Abstract
The paper analyzes the quality of the business environment in Serbia and its impact on business performance of small and medium enterprises and entrepreneurs - SME. The aim of this paper is to identify critical factors from the external environment which have a crucial influence on the operations of SME and to explore influence of the development of this sector on Serbian economy. The paper also analyzes internal factors (strengths and weaknesses) faced by companies in Serbia. Taking into account, the effect of the identified exogenous and endogenous factors on the company's business, the authors propose some solutions for the improvement of the SME sector. Key elements of the model are based on adequate and proper diagnosis of the problem, respecting the elements of strategic thinking and quality implementation of defined strategic decisions.
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