the crisis on different sectors as well as to compare and contrast its effects on enterprises of all sizes. This research analysis also illustrated the different ways in which managements behaved to overcome threats and/or reap benefits resulting from the global crisis. The research revealed that during the global crisis, local firms were exposed to unanticipated changes in factors within the macro-environment. These fluctuations resulted in loss of business, decline in business confidence by management and loss in consumer confidence, loss of profitability, and decline in return on investment. Although firms were open to more or less to the same elements within the environment, the local markets behaved differently and moreover firms adopted diverse strategies in reaction to these changes. Firms, particularly large enterprises, were more risk-takers and increased investment during the economic downturn. On the contrary, smaller firms were constrained to postpone investment to a later period due to lack of accessibility to credit, and adopt more conservative strategies.