Survey on the expectations and concerns of leaders of Quebec enterprises - Overview document

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About this publication

Background

The Laboratoire de recherche sur la performance des entreprises of the Institut de recherche sur les PME at the Université du Québec à Trois-Rivières was asked by the Economic Development Agency of Canada for the Regions of Quebec to conduct a survey with leaders of Quebec manufacturing and service small- and medium-sized enterprises (SMEs). The goal of this survey was to learn what issues these enterprises would have to deal with in the next two years in terms of competitiveness and obstacles to development and what types of assistance they would need to reduce the impact. The Agency also wanted to find out how these obstacles to development or challenges would translate for SMEs with specific profiles.

After identifying a number of areas of activity constituting obstacles to the development of SMEs, particularly with groups of business leaders, a survey was conducted using a sample of 6,984 manufacturing and service enterprises, 1,191 of which agreed to participate.

Most significant challenges for manufacturing enterprises:

• external environment, specifically, regulations and the taxation system
• managing human resources
  • retaining qualified staff
  • competing with salaries paid by big enterprises
• production activities requiring
  • hiring of skilled staff
  • financing of state-of-the art equipment.

Most significant challenges for service enterprises:

• managing human resources
• commercialization activities.

When business leaders placed the various challenges in order of importance, financing headed the list.The leaders also find it difficult to finance:

• the marketing of products and services
• the purchase of state-of-the-art equipment (manufacturing)
• research and development (R&D) activities.

Specific challenges by business model:

The significance of these obstacles for SME development varies according to company size, location, degree of innovation, level of exports, growth rate and business model.The most dynamic SMEs seem to be most concerned about financing.

Enterprises’ profiles differ according to whether they innovate (table of reference for M3 and M4) or not (table of reference for M1 and M2), whether they export (table of reference for M2 and M4) or not (table of reference for M1 and M3), or whether they do both (table of reference for M4).The most innovative enterprises (innovative and international) are managed by business leaders with a little less experience than others.These enterprises carry out more developed intelligence activities, are more likely to have a board of directors or an executive committee, and consult the Agency more frequently for advice and financing. International enterprises are least likely to be found in outlying areas.

On the whole, depending on their business model, SMEs differ in their contribution to the economy.

• Sales revenue per employee is higher among exporting and international SMEs.
• R&D and improvement activities per employee are relatively higher among innovative and international SMEs.
• The value of sales of new or improved products per employee is higher among international enterprises than among innovative ones.
• Innovation has a significant impact on the exporting rate and the value of exports.
• Although a causal relationship between innovation, exporting, size and productivity cannot be established, exporting SMEs are significantly more productive than other SMEs, regardless of their level of innovation.

Main obstacles for SMEs by business model

Profile of SMEs by business model

More SMEs with a local scope are concerned about human resources management.These enterprises are less dynamic, as can be seen from their lower growth targets for the next two years.Their needs are simpler as they concentrate their sales efforts in Canada (and probably in Quebec) and they innovate less than other enterprises. A larger percentage of them seem to have more trouble obtaining financing for their day-to-day operations, whereas accessing financing for commercialization, purchasing state-ofthe art equipment and carrying out R&D activities seem to present less of a challenge.

The dynamism of innovative and international SMEs and the challenges they face are more evident in their commercial activities, where, according to a higher percentage of enterprises (one in three), the recruiting of qualified personnel constitutes a significant obstacle.These SMEs also more often quote rapid marketing and financing of R&D activities as obstacles to innovation rather than finding qualified employees, which is ranked second after financing.

Solutions and needs

To overcome the obstacles described above, SMEs stress the need for more outside assistance in financing commercialization activities than in managing human resources.

Researchers’ conclusions

To guide intervention by economic development agents and help SMEs meet the challenges of their business environment, business leaders need to keep in mind three key strategies: becoming indispensable, cutting overall costs, and reducing risks and uncertainty.

Strategies for increasing or retaining SMEs’ competitiveness in a global economy

Becoming "indispensable"

• Getting closer to the market, connecting to it and responding quickly to new trends and needs.
• Developing a niche and specializing according to client needs and market trends.
• Implementing a culture of continuous innovation (products, equipement, processes, practices).

Cutting overall costs

• Redefining its strategy and reducing or relocating non-value-added activities.
• Using new techonologies for production, management and commercialization.
• Keeping staff skills and efficiency at the cutting-edge and retaining the best employees.

Reducing risks and uncertainty

• Implementing a culture of internal collaboration (with staff) and external collaboration (with clients, suppliers and even competitors).
• Monitoring and assessing the enterprise's situation to adjust quickly when needed.

To meet the challenges spawned by globalization, the high Canadian dollar, the aging of the labour force, the scarcity of skilled workers, and uncertain access to sometimes indispensable financial resources, an enterprise, regardless of its size, cannot operate alone. Given this context, government interventions must be adapted to the type of enterprise and the challenges it faces. Interventions could take the form of tax credits or financial assistance, sometimes for training activities designed to build skills, or, lastly, for analytical and consultancy services to identify specific problems.

The Agency would like to thank the 1,191 business leaders who agreed to participate in the survey as well as the authors of the report, Josée St-Pierre and Claude Mathieu.