12/10/2011 8:39:07 PM   by Dr.Rajesh Patel,Director,NRV MBA,email:1966patel@gmail.com   1
Micro, small and medium enterprises (MSMEs), includingkhadi and village as well as rural enterprises, play a pivotalrole i...
They not only help in providing employment opportunities to millions of people across thecountry, especially to the villag...
Inspite of this, the MSMEs continue to face several problems in their day-to-day operations, thatis, in production and mar...
MSMEs are often unable to procure adequate financialresources for the purchase of machinery, equipment and rawmaterials as...
Although, the primary responsibility for promotion and development ofMSMEs lies with the concerned State/ Union Territory ...
In India, the Ministry of Micro, Small and Medium Enterprises is themain central authority which assist the States/UTs in ...
Types of Problems    The major problems confronting the sector    have been identified as:    1. Technology obsolescence  ...
There is lack of trained and experienced employees because small firms cannot pay high salariesand cannot spend much on tr...
Small scale units have to face several difficulties in the marketing and distribution of theirproducts. Most of them do no...
Small scale firms are generally managed by the owners who very often does not possess the skills required for theefficient...
Raw materials and ProductsNon-availability of quality raw materials on a timely basis in an adequate quantity is one of th...
Credit or FinanceAll kinds of business enterprises require sufficient funds in order to meet their fixed aswell as working...
12/10/2011 8:39:07 PM   by Dr.Rajesh Patel,Director,NRV MBA,email:1966patel@gmail.com   14
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Problems relating to mse

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Problems relating to mse

  1. 1. 12/10/2011 8:39:07 PM by Dr.Rajesh Patel,Director,NRV MBA,email:1966patel@gmail.com 1
  2. 2. Micro, small and medium enterprises (MSMEs), includingkhadi and village as well as rural enterprises, play a pivotalrole in the overall industrial development of the country. Theyhave been the significant contributor to the national income,with their huge involvement in countrys industrialproduction, exports, etc. 12/10/2011 8:39:07 PM by Dr.Rajesh Patel,Director,NRV MBA,email:1966patel@gmail.com 2
  3. 3. They not only help in providing employment opportunities to millions of people across thecountry, especially to the village artisans and rural people, but also check the problem ofeconomic concentration in the hands of a few. They create a sound entrepreneurial base in theeconomy by developing and nurturing the talents, skills, etc. of small and medium scaleentrepreneurs. The labour intensity in the MSME sector is estimated to be considerable higherthan the large enterprises. Thus, this sector has been regarded a priority status by both theCentral and the State Governments. 12/10/2011 8:39:07 PM by Dr.Rajesh Patel,Director,NRV MBA,email:1966patel@gmail.com 3
  4. 4. Inspite of this, the MSMEs continue to face several problems in their day-to-day operations, thatis, in production and marketing of their products. They find it difficult to sell their output atremunerative prices and cannot spend much on advertising, marketing research, etc. They alsoface stiff competition from large firms. Inadequate infrastructural facilities and access to creditare other major problems. 12/10/2011 8:39:07 PM by Dr.Rajesh Patel,Director,NRV MBA,email:1966patel@gmail.com 4
  5. 5. MSMEs are often unable to procure adequate financialresources for the purchase of machinery, equipment and rawmaterials as well as for meeting day-to-day expenses. Further,they find it difficult to recruit and motivate skilled managerialand technical personnel. They are mainly reluctant to adoptmodern methods of organisation and management. 12/10/2011 8:39:07 PM by Dr.Rajesh Patel,Director,NRV MBA,email:1966patel@gmail.com 5
  6. 6. Although, the primary responsibility for promotion and development ofMSMEs lies with the concerned State/ Union Territory (UT)Governments. But, the Central Government has always taken activeinterest in supplementing the efforts of State/UT Governments throughits various regulations, as MSMEs have huge potential both in terms ofcreation of wealth and employment as well as for the proper growth ofrelated sectors of the economy. 12/10/2011 8:39:07 PM by Dr.Rajesh Patel,Director,NRV MBA,email:1966patel@gmail.com 6
  7. 7. In India, the Ministry of Micro, Small and Medium Enterprises is themain central authority which assist the States/UTs in their efforts topromote growth and development of MSMEs. It has been implementingseveral schemes/programmes and policies so as to enhance the globalcompetitiveness of the MSMEs. These relate mainly to simplifiedsystems and procedures, easy access to capital, positioning the MSMEsin the global value chain by enhancing their productivity, technologyupgradation, quality improvement, skill development, access to bothdomestic and international markets, etc. 12/10/2011 8:39:07 PM by Dr.Rajesh Patel,Director,NRV MBA,email:1966patel@gmail.com 7
  8. 8. Types of Problems The major problems confronting the sector have been identified as: 1. Technology obsolescence 2. Managerial inadequacies 3. Delayed Payments 4. Poor Quality 5. Incidence of Sickness 6. Lack of Appropriate Infrastructure 7. Lack of Marketing Network 12/10/2011 8:39:07 PM by Dr.Rajesh Patel,Director,NRV MBA,email:1966patel@gmail.com 8
  9. 9. There is lack of trained and experienced employees because small firms cannot pay high salariesand cannot spend much on training their employees. Small scale firms find it difficult to recruitand motivate skilled managerial and technical personnel as they look for better opportunities inthe large scale industries. Therefore, they get the second rate talent or have to depend on familymembers who do not have diversified skills. 12/10/2011 8:39:07 PM by Dr.Rajesh Patel,Director,NRV MBA,email:1966patel@gmail.com 9
  10. 10. Small scale units have to face several difficulties in the marketing and distribution of theirproducts. Most of them do not have their own marketing network. They find it difficult to selltheir output at remunerative prices due to higher cost of production and non-standardisedquality of products. They cannot afford to spend much on advertising, sales, promotion,marketing research, etc. They have to sell their products at throwaway prices due to weakbargaining power and immediate need for money. They also face stiff competition from largefirms. 12/10/2011 8:39:07 PM by Dr.Rajesh Patel,Director,NRV MBA,email:1966patel@gmail.com 10
  11. 11. Small scale firms are generally managed by the owners who very often does not possess the skills required for theefficient management of the enterprise. There is lack of proper division of work and benefits of specialization are notavailable. some owner-managers are reluctant to adopt modern methods of organisation and management. There isinstability in business because the sickness and dearth of the owner manager directly affects the survival and growthof the small firm. Initiatives undertaken by the government include:Management Training Programmes with the basic objective of improving the productivity/profitability of existingentrepreneurs by upgrading their managerial decision making capabilities and providing them an insight in the latestdevelopments in the area of industrial management, marketing management, financial management, inventorycontrol, human resource development, information technology, and e- commerce, etc. Also, it aims to make themaware about emerging practices in the field of industrial management.National Institute for Micro, small and Medium Enterprises (ni-msme) has taken gigantic strides to become thepremier institution for the promotion, development and modernization of the Small and Medium Enterprise sector. Anautonomous arm of the Ministry of Micro, Small and Medium Enterprises (MSMEs), the institute strives to achieve itsavowed objectives through a gamut of operations ranging from training, consultancy, research and education, to Managerial and Organisationalextension and information services.National Institute for Entrepreneurship and Small Business Development (NIESBUD), NOIDA is an apex bodyestablished by Ministry of Industries, Government of India for coordinating, training and overseeing the activities ofvarious institutions/ agencies engaged in entrepreneurship development particularly in the area of small industry andsmall business. Indian Institute of Entrepreneurship (IIE), Guwahati aims to be the leading provider of qualityprofessional development programmers, research and information services in the field of entrepreneurshipmotivation, entrepreneurship development and enterprise management. The activities of the institute includeidentification of training needs, designing and organizing programmers both for development functionaries andentrepreneurs; evolving effective training strategies and methodologies for different target groups and locations;organize seminars, workshops and conferences for providing fora for interaction and exchange of views by variousagencies and entrepreneurs; undertaking research on entrepreneurship development, documenting anddisseminating information needed for policy formulation and implementation on self-employment andentrepreneurship. 12/10/2011 8:39:07 PM by Dr.Rajesh Patel,Director,NRV MBA,email:1966patel@gmail.com 11
  12. 12. Raw materials and ProductsNon-availability of quality raw materials on a timely basis in an adequate quantity is one of the mainproblems faced by micro, small and medium enterprises. There is acute shortage of even the basic rawmaterials required by small scale units. These units are under a handicap in obtaining raw materials ofrequisite quality at reasonable prices. They do not get the benefits of bulk buying. For instance, thehandloom industry is facing shortage of yarn. Small scale industries also face shortage of power due towhich they are unable to make full utilization of plant capacity. Majority of them cannot afford to installtheir own power generating plants to ensure uninterrupted operations. National Small IndustriesCorporation (NSIC) and State Small Scale Industries Development Corporations are involved in makingefforts for providing some raw materials to MSME sector.NSIC aims to help small scale units by financing purchase of raw material (both indigenous andimported), thus allowing them to focus on manufacturing quality products. It facilitates availability ofscarce raw material either through the domestic market or by importing.State Directorate of Industries distributes scarce raw materials to small units. They have set up depotsfor distribution of raw materials to small scale industries (SSIs). The Central Government has introduceda buffer stock scheme to ensure availability of scarce raw materials to this sector.Raw Material Assistance Scheme of NSIC aims at helping small scale industries by way of financing thepurchase of raw material (both indigenous & imported). This gives an opportunity to SSIs to focusbetter on manufacturing quality products. Benefits of the Scheme§Financial Assistance for procurement of Raw Material upto 90 days.§SSI helped to avail Economics of Purchases like bulk purchase; cash discount etc.§NSIC takes care of all the procedures, documentation & issue of Letter of credit in case of imports.The entrepreneurs are required to apply for raw material assistance only on the prescribed applicationforms. The application may be filled and submitted to the concerned Regional & Branch Offices 12 12/10/2011 8:39:07 PM by Dr.Rajesh Patel,Director,NRV MBA,email:1966patel@gmail.com
  13. 13. Credit or FinanceAll kinds of business enterprises require sufficient funds in order to meet their fixed aswell as working capital requirements. Finance is one of the critical inputs for growthand development of the micro,small and medium enterprises. They need credit supportnot only for running the enterprise and operational requirements but also fordiversification, modernization/upgradation of facilities, capacity expansion, etc.Inadequate access to credit is a major problem facing micro, small and mediumenterprises. Generally, such enterprises operate on tight budgets, often financedthrough owners own contribution, loans from friends and relatives and some bankcredit. They are often unable to procure adequate financial resources for the purchaseof machinery, equipment and raw materials as well as for meeting day-to-day expenses.This is because, on account of their low goodwill and little fixed investment, they find itdifficult to borrow at reasonable interest rates. As a result, they have to depend largelyon internal resources.In respect of MSMEs, the problem of credit becomes all the more serious whenever anydifficult situation occurs such as a large order, rejection of consignment, inordinatedelay in payment, etc. Sometimes, they have to close down their operations due toshortage of funds. Also, there is little or no scope for expansion and growth due to 12/10/2011 8:39:07 PM by Dr.Rajesh Patel,Director,NRV MBA,email:1966patel@gmail.com 13dearth of capital. Hence, economies of scale are not available.
  14. 14. 12/10/2011 8:39:07 PM by Dr.Rajesh Patel,Director,NRV MBA,email:1966patel@gmail.com 14

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