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entrepreneurship and small business management unit iv


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ip university full syllabus notes of ms207 entrepreneurship and small business management

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entrepreneurship and small business management unit iv

  1. 1. UNIT IV 1
  2. 2. Unit I Entrepreneurship: Concept and Definitions; Entrepreneurship and Economic Development; Classification and Types of Entrepreneurs; Entrepreneurial Competencies; Factor Affecting Entrepreneurial Growth – Economic, Non-Economic Factors; EDP Programmes; Entrepreneurial Training; Traits/Qualities of an Entrepreneurs; Entrepreneur; Manager Vs. Entrepreneur. (14 Hours) Unit II Opportunity / Identification and Product Selection: Entrepreneurial Opportunity Search and Identification; Criteria to Select a Product; Conducting Feasibility Studies; Project Finalization; Sources of Information. (14 Hours) Unit III Small Enterprises and Enterprise Launching Formalities : Definition of Small Scale; Rationale; Objective; Scope; Role of SME in Economic Development of India; SME; Registration; NOC from Pollution Board; Machinery and Equipment Selection; Project Report Preparation; Specimen of Project Report; Project Planning and Scheduling using Networking Techniques of PERT / CPM; Methods of Project Appraisal. (14 Hours) Unit IV Role of Support Institutions and Management of Small Business : Director of Industries; DIC; SIDO; SIDBI; Small Industries Development Corporation (SIDC); SISI; NSIC; NISBUED; State Financial Corporation SFC; Marketing Management; Production Management; Finance Management; Human Resource Management; Export Marketing; Case Studies-At least 4 (four) in whole course. (14 Hours) 2
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  4. 4.  The Small Scale industries & Export Promotion department holds the key towards economic development of the state. State Government has been devoting considerable attention to the growth of industry by creating necessary infrastructure to ensure sustained industrialization in Uttar Pradesh. Objectives of the department  To provide competitive cost effective and fast services to the industry  To have industry base that is recognized world wide for quality environmentally friendly & cost effective  Providing facilitation forums for resolving industrial problems to enhance the growth of industrial environment  To plug in the information gaps and thereby increase the industry awareness department 4
  5. 5. Objectives of the department  Generate gainful/meaningful employment  To provide training to entrepreneurs  To develop industrial data base in all major fields  To provide support for trade information's & fairs  To provide quality support testing, patents, copyrights information & support system  To assist craftsman by adequate industrial & social database and marketing support by Urban meats virtual sites etc  Promote & Assist Export from the State. 5
  6. 6.  In each district one agency to deal with all requirements of small and village Industries. This is called “District Industries Centre”  The District Industries Centres have undertaken various programmes for investment promotion at the grassroot level such as a organizing seminars workshops, extending support for trade fairs and exhibitions organized by various Industries associations.  All the services and support required by for MSME units under the single roof of the District Industries Centre. The Centre has a separate wing to look-after the special needs of cottage and house-hold industries as district from small industries. 6
  7. 7. Administration General Manager is the head of the District Industries Centre. The post of General Manager is of Joint / Deputy Commissioner level. The General Manager has senior officers to assist him, such as Manager (Raw Material), Manager (Credit), Manage (Economic Investigation), Manager (Marketing) Industrial Promotion Officer(IPO) and Technical Officer cum Project Manager (PM) Monitoring of DICs The functioning of DICs and their achievement is monitored by Industries Commissioner, Meeting of General Managers are organized frequently to evaluate the performance and also help in resolving difficulties in implementation of different schemes. 7
  8. 8. To resolve the problems of industries/industrialists, there are two types of committee at the district level:  District Industrial Executive Committee (DIEC) DIEC is constituted for solving industry related problems And promoting industrial growth. District Collector is the Chairman of this Committee and General Manager of DIC is the Member Secretary. The other members of the DIEC are President of District Panchayat, DDO, MP, MLAs, Prominent persons active in Industries in the district and members of all district level industries associations.  Single Window Industrial Follow up Team (SWIFT) Entrepreneurs face many difficulties when they start new industries. They have to deal with many government agencies and get many clearances. SWIFT helps them in guiding solving their problems at a single spot. This committee is working under the District Collector, General Manager of DIC is the Member Secretary and District Development Officer is Vice President of SWIFT. All industries related officers in the district are members of this committee. 8
  9. 9. The Small Industries Development Organization (SIDO) is the national SME Development Agency of India. It is a major constituent of the Ministry of Small Scale Industries of the Government of India. A senior official of the Government of India, who is designated as the Development Commissioner for Small Scale Industries (DCSSI), heads SIDO. He is also the ex-officio Additional Secretary in the Ministry of Small Scale Industries; that is, he is second in command in the bureaucratic hierarchy of the Ministry. Set up in 1954, SIDO provides services to small industry throughout the country by implementing a broad program of activities and services including the following: Entrepreneurship Development Tool Room Services Testing Centres Extension Services R&D Services Consultancy Services Policy Development 9
  10. 10. The strength of SIDO lies in its countrywide spread of almost 100 offices/service centres, which employ over 2500 staff, mostly technical. SIDO partners and networks with other national providers of support and financial services to SMEs such as the Small Industries Development Bank of India (SIDBI), the National Small Industries Corporation (NSIC), the Bureau of Indian Standards (BIS), the Reserve Bank of India (RBI) (India's Central Bank) and relevant agencies of the Governments of the 28 States of the country. Various Services provided by SIDO to the SMEs:-  facilities for testing, tool-menting, training for entrepreneurship development  preparation of project and product profiles  technical and managerial consultancy  assistance for exports  pollution and energy audits 10
  11. 11. SIDO is as apex body and nodal agency for formulating, policy-making, coordinating and monitoring agency for the development of small scale entrepreneurs. SIDO is the nodal agency that advises the Ministry of Industry (and other Ministries) in formulating policies and programmers for the development of SSIs. SIDO provides economic information services and advises to the government in policy formulation for the promotion and development of SSIs. It has over 60 offices and 21 autonomous bodies under its management. SIDO provides a wide spectrum of services to the small industries sector like testing, training for entrepreneur’s preparation of projects and product profiles, technical and managerial consultancy, export assistance, etc. 11
  12. 12. Functions of SIDO  To formulate policies regarding the promotion and development of SSI at national level.  The implement those plans, programmers and policies of the government in respect of industrial development of the country.  To coordinate the activities of all departments, institutions and agencies involved in promoting the SSI.  To render all way support and encourage the entrepreneurs to set up and sort out the hurdles.  To conduct regular and ad hoc training courses through SISI’s, Branch SISI’s and extension/production centers;  To organize EDPs, motivational campaigns etc. for rural artisans, educated unemployed, women entrepreneurs, and physically handicapped persons;  To secure reservations of certain products to be manufactured only by SSI’s. 12
  13. 13. Functions of SIDO  To assist and encourage entrepreneurs to set up industrial units in rural and industrially backward areas and industrially backward areas;  To estimate the requirements of raw materials of SSI units and to arrange their supplies. Other than this, SIDO conducts the following types of management courses.  Training in Technical grades  Training in Management Disciplines.  Training of SIDO Officers.  SIDO keeps its officers abreast of the latest developments in their respective fields of specialization. Global trends and national developments have accentuated SIDO’s role as a catalyst of growth of small enterprises in the country. 13
  14. 14.  Small Industries Development Bank of India (SIDBI), set up on April 2, 1990 under an Act of Indian Parliament, is the Principal Financial Institution for the Promotion, Financing and Development of the Micro, Small and Medium Enterprise (MSME) sector and for Co- ordination of the functions of the institutions engaged in similar activities.  The business domain of SIDBI consists of Micro, Small and Medium Enterprises (MSMEs), which contribute significantly to the national economy in terms of production, employment and exports.  MSME sector is an important pillar of Indian economy as it contributes greatly to the growth of Indian economy with a vast network of around 3 crore units, creating employment of about 7 crore, manufacturing more than 6,000 products, contributing about 45% to manufacturing output and about 40% of exports, directly and indirectly. In addition, SIDBI's assistance also flows to the service sector including transport, health care, tourism sectors etc. 14
  15. 15. Four basic objectives are set out in the SIDBI Charter. They are:  Financing  Promotion  Development  Co-ordination The Charter has provided SIDBI considerable flexibility in adopting appropriate operational strategies to meet these objectives. The activities of SIDBI, as they have evolved over the period of time, now meet almost all the requirements of small scale industries which fall into a wide spectrum constituting modern and technologically superior units at one end and traditional units at the other. As an apex institution, SIDBI makes use of the network of the banks and state level financial institutions, which have retail outlets. SIDBI supplements the efforts of existing institutions through its direct assistance schemes to reach financial assistance to the ultimate borrowers in the small scale sector. 15
  16. 16. Its Functions are: It provides Foreign Currency Loan to: A) Import equipment by existing export oriented SSIs and new units having definite plans for entering export markets. B) Execute confirmed export orders by way of pre-shipment credit/letter of credit and provides post shipment facilities. SIDBI’s Venture Capital Fund provide assistance to: A. Small scale entrepreneurs using innovative indigenous technology and expertise. SIDBI refinances: A) Loans granted for new SSI projects and for expansion, technology, up-gradation, modernization, quality promotion. B) Loans sanctioned by SIDBI to small road transport operators, qualified professionals for self employment, small hospitals and nursing homes, and to promote hotel and tourism related activities. 16
  17. 17. Small Industries Development Corporations (SIDC) are state-owned companies or agencies in the states of India which were established at various times under the policy of Government of India for the promotion of small scale industries.  In 1960, the first State Industrial Development Corporation (SIDC) was established in Bihar. These mainly autonomous bodies are controlled by the State government, who may own a stake in the corporation. There are approximately 28 SIDCs in India.  Their main functions include the promotion of rapid industrialization in India. They mainly work at the grass roots level, providing development in the backward and less frequented parts of India.  They offer financial leases and offer guarantees. They also administer the schemes of the central and state governments. The projects and surveys of the industrial potential areas are conducted by them. 17
  18. 18. It has been playing a key role for development of MSME through counselling, consultancy and training. Established in 1960 as Small Industries Service Institute in 1975, the Institute has made significant contributions for promotion and development of Micro, Small and Medium Enterprises. Spectrum of Services:  Assistance / Consultancy to Prospective Entrepreneurs.  Assistance / Consultancy to existing Micro and Small Enterprises . Preparation / Upgradation of District Industrial Potential Surveys. Preparation of Project Reports / Project Profiles.  Entrepreneurship Development Programmes  Motivation Campaigns.  Project Appraisal for Bank / Financial Institutions.  Management Development Programmes.  Skill Development Programmes 18
  19. 19. Spectrum of Services:  Awareness Programmes on Energy Conservation / Pollution Control.  Quality Improvement & Technology up gradation.  Export Promotion.  Ancillary Development.  Linkage with State Govt. Functionaries.  Market Surveys.  Marketing Support through NSIC Enlistment by giving Technical Inspection Report.  Registration of Micro and Small Enterprises under Ozone Depleting Substances (Regulation & Control) Rules, 2000.  Revival of Sick Micro and Small Enterprises . The Institute is manned with highly qualified and experienced technical officers for rendering techno-managerial consultancy services to the Micro and Small Enterprises. 19
  20. 20. National Small Industries Corporation Ltd. (NSIC), is an ISO 9001-2008 certified Government of India Enterprise under Ministry of Micro, Small and Medium Enterprises (MSME). NSIC has been working to fulfil its mission of promoting, aiding and fostering the growth of small industries and industry related micro, small and medium enterprises in the country. NSIC carries forward its mission to assist small enterprises with a set of specially tailored schemes designed to put them in a competitive and advantageous position. NSIC acts as a facilitator to promote small industries products and has devised a number of schemes to support small enterprises in their marketing efforts, both in and outside the country. 20
  21. 21. The schemes comprise of facilitating marketing support, credit support, technology support and other support services.  NSIC operates a single Point Registration Scheme under the Government Purchase Programme, wherein the registered SSI units get purchase preference in Government purchase programme, exemption from payment of Earnest Money Deposit etc.  Issue of the Tender Sets free of cost;  Exemption from payment of Earnest Money Deposit (EMD),  In tender participating MSEs quoting price within price band of L1+15 per cent shall also be allowed to supply a portion upto 20% of requirement by bringing down their price to L1 Price where L1 is non MSEs. 21
  22. 22. For the last five decades, NSIC has acquired various skill sets in the development process of small enterprises. The inherent skills are being networked to offer consultancy services for other developing countries. The areas of consultancy are as listed below:  Capacity Building  Policy & Institutional Framework  Entrepreneurship Development  Business Development Services 22
  23. 23. The National Institute for Entrepreneurship and Small Business Development is a premier organisation of Ministry of Micro, Small and Medium Enterprises engaged in training, consultancy, research, etc. in order to promote entrepreneurship. The major activities of the Institute are Training of Trainers, Management Development Programme, Entrepreneurship-cum-Skill Development Programme, Entrepreneurship Development Programme and Cluster Intervention. The Institute has trained more than 2.98 lakh trainees including 3,000 persons from more than 125 countries till 31st July, 2014. The Objectives are as follows:-  To evolve standardised materials and processes for selection, training, support and sustenance of entrepreneurs, potential and existing.  To help/support and affiliate institutions/organisations in carrying out training and other entrepreneurship development related activities. 23
  24. 24.  To serve as an apex national level resource institute for accelerating the process of entrepreneurship development ensuring its impact across the country and among all strata of the society.  To provide vital information and support to trainers, promoters and entrepreneurs by organising research and documentation activities relevant to entrepreneurship development  To train trainers, promoters and consultants in various areas of entrepreneurship development  To offer consultancy nationally/internationally for promotion of entrepreneurship and small business development.  To provide national/international forums for interaction and exchange of experiences helpful for policy formulation and modification at various levels.  To share international experience and expertise in entrepreneurship development.  To share experience and expertise in entrepreneurship development across national frontiers. 24
  25. 25. In order to provide medium and long term credit to industrial undertaking, which fall outside the normal activities of commercial banks, a central industrial finance corporation was set up under the industrial Finance Corporations act, 1948. The state governments wished that similar corporations should be set up in their states to supplement the work of industrial financial corporation. The intention is that the State corporations will confine to financing medium and small scale industrial and will , as far as possible consider only such access which are outside the purview of industrial finance corporation . The main features of the State financial Corporations Act 1951: i. The bill provides that the state government may, by notification in the official gazette, establish a financial corporation for the state. 25
  26. 26. The main features of the State financial Corporations Act 1951: ii. The share capital shall be fixed by the State government but shall not exceed Rs 2crores . The issue of the shares to the public will be limited to 25 % of the share capital and the rest will be held by the State Governments, The Reserve Bank, Scheduled Banks, Insurance Companies, Investment Trusts, Co- operative banks and other financial institutions. iii. Shares of the corporation will be guaranteed by the Sate government as to the re – payment of principal and the payment of a minimum dividend to be prescribed in consultation with the central government. iv. The corporation will be authorized to issue bonds and debentures for amounts which together with the contingent liabilities of the corporations shall not exceed five – times the amount of the paid – up share capital and the reserve fund of the corporations. These bonds and debentures will be guaranteed as to payment of the principal and payment of interest at such rate as may be fixed by the State government. 26
  27. 27. The main features of the State financial Corporations Act 1951: v. The corporation may accept deposits from the public repayable after not less than five years, subject to the maximum not exceeding the paid up capital. vi. The corporation will be managed by a board consisting of a majority of Directors nominated by the Sate governments , The Reserve banks and the industrial Finance corporation of India. Broad functions of State Financial Corporations  Project advisory and Finance as a catalyst in small scale industrial growth the SFC’s provide the Investment appraisal  Project conceptualization and related services, including guidance in relation to selection of projects, preparation of feasibility studies, capital structuring, techno – economic feasibility, financial engineering, project management design etc.  Credit Syndication including assistance in legal documentation etc.  Documentation of various project documents 27
  28. 28. Marketing is very essential though strenuous, in developing countries like India. The importance of Small Scale Industries (SSIs) is such that their development is concomitant with the balanced growth of Indian economy. Small, Medium or Large scale industries prospects depend upon how well they market their products in the dynamic competitive markets. So with the importance of marketing management in small scale industries increasing and sell the products effectively in the markets. In other words, effective marketing of small scale industrial products would ensure higher levels of income, consumption, and employment which increase the standard of living of the people. Marketing is demanding greater attention not only from industrialists especially of the small scale sector but also from our planners and economists. Marketing is a dynamic process as it is highly situational. It is concerned with the activities involved in the flow of goods and services from producer to consumer. 28
  29. 29. Marketing is an essential input for the success of small scale industries which produce wide range products. Companies have to move from traditional marketing to modern marketing. Some of the factors which contribute to the marketing problems of the small scale industry in recent days have been identified. i. Increasing competition from within the small scale sector as well as from large industries with established brand names and marketing setup; ii. Consumer awareness, even in rural and semi urban areas, for quality goods. iii. The need to set up distribution networks for reaching out widely dispersed markets and iv. Inability of the SSI units to exploit the export markets 29
  30. 30. Small scale industries are weak in differentiation strategy .As small scale industries are following low cost pricing strategies, so it is also essential to follow product differentiation for product development. The small manufactures need to use selective product positioning strategies for different products because same product positioning strategies for all products are not beneficial. For maximum coverage of the market latest technology e- marketing or web marketing may help the small manufacturer to place the product to large number of buyer. Customers also highly dissatisfied from the distribution channel and current method of convenience of the small scale industries. Small manufacturer should adopt new methods of the convenience to the customers. It is not possible to carry out all strategies simultaneously but a set of strategies that can serve as a skeletal framework for customized approach is necessary to contact more customers towards the small scale industries products. 30
  31. 31. The Advantages and Disadvantages of Small Scale Production Advantages of Small Scale Production: The following are the merits of small scale production: 1. Close Supervision:  The small producer can himself supervise the minutest details of the business.Nobody is allowed to spoil machinery or waste materials. The master’s eye is everywhere. There can be no fraud or idleness. He will exercise utmost economy to achieve the aim of maximum profits. 2. Nature of Demand:  The small producer has an advantage over the large producer, when the demand is either small or is constantly changing. He has thus a sphere of his own where he has an advantage over the large scale producer. 31
  32. 32. The Advantages and Disadvantages of Small Scale Production Advantages of Small Scale Production: The following are the merits of small scale production: 3. More Employment:  In the face of large scale unemployment existing in the country, the development of cottage and small scale industries is of great help to create more employment opportunities. Small scale production is more labour-intensive i.e., there is more use of labour than machinery. Thus, many unemployed persons are employed in the newly developed small scale industries. 4. Need of small Capital:  The small scale production can be started with small capital. Where there is shortage of capital, the small scale industries are of great advantage for the development of industries. 32
  33. 33. The Advantages and Disadvantages of Small Scale Production Advantages of Small Scale Production: The following are the merits of small scale production: 5. Direct Relation between the Workers and the Employers:  In small scale production less workers are employed. Therefore, a close relationship exists between the employer and the workers. Because of this close relationship, the employer can look after the well-being of his employees and employees, too, consider their work as their own and the work goes on smoothly without any disputes between the two parties. 6. Direct Relation between the Customers and the Producers:  The small scale producers generally cater to the local demand. Hence, they remain in touch with their customers. A small producer personally knows his customers. Therefore, he can produce goods according to the taste and fashion of each individual customer. 33
  34. 34. The Advantages and Disadvantages of Small Scale Production Advantages of Small Scale Production: The following are the merits of small scale production: 7. Easy Management:  The management of small business is easy and economical. Simple accounts and a few persons can manage the job well. 8. Freedom of Work:  There is complete freedom of work in a small business organisation. Workers are more or less self-sufficient. They are not dependent on the capitalists and carry on their jobs freely. 9. External Economies:  The small scale production secures all kinds of external economies, which are available to large units also. These economies are: better transport, electricity, and communication facilities; banking and insurance services; technical workers, etc. 34
  35. 35. The Advantages and Disadvantages of Small Scale Production Advantages of Small Scale Production: The following are the merits of small scale production: 10. No Evils of Large Scale Production:  The small scale production cannot fall victim to the evils of the large scale production i.e., evils of the factory system, overcrowding, etc. 11. Other Advantages:  In the small scale production, there are some important advantages over the large scale production:  (i) Whenever demand changes, the supply can be adjusted accordingly.  (ii) There are less possibilities of strike and lockouts and no moral degradation of the workers is feared.  (iii) There are no dangers of monopolistic institutions. 35
  36. 36. The Advantages and Disadvantages of Small Scale Production Disadvantages of Small Scale Production: The following are the demerits of small scale production: 1. High Cost of Production:  The cost of production per unit increases because there is a high cost of labour, a very little scope for division of labour and lesser use of machinery. 2. Wastage of By-products:  In the small scale production, it is not possible to make economic use of the by-products, as in the large scale production. By-products of the small producers generally go waste. 3. Less Use of Machines:  In the small scale production, there is less scope for the use of machines. As a result, these firms cannot take advantages of the use of the machinery. 36
  37. 37. The Advantages and Disadvantages of Small Scale Production Disadvantages of Small Scale Production: The following are the demerits of small scale production: 4. Lack of Division of Labour:  In the small scale industries, the size of production is small, and there is lack of division of labour and less profits to the entrepreneurs. 5. Difficulty in Getting Loans:  It cannot enjoy the financial economies. Funds are either not available and if available, they have to pay higher rate of interest. 6. Difficult to Face Economic Crisis:  Because of the limited resources and financial weakness, the small scale producers cannot face economic crisis. The producers do not have the capacity to bear losses for long. In fact, under a small economic crisis, many small factories are closed down. 37
  38. 38. The Advantages and Disadvantages of Small Scale Production Disadvantages of Small Scale Production: The following are the demerits of small scale production: 7. Costly Raw Materials:  In the small scale production, raw materials are purchased in small quantities which are available to the small producer at higher prices. 8. Lack of Standardised Goods:  The quality of goods is not standardised or upto the mark in the small scale production. It is difficult to sell goods because of their low standard and inferior quality. 9. Old Techniques:  In the small scale industries, the production is undertaken with the help of old techniques or old and obsolete machines. It is not within their capacity to bear the risk of installing new machinery. 38
  39. 39. The Advantages and Disadvantages of Small Scale Production Disadvantages of Small Scale Production: The following are the demerits of small scale production: 10. Lack of Research:  The small scale industries have limited means at their disposal. They cannot spend much on research in the field of science and technology. In this way, the small scale industries are a hurdle in the way of technical research and, industrial development. 11. Difficult to Face Competition with Large Scale Producers:  If some large scale producers enter the market, the small producers find it difficult to compete with them. The small producers perish at the hands of the large scale producers. 39
  40. 40.  Managing the finances of the firm in an efficient manner is the most important aspect of managing a business. It means controlling and managing the firm's financial resources. The process of managing finances involves cash flow management which is concerned with the inflow and outflow of money in and out of a business.  For this a cash flow statement is prepared which records a company's income and expenses in a systematic form. Cash flow statement is a financial tool used by the companies to measure its cash receipts and disbursements over a period of time. It lists cash to and cash from operating, investing and financing activities along with the net increase or decrease in cash for the period.  For proper management of a company's finances, the knowledge of accountancy, particularly the principles of double entry book keeping is an essential requirement. 40
  41. 41.  This whole process of financial management gives the true financial position of the company. A good financial standing of a company so indicated reinforces its credit worthiness and competitive position in the market. It is thus essential for smooth and successful functioning of the enterprise in a profitable manner on a long term basis.  A firm can manage its cash flows by following certain basic rules of accounting in the manner as described below:-  Understand the cash flows in a broader perspective in order to any avoid financial troubles in future. It is also considered as a fuel to run your business efficiently.  Measure the cash flows and the changes in it over a time-period and categorize company's cash receipts and outlays for every financial year. This can be done by preparing a statement of cash flows on monthly, weekly or daily basis depending upon the requirement of business.  All the business transactions of a company are recorded in a general ledger account. A 'general ledger account' is the main accounting record of a business in which the financial transactions are represented by means of the two entries i.e. debit and credit. 41
  42. 42.  Manpower management is an integral part of the process of the management of a business. It is a pervasive function and is performed by all managers at all levels in an organisation .  Personnel managers or human resource managers interpret the progressive needs of the organisation and direct individual potential towards a common goal.  Today human factor is considered to be the most important resource because the effective utilisation of the other resources of the organisation depends upon the management of the personnel of the organisation. Human resources appreciates in value as the time progresses in terms of acquisition of knowledge and experience. They have inherent dynamism and potential for development.  The specific objectives of personnel management are:-  To build and maintain cordial relations between people working at different levels of the organisation.  To ensure effective utilisation of the available human resources.  To provide fair working conditions, wages and amenities to the employees.  To achieve the development of each individual employee to his/her fullest potential. 42
  43. 43.  Small and medium industries can include variable pay component to their pay structures. Apart from the regular pay scales, pay-hike linked to performance may be integrated.  Pay decisions should have a linkage with the outcomes of performance appraisal mechanism in force. The practice of paying a consolidated pay at present in vogue need to be replaced with regular pay structure.  Similarly these SMES should put in place individual and group incentive schemes. The units may take consultancy from the business schools, at a nominal charge in this regard.  A majority of small and medium units under review do not follow promotion system. This may be one of the reasons for larger quits. The performance of employee is deeply connected with his career advancement.  These units may adopt appropriate promotion policy. A seniority may be the basis for promotion decisions for non-technical nature of work and ‘performance’ ought to be the criterion for the skill and competency based jobs. 43
  44. 44.  The capability of Indian MSME products to compete in international markets is reflected in its share of about 34% in national exports. In case of items like readymade garments, leather goods, processed foods, engineering items, the performance has been commendable both in terms of value and their share within the MSME sector while in some cases like sports goods they account for 100% share to the total exports of the sector.  In view of this, export promotion from the small scale sector has been accorded high priority in India’s export promotion strategy which includes simplification of procedures, incentives for higher production of exports, preferential treatments to MSMEs in the market development fund, simplification of duty drawback rules, etc.  Products of MSME exporters are displayed in international exhibitions free of cost under SIDO Umbrella abroad.  SSI Sector plays a major role in India's present export performance. 45%-50% of the Indian Exports is contributed by SSI Sector. Direct exports from the SSI Sector account for nearly 35% of total exports. Besides direct exports, it is estimated that small-scale industrial units contribute around 15% to exports indirectly. This takes place through merchant exporters, trading houses and export houses. 44
  45. 45.  They may also be in the form of export orders from large units or the production of parts and components for use for finished exportable goods.  It would surprise many to know that non-traditional products account for more than 95% of the SSI exports.  The exports from SSI sector have been clocking excellent growth rates in this decade. It has been mostly fuelled by the performance of garments, leather and gems and jewellery units from this sector.  The product groups where the SSI sector dominates in exports, are sports goods, readymade garments, woollen garments and knitwear, plastic products, processed food and leather products.  The SSI sector is reorienting its export strategy towards the new trade regime being ushered in by the WTO. 45