Production costs and their effect on the profitability of the SMES in Latin America

Abstract

Background The micro, small and medium-sized enterprises (SMEs) play a pivotal role in the Latin America economy, creating jobs, boosting local economic activity and contribute to the socio-economic development of the region. The purpose is to reflect on the current costs management prices, the common challenges faced by SMEs in the region, and effective strategies to improve the profitability and sustainability of these companies. Methods it is addressed as a review study of type reflective, which used the dialectic as a method for the construction of the speech, based on techniques of triangulation of information. Result in order to obtain the results, these study topics were pre-selected: (a) determinants of the costs of production in the SMES, b) strategies for the reduction and control of production costs, and c) impact of production costs on the profitability of SMES. Conclusion the present research article delves into the pivotal factors influencing production costs within microenterprises and small businesses situated in the Latin American context. This study posits that the determinants underpinning these costs encompass a spectrum of elements including but not limited to labor, raw materials and supplies, energy and utilities, infrastructure and logistics, regulatory frameworks, and administrative intricacies. Furthermore, the intricate interplay of technology adoption and innovative capabilities is also recognized as a crucial facet in this cost determination paradigm. The overarching understanding underscores the direct and substantial influence of these multifaceted determinants on the operational expenditure of microenterprises and small businesses.