PRESENTED BY:HARSHIT SHARMA

IV SEMESTER

Creating Competitive/Developed Micro, Small & Macro

Enterprises“Masters in International Business”

Department of Banking & Business Economics

Mohan Lal Sukhadiya University

Content

Overview of Indian MSMEsOpportunities for MSMEsChallenges being faced by MSMEsCreating Competitive MSMEsPolicies and Initiatives taken by

Government of IndiaWay of Growth of MSME’sSWOT AnalysisConclusion

Overview of the Indian MSMEs

In accordance with the provision of Micro, Small & Medium Enterprises Development (MSMED) Act, 2006 the Micro, Small and Medium Enterprises (MSME) are classified in two Classes :

MSMEs

Manufacturing Enterprises

Service Enterprises

Definition of MSMEs

The limit for investment in plant and machinery / equipment for manufacturing / service enterprises, as notified, vide S.O. 1642(E) dtd.29-09-2006 are as under :

Investment Limits for service sector

MSME in India

Employs – More than 60 Million

45% - Total Industrial Output

40% - Total Exports

Creates more than 1 Million

jobs annually.

Contribution to GDP set to

expand to 22% by 2012 from current

17%.

Some quick estimates

The number of enterprises is estimated to be about 26 million and these provide employment to an estimated 60 million persons

Of the 26 million MSMEs, only 1.5 million are in the

registered segment while the remaining 24.5 million (94%) are in the unregistered segment

The state-wise distribution of MSMEs show that more

than 55% of these enterprises are in 6 States, namely, Uttar Pradesh, Maharashtra, Tamil Nadu, West Bengal, Andhra Pradesh and Karnataka.

Source: 4th All-India Census of MSMEs, for reference year 2006-07

Some quick estimates (contd..)

About 7% of MSMEs are owned by women and more than 94% of the MSMEs are proprietorships or partnerships

MSMEs contribute 8 per cent of the country’s GDP, 45 per cent of the manufactured output and 40 per cent of our exports

The labour and capital ratio in MSMEs and the overall growth in the MSMEs are much higher than in the larger industries.

Source: 4th All-India Census of MSMEs, for reference year 2006-07

Opportunities for MSMEs in India

Opportunities provided by clustering approach:

Tirupur Garment Cluster

Ahmedabad Pharmaceutical Cluster

Chennai Leather Cluster

Opportunities for MSMEs in India(contd..)

Automotive

Dairy Industry

Industrial machinery and machine tools

Auto and auto ancillary

Key challenges faced by Indian MSME sector

High cost of credit Collateral requirements Limited access to equity capital Problems in supply to government

departments and agenciesProcurement of raw materials at a competitive

cost Lack of access to global markets

Key challenges faced by Indian MSME sector(contd..)

Inadequate infrastructure facilities, including power, water, roads, etc

Low technology levels and lack of access to modern technology

Lack of skilled manpower for manufacturing, services, marketing, etc

Absence of a suitable mechanism Branding and Marketing

Steps that can be taken to meet these challenges

Adopting new standards in technology, quality and pricing to be able to survive in the marketplace.

This sector is very seriously looking for ICT enablement Restructuring Building online presence as well as e-mail

facilities. E-Commerce and enterprise management

solutions

Creating competitive SMEs

Major thrust areas for increasing competitiveness of MSMEs

Government has identified three major areas that contribute to competitiveness of MSMEs

Technology (including quality): ICT systems like ERP, HR & Information Systems, etc.

Skills developmentFinance: MSMEs are beginning to move from a

reliance on bank credit to a variety of other specialized financial services and options

Measures taken for promoting emerging Financial Resources

Setting up of a separate trading exchange exclusively for the MSMEs

Provision of special incentives for encouraging larger flow of Venture Capital & Private Equity funds into the sector

More liberal “All-in-Cost Ceilings” for SMEs to raise low-cost funds through the External Commercial Borrowing route

Bringing legislation on ‘Factoring Services’.

1.Organic Strategies

Growth Strategies

a. New Product / Technology

b. New Market

c. New Customer

New Product/Technology:

Beginning …New Search algorithm Start-up of a company in a garage 12 years back by two PhDs.

Today …$ 200 billion enterprise… and growing

Today the name is used as generic for “search” on the internet.The company leads the rankings when it comes to product/technology innovation.

Organic Growth

New Markets:

Different geography or different channels

Sales channel for India

Organic Growth

Sales Channel – Direct/Retail/Outlet

Result – No.1 PC/Laptop brand in India within 8 years despite stiff competition from entrenched foreign and local low cost competitors.

Sales Channel – Direct/Retail/Outlet

Result – No.1 PC/Laptop brand in India within 8 years despite stiff competition from entrenched foreign and local low cost competitors.

Sales Channel – Direct Sales Channel – Direct

IndianIndianGlobalGlobal

New Customers:

Organic Growth

Range of product in different product categories.

14000+ employees

Revenue: Rs. 4500 Crore +

Range of product in different product categories.

14000+ employees

Revenue: Rs. 4500 Crore +

One product – washing powder.

Single entrepreneur

Facility: own premises

One product – washing powder.

Single entrepreneur

Facility: own premises

TodayTodayStart-upStart-up

Market is not just finding a customer but finding need gaps that can be satisfied in a economically viable way.

Understanding the customer:•MSMEs should focus not only on finding solution for its customers but

also take care of their preferences.

The company adapted to different sales channels for its customers in different regions (Europe and America).

MSMEs: Growth Strategies

Order book: more than Rs.1000 Crore.

Market standing: Preferred supplier for to all major global retailers

Order book: more than Rs.1000 Crore.

Market standing: Preferred supplier for to all major global retailers

Order book: Rs. 6 Lakh

Market standing: Newcomer

Order book: Rs. 6 Lakh

Market standing: Newcomer

TodayTodayStart-upStart-up

To connect more closely with its customers it is important for MSMEs to leverage “Branding”. A strong brand build reassurance, credibility and reliability among its customers.

Branding creates goodwill and goodwill helps entrench the position of the product in the market

MSMEs: Growth Strategies

2. In-organic Growth

Growth Strategies

a. Mergers & Acquisition

b. Strategic Partnership

c. Joint Venture

Mergers and Acquisitions:

In-organic Growth

Control of target firm by buyer firm.

Arise from buyer’s deep desire to expand.

TATA + Corus = TATA

Control of target firm by buyer firm.

Arise from buyer’s deep desire to expand.

TATA + Corus = TATA

Union of two firm. Often on equal terms.

Often arise out of business necessities.

Nissan + Renault = Nissan-Renault

Union of two firm. Often on equal terms.

Often arise out of business necessities.

Nissan + Renault = Nissan-Renault

AcquisitionAcquisitionMergerMerger

Strategic Partnership:

Typically companies with complementary business assets ally to harness the available market opportunity.

In mid – 2009 Intel joined hands with Nokia for developing a new class mobile computing device and chipset architectures. The devices will combine the performance of powerful computers with high-bandwidth mobile broadband communications and ubiquitous Internet connectivity.

In-organic Growth

Joint Venture:

Established when two parties come together to set a new project.

The partners share markets, IP, other business assets and profits as per the agreed-upon arrangement.

1. Tata Teleservices+ Virgin Group = Virgin Mobile India Limited

2. Bharti Enterprises + Wal-Mart = Best Price Modern Wholesale

Inorganic Growth

Policy Initiatives & Measures taken by the Indian Government

‘Udyami Helpline’, the Call Centre of Ministry of Micro, Small and Medium Enterprises (MSME)

Proposed to link the ‘Charkhas Scheme’ of Khadi and Village Indutries Commission (KVIC) with the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).

Enactment of the ‘Micro, Small and Medium Enterprises Development Act, 2006’.

Policy Initiatives & Measures taken by the Indian Government

Policy Initiatives & Measures taken by the Indian Government

National Manufacturing Competitiveness Program(NMCP)

Task Force to reflect on the concerns & issues regarding MSMEs and formulate an agenda for action.

SWOT ANALYSIS

SWOT Analysis

Weakness

Unskilled LabourLack good InfrastructureLack of new technology

Opportunity Create Export Oriented Units moreAdaptation of effective marketing strategies from relating MNC’s

Threat

Entry of Big Firms or MNC’sCorruptionMaking of unrealistic NTB’s by foreign countries

SWOT

Conclusion

MSME’s can utilize the Schemes of GOI.Training & Development Programme for

unskilled Labour can make skilled labour.Adaptation of Marketing strategies.Funding help by Financial Institutions

SIDBI NABARD

Use of new technologies.Customer Satisfaction is Necessary .

THANK YOU