Komal AgarwalNishat AnjumTanay NangaliaYashvardhan Kanoi

Small and Medium Enterprises

INTRODUCTION

The small and medium enterprises are defined as follows:

Source: Various publications of DCSME including Small Scale Industries in India – An Engine of Growth.

Regression of SME units and years

Independent Dependent R-square F-value Sig

Year SME units 0.995 1504.07 0.000

The trend line equation Y=-7712.4+3.91X shows that at an all India level, the number of SME units are increasing rapidly and has positive impact on Indian economy.

Source: Various publications of DCSME including Small Scale Industries in India an Engine of Growth.

Regression of SME units and years

Independent Dependent R-square F-value Sig

Year Production 0.998 5306.99 0.000

The trend line equation Y=-3.E+07 +12731.3X shows an increasing trend in the production of SMEs and we conclude that in the span of 10 years the SMEs have significantly contributed to the Indian economy output wise.

Source: Various publications of DCSME including Small Scale Industries in India – An Engine of Growth.

When we apply the correlation analysis on the ‘All India export’ and ‘SMEs contribution’, we get the Karl Pearson’s co-efficient of correlation as r=0.999. We conclude that the contribution of SMEs to the exports of India is highly significant in the years from 1996-2009.

Source: Annual report of ministry of commerce 2009.

Source: Report of national statistics department 2009.

Regression of Employment Potential of SME units and years

Independent Dependent R-square F-value Sig

Year Employment potential

0.988 669.28 0.000

The of regression Y=-17825 +9.0289X shows a continuously increasing trend in the employment potential of SMEs from 1999-2009. This can be attributed to factors such as resources endowment, availability of cheap skilled labor, favorable government policies.

CONSTRAINTS

LOAN FINANCE

Raising finance from the financial institutions have the following drawbacks for the SSIs:• The rate of interest charged is higher • Insufficient collateral • Restrictive and conditional working capital limits • Time consuming and cumbersome procedures •The terms of credit are hard • Improper assessment of requirements

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INFRASTRUCTURE

Some of the essential infrastructural inadequacies are listed as follows:•Lack of access to dependable supply of electricity, which blocked the rise of productivity and output of small firms.

•Poor transportation facilities in rural and semi-urban areas, which hampers the access to newer and larger markets.

Hence, there is a need for improved roads, railways, port facilities; generic infrastructure that boosts the local economy and enterprise specific infrastructure such as provision of common effluent treatment plants (CETPs), industrial estates, common quality check facilities, and provision of potable water to small enterprises

PRODUCT RESERVATION The policy of reserving certain products to be exclusively produced

by the SSI sector is rather long standing and unusual. It has come to be interpreted as a bottleneck to productive efficiency of the SMEs.

A list of over 800 products was made with the aim of creating local employment using locally available resources within a ‘protective’ policy framework. But the original purpose was lost as the list kept undergoing frequent revisions.

Products manufactured under reserved category are technically inefficient and poorer in quality as compared to the non-reserved products.

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MARKETING

The survival of small entrepreneurs essentially depends on marketing techniques. Small entrepreneurs can promote their sales on the basis of low prices along with credit to buyers, but which give rise to several problems at a later stage.

Marketing as a profession is relatively underdeveloped in the SME sector which is primarily accounted to the paucity of funds. Many ad-hoc initiatives have been taken by the Government to promote marketing of products and which has failed to have a desired effect.

CLUSTER-DEVELOPMENT APPROACH

Clusters refer to an assemblage of independent firms, selling homogenous or complementary products each faced with similar obstacles and opportunities.

Development of clusters can prove to be the fountainhead of growth of SME’s in India, especially after the Indian economy opened up to a highly competitive business environment in 1991.

Source: Report by MSME foundation.

Open Incubator Model

The open incubator model can create an environment conducive for the clustering process in a value chain in the selected field of specialization in a country with a large proportion of both skilled and unskilled labor.

Innovative entrepreneurship in rural areas based on local initiatives can help generate a wider and deeper economic development which in turn has a favorable impact on India as a whole.

Stages in the Development of the model:

The model proposes to establish

A network of firms belonging to the same value chain that sustain cordiality and cooperation among them.

Enable local authorities to improve the conditions in the business environment and generate new business opportunities for enterprises to flourish.

Organizational structure

The partners and beneficiaries to this model belong to the value chain of the selected domain of specialization which strives for collaborative benefits of all enterprises.

Local authorities and members from the selected business sector form the board representing the interests of the business operations located in the specialized region.

The management is carried on by nominated members from the board who by means of a progressive networking system establish chain of links between all specialized business units and promote achievement of common business ideals in the most cost effective and seller-effective manner.

Process:

Strategic Prioritization:An area with specialized local business activity is demarcated to

check the potential for innovative development of SMEs based on domains of specialization. In order to carry these out, expert knowledge, technology, business and regional development should be kept in mind.

Collection of detailed information:Interviews are conducted and entrepreneurial profiles are assessed.

On the basis of this survey, those projects are chalked out which have the highest potential for growth and have the maximum linkages.

• Key institutions:Local authorities and R & D institutions are consulted for a proper assessment of the business environment and a congenial environment is sought to be created which can serve as a positive externality for the cluster development program.

•Clarify the roles:Lobbying with governmental authorities should be initiated from the very onset so that the business agenda receives maximum governmental assistance. Local policies must be so implemented that they conform to the growth objectives of the enterprises.

Engaging key groups:Proper rehabilitations of the locals who have been displaced due

to the setting up of SME’s. Provision of incentives for productive employment should be given.

Continuous monitoring and dissemination of information:To cater to the ever changing market tastes and preferences,

research and development techniques should be institutionalized on a greater scale and along with the aid of tacit and external knowledge constant innovation should be provided to generate product sustainability.

• Network linkages• Application of innovative technology and advanced research

and development• Implementation of effective governmental policies so as to

boost the proper functioning of the Small and medium enterprises 

This model induces informed decisions regarding the adoption of a cluster approach and entering into cluster-based relations. The academic value can be added in the context of expanding knowledge in relation to the impact of clusters on economic development in transition countries.

In this cluster model we primarily focus on externality in the form of:

Knowledge Management

Small and medium type industry in an economy requires special treatment because of their special characteristics as well as their contribution to national economy. In the event of globalization, knowledge management provides a systematic approach towards,

Identifying Creating Retaining Disseminating the knowledge among the employees of an

organization who integrate and assimilate this knowledge to achieve greater organizational goals.

CASE STUDY : SYMPHONY LTD.

FOUNDER : ACHAL BAKERI

OLD NAME : SANSKRUT COMFORT SYSTEMS PVT. LTD

FOUNDED ON 5TH FEBRUARY 1988 IN AHEMDABAD

HISTORY

Started on 1988 the first air cooler made up of FRP (fiberglass reinforced plastic ) and wooden grill was a runaway success. The whole idea behind it was to design an air cooler that resembled an and functioned like an air conditioner.

They also went on the national television network. This was the first time an air cooler was advertised on TV in India.

In 1994 they had their first IPO. After the IPO the company was forced to diversify into

varied product ranges in order to keep pace with their competitors. However, the company failed to do so.

AFTER 2002 – MAJOR TURNAROUND

After getting registered with BIFR Symphony was left with capital of only 2.8 crore . The stocks of the company had become penny stocks and the market had written them off. Although the other products dint work well and their production had to be stopped the air cooler business was doing pretty well.

Symphony decided to stick to its core DNA ie producing Air cooler and adopted the Knowledge Management model to give itself a new and a fresh start. Research and development was given more emphasis in order to re engineer and design a new innovative product with a lesser cost of production and increased efficiency.More emphasis was laid on increasing the strength of distribution and aggressive marketing techniques were adopted to reach a larger customer base.

 

KEY FINANCIALS OF

SYMPHONY LTD. OVER THE YEARS

Due to increase in the sales figure the size of the company has witnessed a huge increase with a market cpitalisation of 2.8 crores (2002) to 4700 crores (2014).

The shares of the company which were once traded as penny stocks with lowest being at 40 paise (Oct 2013) only are now being traded at a high price of Rs. 1370 (approx.)

Current Presence of the company :

CONCLUSION

We may conclude that the future of the industry is dependent on the growth of the SMEs. The growth of SMEs is not only important for industries but helps to generate a lot of employment of labor. Therefore in a labor intensive country like India the SMEs play a vital role in increasing the standard of living as they help to generate a lot of employment. Thus SMEs are A catalyst for socio-economic transformation of the country, meeting the national objectives of generating employment, reducing poverty, and discouraging rural-urban migration.