ABSTRACT
Considering reel economy, one of the most influenced parties is small and medium enterprises (SMEs), because they compose 99 per cent of manufacturing industry. This amount exhibits the importance of SMEs in economic activity. Objective of this paper is to investigate the influence of 2007- 2008 Global Financial Crisis on SMEs. In line with this aim a survey is conducted in order to detect the effects. Selected variables to be analyzed were market share, productivity, profitability, export of SMEs in Karaman manufacturing industry. Results point out the negative effects such as decline in business activity of SMEs, under capacity production, decreasing in production and sales, increasing of over-due receivables. The positive effects of the crisis are efficient utilization of resources, increasing in new market search and consideration of foreign markets.
1.1. INTRODUCTION
The global financial crisis, brewing for a while, really started to show its effects in the middle of 2007 and into 2008. Around the world stock markets have fallen, large financial institutions have collapsed or been bought out, and governments in even the wealthiest nations have had to come up with rescue packages to bail out their financial systems. The crisis which erupted in the financial systems of developed countries in the autumn of 2008 quickly affected all economies throughout the world. The result was job losses, enterprise bankruptcies and cuts in the incomes of millions of people.
Small and medium enterprises (SMEs) have structure which can adopt easily the marketing economic and due of flexible structure they can remain against economic fluctuations. SMEs that generate %90 of manufacturing industry of Turkey have important position about investment and employment. Nowadays, globalization fact affects structures and strategies of economic organizations that are active in national and international area. This situation creates advantage and disadvantage for SMEs. Disadvantages; SMEs can’t adapt to new economic developments, result of this they might lose competitiveness, their production might decrease, even bankruptcy inevitable fact for businesses. Advantages; with growing market share and competitiveness increasing profitability, contribution to country’s economy and employment. Results of some negations created crisis and all businesses was affected in global competition. The recent global economic crisis influenced all sizes regardless of scale of businesses. These effects revealed different sizes. According to research about the effects of the crisis on SMEs show us that SMEs was affected negative by economic crisis. These effects are increasing short-term debts and decreasing market share production and rate of profitability.
In this case goal of this research is investigating effects of 2008 economic crisis on native area. To this end, survey was implemented for affects of crisis on SMEs which in Karaman city and then this research will help us to evaluation the finding and for solutions. This research has 5 parts. On the second part is going to focus importance of SMEs, third part is to explain affects of crisis with macro indicators such as production, consumption, employment, investment. Studies end theses was used about this issue. Fourth part, goal is explain how affected with result of questionnaire. End of the research, fifth part is completed with conclusion and evaluation.
1.2. EFFECTS OF GLOBAL CRISIS ON SMES
The root cause of the economic and financial crisis was the United States mortgage market selling sub-prime mortgages to large numbers of consumers with inadequate incomes. These mortgages were bundled into securitized paper investments, and sold by Wall Street to major financial institutions across the globe. When the mortgages became non-performing, these securitized assets were transformed into toxic acid, infecting the entire worldwide financial system. The ensuing global economic and financial crisis has destroyed trust in banks and borrowers in all the major economies of the world. Depositors are withdrawing their money from uninsured and even insured accounts. Coinciding with this massive run on the world’s banks, these financial institutions are no longer lending capital to each other, reflected in the rising LIBOR short term inter-bank loan rates.
The crisis rapidly developed and spread into a global economic shock, resulting in a number of European bank failures, declines in various stock indexes, and large reductions in the market value of equities and commodities.
Both MBS and CDO were purchased by corporate and institutional investors globally. Derivatives such as credit default swaps also increased the linkage between large financial institutions. Moreover, the de-leveraging of financial institutions, as assets were sold to pay back obligations that could not be refinanced in frozen credit markets, further accelerated the solvency crisis and caused a decrease in international trade.
World political leaders, national ministers of finance and central bank directors coordinated their efforts to reduce fears, but the crisis continued. At the end of October 2008 a currency crisis developed, with investors transferring vast capital resources into stronger currencies such as the yen, the dollar and the Swiss franc, leading many emergent economies to seek aid from the International Monetary Fund.
In general, the crisis is a process used to render as normal within a time period or the short, medium or long term the emergence of a loss or interruption at a time. These losses might be material and spiritual. Economic crisis can be classified in the form of financial crisis and corporate sector crisis. Reel sector crises are crises which in goods and market (inflation crisis and the recession crisis). Financial crisis be divided into three categories such as banking crisis, currency crisis and stock market crash.
Financial crisis that might lead devastating effects on the real economy can influence all markets. Defects in the U.S. financial markets created 2007-2008 global crises and then it affected all world markets. Coming out of this crisis in the financial markets very soon showed its effects on the real sector and the macroeconomic indicators of countries led to a number of adversities. For example for the first quarter of 2009, the annualized rate of decline in GDP was 14.4% in Germany, 15.2% in Japan, 7.4% in the UK, 18% in Latvia,9.8% in the Euro area and 21.5% for Mexico. In developed economies while GDP (gross domestic product) was 2.7 % in 2007 this rate decreased to 0.9 % and -3.8% broke out in a downsizing. In Turkey while GDP was 4,7 % in 2007 it decreased to 1,1 % in 2008 -5,4 % broke out in a downsizing in 2009.
To understand clearly effects on turkey economy, we need to focus macroeconomic indicators (production, consumption, investment, capacity utilization, workplace closures, employment, exports, imports, etc.). For example, the consumption of resident households which is 70 378 million in 2008 has been decreased -27.5% 51 014 million TL to in 2009.
Exports of goods and services decreased 29% compared to 2008 in 2009. Reduction in imports of goods and services was 38% in the same year. While
rate of unemployment was 10.3 %, this rate was 11% in 2008, 14% in 2009 and 14.5 % in 2010. While the total industrial production index for industry (2005=100) was 115.3 % in 2007, 114.2 % in 2008 and 103.5 % in 2009. Seeing is possible effects of crisis on the total automotive production. Total automotive production was 1.132.951 million in 2007, 1.171.917 2008, 884.620 in 2009. While capacity utilization rate in manufacturing industry was 79.2 %, this rate decreased to 64.9%. The biggest breaks in the rate of capacity utilization by sector broke out furniture, motor vehicles, electrical machinery and equipment, coking coal, the manufacture of refined petroleum products and nuclear fuel. So that rate of coking coal, the manufacture of refined petroleum products and nuclear fuel decreased from 90% to 50 %.
As is apparent from the data, effects of crisis were more felt by SMEs in 2009. SMEs that is most important part of reel sector affected adversely. There are a lot of research about SME and crisis. These researches are investigated below.
Stamatovic and Vemic(2009) ingestigated global ecenomic crisis on the reel sector of serbia. According to his research cause glocal economic crisis, result of the reduction of production capacities industrial production decreased rate of 17.4 %. SMEs of the share of total exports diminished (from 87 % to 84%) therefore enterprises which in Serbia had engaged in searching for new markets.
Hodoregel (2009), The effects of the global financial crisis on SMEs in his work, SMEs which is the Dynamics of Romanian economy was (Romania forming almost 80% of GDP) affected adversely by the global financial crisis. Rate of bankrupt SMEs increased, 600.000 enterprises felt this fear and 525000 people lost their job finally, 83 % of businesses have expectation negative expectations about profitability.
Visinescu ve Micuda (2009), according to research about SMEs which in European Union, we can see that collection of receivables of SMEs was delayed and bankruptcies and foreclosures increased. For example bankruptcies of SMEs increased in 2008 by 11% compared to 2007. Even in Denmark, Italy, Ireland, Norway and Spain rate of bankruptcies increased more than 25% in the same year. In addition to these that production costs of businesses increased, investments reduced or postponed is stated.
1.3. METHODOLOGY OF THE STUDY
1.3.1. AIMS AND SCOPE OF RESEARCH
SMEs have very important position in all world however they have some chronic problems. After 1980 Because of growing globalization became single market and processes such as European Union imposed that SMEs have more responsible. Moreover global economic crisis was added on these problems. Due of problems SMEs developed new solution. That small enterprises want to be medium enterprises and efforts of supporting the large industry is not enough, cause management, personnel, finance, organization, marketing and other problems. Effects of global crisis and problems of SMEs were focused. Applied methods that enterprises mitigate or to eliminate the effects of the global crisis was tried explain.
1.3.2. RESEARCH METHODS AND SAMPLING
Field research was chosen as research method in this study. Field research is via asking question to group directly; data that provide for comparison, analysis, interpretation was aims to achieve. The survey method was used in the research as a method of data collection. There are 27 questions in questionnaire. Questions are compatible with the literature; it was prepared to cover the study objectives. Research sample was chosen the 24 SMEs that operate manufacturing industry sector inside 175 SMEs. The data were analyzed with the aid of SPSS (Statistical Package for the Social Sciences) statistical program.
1.4. ANALYSIS OF FINDINGS OBTAINED
Frequency method was used to analyze the survey questions. The results were interpreted as a result of frequency analysis of the survey questions. Obtained findings were evaluated with tables for the data. When we look positions of participants at the enterprises, 45.8 % of respondents are owner, 29.2 % of respondents are administrator and 25 % of respondents are accounting-finance director. When we take account of the field and duration of enterprises; 54.2% of the enterprises are food, 8.3% of them are construction and construction materials, %4.2 furniture, % 20.8 other. %29.2 of companies are between 16-20 years, 20 %, 20.8 % 1-5 years, 20.8% 6-10 years, 25% 11- 25 years and 4.2 % more than 20 years. The number of employees in enterprises, 58.3 % of them have employee 11-49. However, 20.8% of companies have 1-10 employee and other 20.8% have 50-250 employee.
When we investigate annual net sales revenues, the vast majority of SMEs have turnover between 1-5 million € (66.7 %). One other two groups is with % 16.7 have 250 thousand- 1 million €. Another group with 16.7 % has 5-25 million €. To asked question about goals of respondents; 45.8 % increase sales, 33 % increase profitability, %12.5 create employment, 8.2 services.
As you can see from Table 2, 54.3% of respondents want to grow sales- marketing department or this department is seen problem by SMEs. For 8.3 % financing is problem and method should be grown for 4.2 %.
2-Can you explain the field that you want to grow or has problem?
This show all of us that problems of SMEs increase about sales-market and they was aware that enter new market with sharing risk is better idea however, they couldn’t comprehend the importance of source of funding adequately. 8.3 % prove that.
When investigated table 3, most important production problem was seen by 50 % limited capacity, for 25% wrong definition, 16.7 % stocking the problem and %8.3 difficulties which contract manufacturing plan encountered
3- Which problems do you encounter most about production in the company?
To increase capacity is very important in the global competition world. In this case enterprises must follow closely technological development closely that reduce cost and invest, spend time and money for research and development provide advantages for competition.
4- Which problems do you encounter most about marketing and export in the company?
When domestic markets contract, to sell has major importance in the foreign markets. In this case, enterprises need qualified marketing staff. In the growing economy, while rate of unemployment is increasing, finding qualified personnel is very hard for businesses. Specially, advances which in communication sector can increase sales and it might provide to enter different market with low costs.
5- What are the fundamental factors which affect your financial problem?
6- If you make financial planning, what is this type of planning?
7- What is the most important factor which annuls the financial plan?
8-What kind of reaction do you show to interest rate increases?
9- What do you think the most important problem of SMEs?
10- Are you member of KOSGEB (Support and development SMEs)? Did you benefit the support and loans?
11- What do you think about the best solution of financial problems that SMEs encounter?
12- What was priority policy during economic crisis for your business?
13- What kind of changes did it happen about business volume of enterprise during economic crisis?
14- What is the most important effect of economic crisis on your company?
15- Which ones of company policies were most affected by global crisis?
16- What do you think about effects of the global crisis to businesses in general?
17-What are the changes that in enterprise policy after the global crisis?
18-Which ones of interest group was affected Price Decisions of enterprises (except for the Consumer)?
19-There are laws about SMEs. Do you know these laws? Did you make the necessary application that government wanted?
20-What kinds of measures were taken during global crisis?
21-What do you want to say about effects of this crisis when you compare with other crises?
22-What do you think about supports of KOSGEB?
23-What do you think about positive effects of global crisis?
24-What do you think about politics that government must follow in the future?
25-Which tools you use most to increase cash gray in the crisis?
26-Which tools you use most to reduce cash out in the crisis?
27-What is prediction about rate of unemployment, inflation and Interest for the future in turkey economy?
5. CONCLUSION AND EVALUATION
This study was prepared to determinate effects of global crisis on SMEs that operate manufacturing industry. In the result of research, it is understood SMEs was affected adversely by global crisis. Half of respondents specified that volumes of business decreased in global crisis.
We can see lessons to be drawn in four areas. First, it started as a subprime mortgage lending crisis in the US, but gradually spread into other markets and countries through a combination of market failures and regulatory weaknesses where markets failed was in poor governance and the structures of executive incentives that were inappropriate for the stability of financial firms. They failed in the opacity of financial instruments and their trading, and a lack of public information about balance sheets of financial institutions and their off-balance sheet vehicles. The second lesson is that we really have to work harder at strengthening the countercyclical features of fiscal, monetary, and financial policies, both to reduce the intensity of future business cycles and lower the likelihood of a global crisis like the current one happening again. Third, much better contingency planning and crisis management will be needed. After all, this crisis was managed in a pretty haphazard way. Governments moved very late on from ad hoc and selective emergency bailouts to a comprehensive rescue operation of their financial systems. And only very late on did they shift their focus from removing toxic assets to providing comprehensive support to different components of balance sheets, by providing guarantees on deposits and interbank loans, acquiring bad assets of banks and non-banks, and providing new capital. The approach got better only at the very end. We require rethinking of our current international financial architecture. This includes international co-operation in regulatory reform of financial and capital markets, accounting standards, and treatment of international financial transactions. The aim is to strengthen both integration and stability of world capital markets.
Currently, although the situation has improved, still 4 percent of SMEs suffer from financing difficulties Although the number of bankruptcies has not yet increased dramatically, the number of business restructuring proceedings has increased 13 percent in January‐March 2012 compared to January ‐ March 2011. Half of respondents specified that volumes of business decreased in global crisis.
In summary, the survey was came out that global crisis has negative effects such as decrease business volume, sales, production under capacity, delay the collection of receivables. Moreover, there are positive affects as use more efficient the resources, try to find new market.
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