Business Models of SMEs

BUSINESS MODELS OF SMALL AND MEDIUM SIZED ENTERPRISES (SMEs)
What is a Business Model?
A business model is a strategy that outlines how a company generates revenue and
profits. It covers key aspects like the products or services offered, target market, marketing
and sales approach, and income sources. It provides a roadmap for success and helps
businesses, large or small, make informed decisions about resource allocation and growth.
What is SME?
SME or Small and Midsize Enterprise, are businesses that maintain revenues, assets, or
a number of employees below a certain threshold. Each country has its own definition of what
constitutes a small and midsize enterprise. Certain size criteria must be met, and
occasionally, the industry in which the company operates is taken into account as well.
Importance of Small and Medium-sized Enterprises
1. Favors flexibility and innovation
Small and mid-size enterprises (SMEs) are key drivers of technological innovation, as
they focus on creating new products and services, enabling them to adapt quickly to market
changes. Unlike larger enterprises, which prioritize improving existing products and benefiting
from economies of scale, SMEs are more flexible and play a crucial role in shaping a country’s
economy. Their social and economic contributions make the SME sector strategically
important for national growth and innovation.
2. Creates a more competitive and healthier economy
Small and medium-sized enterprises stimulate competition for the design of products,
prices, and efficiency. Without SMEs, large enterprises would hold a monopoly in almost all the
activity areas.
3. Assists big enterprises
Small and medium-sized enterprises (SMEs) play a crucial role in helping big companies
by efficiently managing tasks like supplying raw materials and distributing finished products.
If SMEs were to disappear, large companies would be forced to take on these tasks
themselves, which might not be as efficient for them. Governments understand how
important SMEs are, so they offer support in the form of easier loans and tax breaks to help
these businesses thrive and continue contributing to the economy.
Types of Business Model for SMEs
1. Retail Model
One of the most simple and popular business types for small firms is the retail one. It
entails purchasing products at wholesale costs and reselling them at retail costs. Industries
including apparel, electronics, and food and beverage use the retail model frequently.
The ability for small firms to benefit from economies of scale by acquiring large
quantities of items at a cheaper cost is one benefit of the retail model. To compete with larger
shops, who can have greater resources and purchasing power, in the retail sector can be
difficult for small firms.
2. Subscription Model
Customers are charged a monthly price under the subscription business model to have
access to a good or service. This paradigm is frequently employed in sectors like software,
media, and cosmetics. Services that require a subscription include Netflix, Spotify, and Dollar
Shave Club, as examples.
Small businesses choose the subscription model because it may build a devoted
customer base and provide a reliable revenue stream. To keep subscribers and remain
competitive, the subscription model needs continuing investments in product development
and customer support.
3. Service Model
The service business model is offering a particular service to clients in return for
payment. Companies that provide services include accountancy, legal, and consulting firms.
Scaling the service model can be difficult for small businesses since it needs a substantial
investment in personnel and knowledge. However, because they frequently offer high-value
services to clients who are ready to pay a premium, service-based enterprises can be quite
profitable.
4. Franchise Model
A successful business strategy and brand name are licensed to individual business
owners as part of the franchise business model in exchange for a fee. The franchisee pays
ongoing royalties to the franchisor in exchange for ongoing support and access to the
franchisor’s brand.
The franchisee is in charge of establishing and operating a local business based on the
franchisor’s established model. Small business owners who wish to launch a company but
may not have the resources or experience to create a successful business strategy from
scratch may find appeal in the franchising model. The franchise model, however, calls for a
sizable initial investment as well as ongoing costs, which might make it difficult for some
small enterprises to remain viable.
5. Online Marketplace Business Model
The business plan for an online marketplace is developing a platform that links buyers
and vendors. Marketplaces on the internet include eBay, Etsy, and Amazon.
Payment of listing, transaction, and advertising fees enables online marketplaces to

make large profits. Customers can choose from a variety of products, and they offer a
convenient shopping environment. On the internet include eBay, Etsy, and Amazon.
6. Manufacturing Business Model
Producing things or products and selling them to clients constitute the manufacturing
business model. Food and beverage, apparel, and electronics are just a few of the categories
in which manufacturing companies can operate.
Manufacturing companies must make a substantial initial investment in facilities and
equipment, but they can earn sizable profits by creating high-quality goods that satisfy
consumer demand. In order to effectively deliver goods to clients, they must also manage
their supply chain and logistics.
7. Direct Sales Model
Using the direct sales approach, goods or services are sold directly to consumers,
frequently during events, parties, or demos that take place at their homes. The direct sales
firms Avon, Tupperware, and Mary Kay are such examples.
8. Social Enterprise Model
This refers to a business approach that seeks to address social, cultural, or

environmental issues while generating revenue. Unlike traditional businesses that primarily
focus on profit maximization, social enterprises aim to achieve social goals and impact
alongside financial sustainability.
Social enterprises can operate in various sectors, such as education, healthcare,

environment, and economic development, often targeting underserved or disadvantaged
populations.
9. Hybrid Model
It is a business model that combines different approaches, strategies, or operations to

maximize efficiency and profitability, such as offering both products and services or a mix of
online and offline sales. These hybrid models may integrate elements from various sectors,
technologies, or organizational structures to enhance the agility and sustainability of SMEs.
Group 5
Dawey, Kristel
Diguel, Ida Rose
Dinamling, Jolina
Ducayat, Rizzie Kate
Faba-an, Loraine Cate
Faustino, Cresty October 08, 2024
BS in ACCOUNTANCY – 2nd Year M.GW2:

REPORTING
Criteria 5 (Excellent) 4 3 2 (Needs 1

(Very Good) (Satisfactory Improvement (Unsatisfactor
) ) y)
Content Demonstrates Good Satisfactory Limited Minimal or

Knowledge deep understanding understanding understanding; incorrect
and Depth understanding , most key ; some key major gaps in understanding;
, all key points points are details or information. lacks depth and
explained addressed concepts are accuracy.
thoroughly clearly. unclear or
and missing.
accurately.
Organizatio Well- Mostly well- Adequate Poorly No clear
n and organized, organized, organization; organized, structure;
Structure logical flow, though some flow may be hard to follow presentation is
with clear parts may feel difficult to the confusing.
transitions slightly follow at presentation.
between unclear. times.
sections.
Clarity and Explanations Explanations Some Many Explanations
Explanatio are very clear, mostly clear explanations explanations unclear and
n concise, and but could be unclear, lack clarity; confusing;
easy to follow, more concise certain points difficult for overall
complex ideas or organized. hard to audience to presentation is
broken down understand. follow. hard to
well. understand.
Visual Aids Visual aids Visual aids are Visual aids are Visual aids No visual aids
and are highly mostly minimal or not poorly used, or they
Support relevant, relevant and very effective designed, detract from the
appealing, supportive but in supporting presentation.
confusing, or
and could be the content.
effectively clearer. not helpful.
support the
content.
Delivery Confident Good delivery, Adequate Weak delivery, Poor delivery,

and speaking, minor issues delivery, but little minimal
Engagemen maintains eye with presenter may engagement or engagement or
t contact, confidence or seem nervous poor communication.
engages engagement. or disengaged. communicatio
audience, n skills.
strong
communicatio
n skills.
Analysis Strong Good analysis Some analysis Limited No significant
and Critical analysis and and critical and critical analysis or analysis or
Thinking critical thinking; some thinking; critical critical thinking,
thinking; interpretations interpretations thinking; relies heavily on
insightful could be are basic or surface-level basic facts.
interpretation stronger. incomplete. interpretations
s and .
applications.

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BUSINESS MODELS OF SMALL AND MEDIUM SIZED ENTERPRISES (SMEs)

What is a Business Model?

Importance of Small and Medium-sized Enterprises

1. Favors flexibility and innovation

2. Creates a more competitive and healthier economy

3. Assists big enterprises

Types of Business Model for SMEs

5. Online Marketplace Business Model

Payment of listing, transaction, and advertising fees enables online marketplaces to

6. Manufacturing Business Model

7. Direct Sales Model

8. Social Enterprise Model

This refers to a business approach that seeks to address social, cultural, or

Social enterprises can operate in various sectors, such as education, healthcare,

It is a business model that combines different approaches, strategies, or operations to

Diguel, Ida Rose

Faba-an, Loraine Cate

Faustino, Cresty October 08, 2024

BS in ACCOUNTANCY – 2nd Year M.GW2:

Criteria 5 (Excellent) 4 3 2 (Needs 1

Content Demonstrates Good Satisfactory Limited Minimal or

Delivery Confident Good delivery, Adequate Weak delivery, Poor delivery,

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