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    MAJOR MARKETING CHALLENGES FACED BY MSME SECTOR Page 1

    SUMMER INTERNSHIP PROJECT REPORT

    ON

    MAJOR MARKETING CHALLE NGES FACED BY MSME SECTOR

    Submitted for the Partial Fulfillment of the Requirement for the degree of

    MBA (Masters of Business Administration)

    2011-2013

    FACULTY GUIDE SUBMITTED BY

    S.K SAHOO PRADEEP PANDEYAsst. Professor(Marketing ) Reg. No. - 1106262013IIPM School of Management MBA (2011-2013)Kansbahal

    BIJU PATNAIK UNIVERSITY OF TECHNOLOGYROURKELA

    ODISHA

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    ACKNOWLEDGEMENT

    I express my sincere gratitude to MR. ANUPAM GAYEN ( Branch Manager of NSIC, Rourkela) for providing me an opportunity to work on this project. I am very

    grateful for their constant support and guidance throughout the duration of the entire

    project. Acknowledgements are also due to all the other staff in NSIC, Rourkela,

    Branch for providing information at various point of the project, especially the

    discussions on the market. I also express my sincere thanks to MR. S. K. SAHOO

    (Faculty Mentor) for his sincere cooperation, guidance and support. Lastly, I thank

    my parents, family members and friends for their constant support in my endeavour.

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    DECLARATION

    I PRADEEP KUMAR PANDEY declare that this project report entitled MAJOR

    MARKETING CHALLENGES FACED BY MSME SECTOR with reference to

    NSIC Rourkela submitted by me to the BPUT university, Rourkela is bonafied work

    of own and it has not been submitted to any other or university for any degree or

    diploma.

    Dated pradeep kumar pandey

    Signature

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    CERTIFICATE

    This is to certify that Ms. Pradeep Kumar Pandey bearing registration number

    1006262013, a Student of IIPM-School of Management under Biju Patnaik

    University of Technology, Rourkela has undergone his SIP (Summer Internship

    Project) entitled MAJOR MARKETING CHALLENGES FACED BY MSME

    SECTOR of NSIC under my guidance and supervision. The project Report is

    original to the best of my knowledge and belief. I recommend the Project for

    Evaluation.

    Date- Prof. S.K SHAOO

    IIPM School of Management

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    EXECUTIVE SUMMARY

    During the course of one month s project, the detailed study of Major

    marketing challenges faced by MSME (micro, small and medium enterprises)

    sector was carried out in NSIC, Rourkela for determining the goodwill of NSIC

    and also to determine the potential and efficiency of NSIC registration schemes for

    development of small industries of Rourkela. The mode of sample methodology is

    random. The sample unit is small industries whether registered or not registered underNSIC. Research approaches observation and survey. The research instrument used is

    questionnaire. The geographical condition of Rourkela favours a lot in the field of

    industrial marketing. It provides great immense for the small scale industrial sector.

    The final conclusion after the analysis done on the data acquired during the survey is

    that Rourkela is a fast developing city with a great future for business units. All that

    needs to be done by the NSIC is that create an awareness about the prevailing

    schemes and also introduce new schemes prevailing to the market trend of Rourkela

    and they should even keep a keen watch over the activities and schemes of other

    players in the city.

    There are various steps that are being done to improve their marketing

    strategies as being the leader in Raw materials and government purchase in the region

    to make it customer friendly. NSIC is also giving its best effort to create awareness by

    conducting programmes like Entrepreneurship Development Programme (EDP) .

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    TABLE OF CONTENTS

    1.Introduction 7 -15

    2.Company profile16 -18

    3.Objective of the study19 -20

    4.Research methodology

    21 -24

    5.Litrature review25 -35

    6.Analysis and findings 36 -39

    7.Conclusion suggestion and limitation of the study40 -42

    8.Refrence43

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    CHAPTER - 1INTRODUCTION

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    INTRODUCTION TO MSMEs

    Micro Small and Medium Enterprises (MSMEs) have played a significant role world

    over in the economic development of various countries. Over a period of time, it has

    been proved that MSMEs are dynamic, innovative and most importantly, the

    employer of first resort to millions of people in the country. The sector is a breeding

    ground for entrepreneurship. The importance of MSME sector is well-recognized

    world over owing to its significant contribution in achieving various socio-economic

    objectives, such as employment generation, contribution to national output and

    exports, fostering new entrepreneurship and to provide depth to the industrial base of

    the economy.

    Micro Small and medium-sized enterprises (MSMEs) are the backbone of all

    economies and are a key source of economic growth, dynamism and flexibility in

    advanced industrialized countries, as well as in emerging and developing economies.

    MSMEs constitute the dominant form of business organization, accounting for

    over 95% and up to 99% of enterprises depending on the country. They are

    responsible for between 60-70% net job creations in Developing countries. Small

    businesses are particularly important for bringing innovative products or techniques tothe market. Microsoft may be a software giant today, but it started off in typical

    MSME fashion, as a dream developed by a young student with the help of family and

    friends. Only when Bill Gates and his colleagues had a saleable product were they

    able to take it to the marketplace and look for investment from more traditional

    sources. MSMEs are vital for economic growth and development in both

    industrialized and developing countries, by playing a key role in creating new

    jobs. Financing is necessary to help them set up and expand their operations, developnew products, and invest in new staff or production facilities. Many small businesses

    start out as an idea from one or two people, who invest their own money and probably

    turn to family and friends for financial help in return for a share in the

    business. But if they are successful, there comes a time for all developing MSMEs

    when they need new investment to expand or innovate further. That is where

    they often run into problems, because they find it much harder than larger

    businesses to obtain financing from banks, capital markets or other suppliers of

    credit.

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    MSMEs in India

    India has a vibrant MSME sector that plays an important role in sustaining economicgrowth, increasing trade, generating employment and creating new entrepreneurship

    in India. In keeping in view its importance, the promotion and development of

    MSMEs has been an important plank in our policy for industrial development and a

    well-structured programme of support has been pursued in successive five-year plans

    for. MSMEs in India have recorded a sustained growth during last five decades. The

    number of MSMEs in India is estimated to be around 13 million while the estimated

    employment provided by this sector is over 31 million . The MSME sector accounts

    for about 45 per cent of the manufacturing output and over 40 per cent of the

    national exports of the country.

    Figure -MSMEs in India

    India embarked on the path of opening up its economy and integrating it with the

    global economy in 1991. The liberalization of economy, while offering tremendous

    opportunities for the growth and development of Indian industry including MSMEs,

    has also thrown up new challenges in terms of fierce competition. The very rules

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    which provide increased access for our products in the global markets also put

    domestic industry under increased competition from other countries. In today s world,

    access on a global basis to modern technology, capital resources and markets have

    become the most critical determinants of international competitiveness.

    Defining MSMEs

    In India, the enterprises have been classified broadly into two categories:

    (i) Manufacturing; and

    (ii) Those engaged in providing/rendering of services.

    Both categories of enterprises have been further classified into micro, small and

    medium enterprises based on their investment in plant and machinery (for

    manufacturing enterprises) or on equipment s (in case of enterprises providing or

    rendering services). The classification on basis of investment is as under :

    Table Classification Of Micro, Small And Medium Enterprises

    Classification Investment Ceiling for Plant, Machinery or Equipments

    Manufacturing Enterprises Service Enterprises

    Micro Upto Rs.25 lakh Upto Rs.10 lakh

    Small Above Rs.25 lakh & upto Rs.5

    crore

    Above Rs.10 lakh & upto Rs.2

    crore

    Medium Above Rs.5 crore & upto

    Rs.10 crore

    Above Rs.2 crore & upto Rs.5

    crore

    SME would be meant to include Micro Small and Medium Enterprises (MSMEs). The

    above definitions of Micro, Small and Medium Enterprises would be in place of the

    existing definitions of Small & Medium Industries and SSSBEs/Tiny Enterprises.

    Micro Enterprises would include Tiny Industries also.

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    In Manufacturing, Small Enterprises would mean Small Scale Industries

    (SSIs) & Medium Enterprises mean Medium Industries (MIs).

    In Services, Small Enterprises and Medium Enterprises would mean other

    Small & Medium Enterprises.

    All advances to segments viz. Micro, Small and Medium Enterprises in the

    Manufacturing sector irrespective of sanctioned limits, (including advances

    against TDRs/Govt. Securities etc for business purposes to these categories of

    Borrowers), and

    Advances to Services Sectors such as Professional & Self-Employed, Small

    Business Enterprises, and Small Road/Water Transport Operators and other

    enterprises, engaged in providing/rendering of services, conforming to the

    above investment criteria and enjoying borrowing/non-borrowing facilities

    with the Bank (including advances against TDRs/Govt. Securities etc for

    business purposes to these categories of Borrowers).

    Those enterprises exceeding the investment ceilings would be categorized as

    Large Enterprises and be outside the purview of MSME.

    The sanctioned limits would no longer be the criteria determining the status as micro

    or small or medium enterprises in these cases.

    IMPORTANCE AND CONTRIBUTION OF MSME:

    The Micro Scale and Medium Enterprises (MSMEs) play an important role in the

    economic development of any country. MSME enterprises can be rightly called as the

    backbone of the GDP of India. The MSME sector in India is growing at an

    exceptionally fast rate due to which it is proving to be beneficial to the Indian

    Economy. However, there are some important points that need to be considered for

    further development of the MSME sector.

    MSME contributes in the following:

    Rural industrialization

    Rural development and decentralization of industries

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    Creation of employment opportunities and more equitable income distribution Use of indigenous resources; earning of foreign exchange (FOREXs)

    resources

    Creation of backward and forward linkages with existing industries

    Entrepreneurial development

    The development of MSMEs is one of the sustainable ways of reducing the level of

    poverty and improving the quality of life in household through job and wealth

    creation. According to the United Nation Development program (UNDP), MSMEs

    have the highest capital, employment ratio and are a source of income for a lot of

    people World over. The most important thing is that MSMEs also act as safeguard in

    times of economic recessions.

    The MSMEs constitute over 90% of total enterprises in most of the economies and are

    credited with generating the highest rates of employment growth and account for a

    major share of industrial production and exports. In India too, the MSMEs play a

    pivotal role in the overall industrial economy of the country. In recent years the

    MSME sector has consistently registered higher growth rate compared to the overall

    industrial sector. With its agility and dynamism, the sector has shown admirable

    innovativeness and adaptability to survive the recent economic downturn and

    recession.

    This sector contributes 8% of the country s GDP and employs around 60 million

    people, through 26 million enterprises. MSMEs in the country manufacture over

    6,000 products.

    Let us analyze the factors that have contributed to the growth of the MSME sector in

    India.

    MSME units in India are being funded by foreign and local fund providers. The advancement in technology has also contributed highly to the MSME

    sector. There are numerous business directories and trade portals available

    online that contains a rich database of manufacturers, sellers and buyers.

    To start and maintain these units, minimal investment is required. These MSME units are now being funded by many government and private

    banks.

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    The MSME sector is one of the greatest contributors of domestic production as

    well as the export earnings Many major mergers have taken place recently.

    Major Problems of MSMEs

    Despite its commendable contribution to the Nation's economy, MSME Sector does

    not get the required support from the concerned Government Departments, Banking

    Sector, Financial Institutions and Corporate Sector, which is a handicap in becoming

    more competitive in the National and International Markets and which needs to be

    taken up for immediate and proper redressal. MSME sector faces a number of problems - absence of adequate and timely banking finance, limited knowledge and

    non-availability of suitable technology, low production capacity, follow up with

    various agencies in solving regular activities and lack of interaction with government

    agencies on various matters.

    Some of the major problems are briefly as follows:

    a) Financial problems of MSMEs:

    The financial problem of MSMEs is the Root Cause for all the other problems faced

    by the MSME sector. The small and medium industrialists are generally poor and

    there are no facilities for cheap credit. They fall into the clutches of money lender

    who charges very high rates of interest, or else they borrow from the dealers of their

    goods, who exploit them by completing them to sell their products at very low price.

    After the nationalization of 14 major Indian Banks in July, 1969, the Commercial

    banks were providing only a small proportion of SMEs financial requirements. Credit

    to the MSME sector continues to be non-commensurate with its contribution to the

    total industrial output. As against the share of the village and MSME at 40% in the

    industrial output, its share in total credit to the industrial sector is only about 30%.

    b) Raw Material problem of MSMEs:

    This difficulty is experienced in a very pronounced form. The quantity, quality and

    regularity of the supply of raw materials are not satisfactory. There are no

    quantity discounts, since they are purchased in small quantities and hence

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    charged, higher prices by suppliers. Difficulty is also experienced in procuring

    semi-manufactured materials. Financial weakness stands in the way of securing raw

    materials in bulk in a competitive market.

    c) Production problem of MSMEs:

    MSME units suffer from inadequate work space, power, lighting and

    ventilation, and safety measures etc. These short comings have tended to endanger

    the health of workmen and have adversely affected the rate of production. Many

    units are following primitive methods of production. Adoption of modern

    techniques is either disliked by the entrepreneurs is not feasible. Wage rates and

    service conditions of small industries are not attractive to skilled labor.

    d) Technological problem of MSMEs:

    Today technology is changing at a very fast phase; it becomes difficult for MSMEs to

    cope up with changing technology. Technology up gradation and the frequent need to

    renew the equipment has emerged as a big problem.

    d) Marketing problem of MSMEs:

    As marketing is not properly organized, the helpless artisans are completely atthe mercy of middle man. The potential demand for their goods remains under

    developed. The MSMEs have to face the competitions from large scale units in

    marketing their products. It causes damage to the growth and stability of MSMEs.

    MSMEs cannot afford to spend lavishly for advertisement to promote their sales.

    e) Managerial problem of MSMEs:

    Small scale industries in our country have suffered from the lack of entrepreneurial

    ability to develop initiative and undertake risks in the unexplored industrial

    fields. The in efficiency in management comes first among managerial

    problems. The entrepreneurial ability of promoters of cottage industries and

    MSMEs are handicapped by technical know how in the areas of production, finance,

    accounting and marketing management.

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    f) Sickness of MSMEs:

    A serious problem which is hampering small and medium sector has been sickness.

    Many small units have fallen sick due to one problem or the other. Sickness is caused

    by two sets of factors, Internal and external factors. From among the variousinternal and external causes of sickness the important ones are bud

    management, high rate of capital gearing, inadequacy of finance, short of raw

    materials, outdated plant and machinery, low labor productivity etc.

    Importance of the study

    The researches that were conducted in past by the various professionals are in foreign

    context and not in Indian context. Study relating to MSMEs, their problems and

    source of financing has been done but regarding the MSME financial schemes of

    public sector banks has not been done. This gap has been identified and it has led to

    the present research to be undertaken. So, the need was felt to cover the areas

    neglected. Thus, here a study on major marketing problems faced by MSME.

    Scope of the study

    The scope of this study was limited to the whole world which are going to start Micro

    Small & Medium Enterprises.

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    CHAPTER-2COMPANY

    PROFILE

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    COMPANY PROFILE

    National Small Industries Corporation Ltd. (NSIC), is an ISO 9001-2008 certified

    Government of India Enterprise under Ministry of Micro, Small and MediumEnterprises (MSME). NSIC has been working to fulfill its mission of promoting,

    aiding and fostering the growth of small industries and industry related micro, small

    and medium enterprises in the country. Over a period of five decades of transition,

    growth and development, NSIC has proved its strength within the country and abroad

    by promoting modernization, upgradation of technology, quality consciousness,

    strengthening linkages with large medium enterprises and enhancing exports -

    projects and products from small enterprises. NSIC operates through countrywide network of offices and Technical Centres in theCountry. To manage operations in African countries, NSIC operates from its office in

    Johannesburg, South Africa. In addition, NSIC has set up Training cum Incubation

    Centre & with a large professional manpower, NSIC provides a package of services as

    per the needs of MSME sector.

    ORGANISATIONAL SET-UP

    The Policy guidelines to the Corporation are provided by the Board of Directors

    consisting of a full time Chairman-cum Managing Director; two Functional Directors;

    two Government Nominee Directors, one SIDBI Nominee Director and six Non-

    official Part-time Directors. The Corporation has a dedicated team of professionals at

    all levels and operates through 123 offices located all over India and one office

    located at Johannesburg (South Africa).

    NSIC offers small enterprises the following support services through its Technical

    Services Centres and Extension Centres

    1. Advise on application of new techniques

    2. Material testing facilities through accredited laboratories

    3. Product design including CAD

    4. Common facility support in machining, EDM, CNC, etc.

    5. Energy and environment services at selected centres.

    6. Classroom and practical training for skill upgradation.

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    PERFORMANCE AND ACHIVEMENT

    National Small Industries Corporation Ltd (NSIC), a Government of India enterprise

    under the aegis of Ministry of MSME, achieved record operational and financial

    performance in terms of gross volume of business and profitability in the recently

    concluded financial year 2009-10. The year witnessed the Corporation achieved new

    heights on all parameters. There was substantial improvement in enhancing the

    company s outreach and its volume of operations. With the opening of new offices the

    Corporation expanded its reach to serve larger number of MSMEs, making the total

    number of NSIC offices 123. The Business Turnover of the Corporation for the year jumped to Rs. 4488 crore over the previous year s turnover of Rs. 3508 crore.

    NSIC continued with its efforts to provide various raw materials like steel,

    aluminium, zinc, copper, paraffin wax etc to MSMEs through arrangements made

    with bulk manufacturers of these materials. In addition, the Corporation also started

    distribution of Coal to MSMEs in West Bengal. Total raw material facilitation to

    MSMEs increased from 302164 MTs in the year 2008-09 to 355719 MTs in the year

    2009-10.NSIC organized 963 Marketing Promotion events including participation /

    organization / co-sponsoring of exhibitions, buyer-sellers meets and marketing

    campaigns as compared to 874 events in the previous year 2009- 10. NSIC s,

    Techmart 2009 organized at the India International Trade Fair during November, 2009 was awarded Gold Medal for outstanding display of the MSMEs technology

    and products.

    During the year, NSIC continued its initiative to set up new Training-cum Incubation

    centres under Public-Private Partnership (PPP) mode for the purpose of inculcating

    entrepreneurial skills in the youth by way of skill development through which they

    become employable or create their own enterprises. So far, 45 such centres have been

    established at various locations in the country. These are in addition to three

    incubation centres opened at our technical centres. During the year, 8364 candidates

    were trained at these centres.

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    CHAPTER-3

    OBJECTIVES OF

    THE STUDY

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    Objectives of the study

    Objectives are the guiding lights of a study. The present study was undertaken to

    achieve the following objectives: -

    To know about marketing challenges faced by MSME sectors. To know the effectiveness of various MSME marketing strategy. To enhance marketing capabilities & competitiveness of the MSMEs. To update MSMEs about the prevalent market scenario and its impact on

    their activities.

    To facilitate the formation of consortia of MSMEs for marketing of theirproducts and service.

    To enrich the marketing skills of the micro, small & medium entrepreneurs.

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    CHAPTER - 4

    RESEARCH

    METHODOLOGY

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    RESEARCH METHODOLOGY

    Research Methodology is a way to systematically solve the research problem. The

    Research Methodology includes the various methods and techniques for conducting a

    Research. M arketing Research is the systematic design, collection, analysis and

    reporting of data and finding relevant solution to a specific marketing situation or

    problem. D. Slesinger and M.Stephenson in the encyclopedia of Social Sciences

    define Research as the manipulation of things, concepts or symbols for the purpose

    of generalizing to extend, correct or verify knowledge, whether that knowledge aids in

    construction of theory or in the practice of an art.

    Research is, thus, an original contribution to the existing stock of knowledge making

    for its advancement. The purpose of Research is to discover answers to the Questions

    through the application of scientific procedures. Our project has a specified

    framework for collecting data in an effective manner. Such framework is called

    Research Design . The research process followed by us consists of following steps:

    RESEARCH DESIGN

    This research was descriptive and conclusion oriented research.

    Conclusion Oriented Research: -Research designed to assist the

    decision maker in the situation. In other words it is a research when we give

    our own views about the research.

    Descriptive Research: -A type of conclusive research, which has as its

    major objective the description of something-usually market characteristics or

    functions. In other words descriptive research is a research where in researcher

    has no control over variable. It just presents the picture, which has already

    studied.

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    Sources of data

    Data Collection: Information has been collected from both Primary and

    Secondary sources of data collection.

    Primary sources- Primary data are those, which are collected are fresh and

    for the first time and thus happen to be original in character. Primary data had

    been collected by conducting surveys through questionnaire, which include

    several questions and personal and telephonic interview.

    Secondary sources - Secondary data are those, which have already been

    collected by someone else, which already had been passed through thestatistical process. Secondary data had been collected through websites,

    newspapers and journals.

    SAMPLING DESIGN

    Sampling can be defined as the section of some part of an aggregate or totality on the

    basis of which judgment or an inference about aggregate or totality is made. The

    sampling design helps in decision making in the following areas: -

    Universe of the study -The universe comprises of two parts as theoretical universe

    and accessible universe

    Theoretical universe - It includes all the MSMEs throughout the universe.

    Accessible universe - It includes the MSMEs in Rourkela city.

    Sample Frame -Sample frame was Small and Medium enterprises all over in

    Rourkela .

    Sample Unit- Sampling unit is the basic unit containing the elements of the

    universe to be sampled. The sampling unit of the present study was MSMEs located

    in Rourkela.

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    Sample Size - Sample size is the number of elements to be included in a study.

    Keeping in mind all the constraints 30 respondents were selected.

    Sampling Techniques - The sampling techniques used were convenience

    technique and simple random sampling technique.

    Type of questionnaire used open and closed both question use to conduct this

    research .

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    CHAPTER 5REVIEW

    OFLITERATURE

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    REVIEW OF LITERATURE

    A research literature review is a systematic, explicit and reproducible method for

    identifying, evaluating and synthesizing the existing body of completed and recordedwork produced by researchers, scholars and practitioners. This report provides an

    organized critical account of information, ideas and knowledge that has been

    published (or is available in the public domain) on MSME access to credit. The

    empirical analysis has to be built on a comprehensive review of relevant in the area of

    the study. A review of the available literature on micro small scale industries is

    undertaken with a view to identify possible areas of enquiry. It also provides the

    necessary background for the present study.Vijay Kumar (2011)

    Talking about a few basic issues being faced by the MSMEs sector is lack of awareness,

    investment and resource, "Zero wastage and continuous design improvement hold the key

    to survival and growth of MSMEs."

    Tarak Shah (2011)

    The major problem of inadequate financing to MSMEs needs an urgent attention amongst

    the others such as adequate credit delivery to MSMEs, better risk management,

    technological upgradation of Banks esp. Public Sector Banks, attitudinal change in

    Bankers. The MSMEs sector is considered to be an untapped market for financial

    institutions in India. The only way out of the mire is that the Indian manufacturing sector

    could be strengthened by the existing rural systems and making them self-sufficient. This

    could take place only by helping Small and Medium Enterprises and the rural artisans

    (people with innate skills and talents) in becoming effective and competitive enough to

    face the future. A number of issues and business practices of global players and markets

    can be observed, learnt and adapted for ensuring competitiveness of Indian MSMEs.

    Roopa Kudva (2011)

    The Mangining Director of CRISIL says it is not easy to attract MSME s to do a credit

    rating, however it is important to have the credit rating done if the MSME s wants to

    position itself in the international market as well as there is a rebate from the bankers in

    the lending terms. Unfortunately the 75% subsidy is available only for the first time /year

    the MSME gets its rating done subsequently they have to bear the entire cost next year

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    which is a strain on the purse strings. . Producing a new framework for rating SMEs is

    important, because most would receive low ratings on traditional scales solely because of

    their small size. The benchmarks used for large corporations have to be abandoned

    MSME Chamber of India (2011)

    MSMEs are now exposed to greater opportunities than ever for expansion and

    diversification across the sectors. Indian market is growing rapidly and Indian

    entrepreneurs are making remarkable progress in various Industries like Manufacturing,

    Precision Engineering Design, Food Processing, Pharmaceutical, Textile & Garments,

    Retail, IT and ITES, Agro and Service sector.

    B. Yerram Raju (2011)

    The problem which continues to be a big hurdle for the development of the sector is lack

    of access to timely and adequate credit. The Abid Hussain Committee on SSIs (1997)

    examined the problems of the SSI sector and recommended a package of policies to

    restructure the industry in the context of current global economic changes. The Expert

    Committee was of the view that the existing institutional structure for delivering credit to

    SSEs needs a thorough overhaul. It endorsed the recommendations of the Nayak

    Committee and urged the RBI to implement the same. The Committee recommendedrestructuring of financial support through SFCs and SIDCs, tapping of other sources of

    funding for SSEs, extending credit rating services to small units, and addressing the credit

    needs of tiny units to ensure that they are not bypassed by the commercial banking

    system.

    Parijat Upadhyay, Saeed Jahanyan, Pranab K. Dan(2011)

    The paper attempts to assess empirically the four factors like project execution

    competency; product and vendor perspective; organizational climate; and technical

    perspective which are most critical in the ERP implementation process from the

    perspective of the Indian MSMEs.

    Govind Sharma(2011)

    Do M SME s Need to Strategize? Business Strategy Series, Vol 12, Issue 4,

    The author says that M SME s need to strategize and a model should be created which

    will assist the top management and a low cost ERP model should be designed keeping in

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    the need of the MSME. The practical implications are for the labour intensive countries

    which are not capital intensive but generate create employment

    Mehul Kapadia (2011)

    Every bit of capital investment is crucial for an MSME. Seasonal peaks are one of the

    greatest reasons for companies under-provisioning or over-provisioning. This can later

    result in a heavy loss and idle resources. All businesses undergo a transition at various

    points. Whether you run a full-fledged enterprise, a medium-sized business venture or

    even a smaller, relatively newer business, updating business IT processes is a critical step

    in your enterprise life cycle. In fact, some businesses even have to undergo multiple

    transformation phases. Large enterprises have the capability and the resources to execute

    such transformations smoothly, but MSMEs face a significant challenge in doing so,

    given their limited resources and capital.

    Sangeeta Baksi (2010)

    TIFAC is of the opinion that, there are few programs which are of utmost importance in

    the MSME- led technology development efforts, which promote the public private

    partnership. Moreso the technological development has never been a straight forwards

    process. Technological innovations have been the key to the survival of the MSMEs. Fourdecades of planned development have elevated India to a stage, where the country

    demonstrates some remarkable strength in modern technologies for achieving

    development goals.

    C.B.Bhave(2010)

    In is opinion the MSME s are a c atalyst in most of the economies and constitute a major

    part of the industrial activity. MSME s generally face financial crisis. He foresees that the

    SME Stock Exchange will be a great boon to this sector as it will provide a wide pool of

    capital, increased status and credibility and other benefits.

    Raja, MSME Times (2010)

    The challenges that the MSMEs face today seem to be primarily in the area of ICT and to

    quote specifically, ERP. The MSMEs lament that whenever they approached the usual

    ERP firms, the first question they were faced with was that of their turn-over as they are

    quoted based on their turnover. The question that arises is does the Indian MSME

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    presents an opportunity for Technology Startups to deliver smaller and much palatable

    solutions, which fit both the pocket and the background of the MSMEs

    Seema Sharma & Milind Sharma (2010)

    The purpose of this paper is to examine the relative production efficiency of state-wise

    clusters in the registered small-scale sector in India.The author says that, most of the

    states are found to be operating at decreasing returns to scale, which signifies the scope

    for investment and further employment generation.

    Porter M. E (2010)

    The author says the major objectives of the new industrial policy package should be to

    build on the gains already made, correct the distortions or weaknesses that may have crept

    in, maintain a sustained growth in productivity and gainful employment and attain

    international competitiveness.

    Rajesh Dubey (2010)

    The author says Actually, Private Equity and Venture Capitalists firms would be

    interested in investing in a listed company. Credit ratings would help an entity to get an

    exposureFirst of all, the fear is that the MSME may not get a good rating. Second is

    probably the financial statements that they have prepared to get rated do not reflect their

    true and fair picture of their performance. And, the rating agencies will not look beyond

    that. These could be the two main reasons why SMEs may not be interested while going

    for a rating. We need to look at what is their management and how sound a promoter is,

    or how resilient the SME has been and their overall performance.

    Report of the Task Force on MSME (2010)

    The MSME sector in India is highly heterogeneous in terms of the size of the enterprises,

    variety of products and services produced and the levels of technology employed. While

    one end of the MSME spectrum contains highly innovative and high growth enterprises,

    more than 94 per cent of MSMEs are unregistered, with a large number established in the

    informal or unorganized sector. Besides the growth potential of the sector and its critical

    role in the manufacturing and value chains, the heterogeneity and the unorganised nature

    of the Indian MSMEs are important aspects that need to befactored into policy making

    and programme implementation.

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    Risk And Capital Management in MSMEs - by SIDBI (2010)

    The advent of globalization offers both challenges and opportunity to MSMEs. The

    challenge for them is to remain competitive and consistently deliver value to customers.The opportunities available include tapping the global markets and growth in scale by

    forging strategic partnerships. Internationally, Risk Capital forms the basis of

    entrepreneurial ecosystem. Risk Capital is an important instrument for not only start-ups

    and innovative / fast growing companies but is also critical to those looking at growth.

    However the sources of risk capital are limited in developing countries. It is encouraging

    to note that with global integration of economy, emerging markets like India are sought

    after destinations for successful Private Equity (PE) funds. However, the PE Funds

    continue to focus on larger investments and bigger corporatised units though there are

    more success stories of software and other new economy enterprises in the medium sector

    being assisted by Venture Capital [VC] Funds. Majority of the MSMEs are owner driven

    with lesser inclination towards formal organizational structures. The non corporate

    structure and small size of the majority of MSMEs in India makes the venture capitalists

    and other risk capital providers reluctant to investing in them due to higher transaction

    costs and difficulties in exits out of such investments. Thus, it is critical to have

    appropriate risk capital products and focused funds for MSMEs of different size andconstitution.

    Shamika Ravi (2009)

    The MSME sector has often been termed the engine of growth for developing

    economies. We begin with an overview of this sector in India and look at some recent

    trends which highlight the development and significance of this sector vis--vis the Indian

    economy. Over the last few years, there have been major policy changes at the federal

    and state level aimed at consolidating and developing this sector. The MSME

    Development Act of 2006 is perhaps the most crucial of these recent policy changes.

    India Microfinance Editorial Board (2009)

    Every crisis throws up an opportunity. And the global economic meltdown is no

    exception. The recession threw up a few such opportunities for passionate entrepreneurs

    who, undeterred by the turmoil outside their offices, built their businesses while many

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    others were either collapsing or struggling to survive. A few passionate entrepreneurs

    are making the best out of recession

    Krishnamurthy Subramanian(2009)

    This article deals with some factors critical to the success of the mergers and acquisitions

    based on the comparisons between failed and successful deals. A merger / acquisitions

    would make sense only if it leads to certain operational and/or financial advantages that

    the individual entities could harness by themselves thereby creating value for

    shareholders of both protagonist firms.

    Ramesh V Penumaka (2009)

    It reflects that while the government can be a facilitator of growth and promoter of equity

    , the role of the large enterprises is also critical, The MSME could be the steroid the

    Indian economy needs at this juncture. The SME provides not only the much needed

    boost for growth, employment and exports but more significantly, contributes to

    geographical and social equity.

    Krishna Tanuku (2009)

    India can achieve its socio-economic objectives by focusing on gainful employment for

    millions of educated youth and by helping millions of others transition from an

    overburdened agricultural sector to the small-scale manufacturing and service sectors.

    Sankar De (2009)

    This article potrays the enormity of the challenge and outlines a possible partial remedy.

    MSME s in India face may challenges, but perhaps none are as difficult as the challenge

    of financing , both short term and long term. Poor profitability and lack of access toformal capital markets and institutions result in heavy dependence on alternative

    financing challenges which is generally more costly than funding from normal sources

    and creates a vicious cycle in the pattern of funding.

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    Krishna B Kumar (2009)

    The author says that the challenge is to enhance economic participation among those at

    the bottom rungs and facilitate the climb, without tripping up those who are at higherrungs and encouraging entrepreneurship is one way of address this dilemma.

    Ravi Jagannathan, Mudit Kapoor, Ernst Schaumburg (2009)

    The author says, the global economy is in recession and unemployment rates are soaring,

    but the financial crisis is a mere symptom and not the disease itself. The fundamental

    cause of the crisis is the labour supply shock and not the glut in liquidity which is often

    blamed. A higher savings rate in the debt laden developed nation and greater capital flows

    to the developing nation will correct the structural imbalances in global capital flows.

    Bhatendra Kumar Gupta (2008)

    In India, the MSME sector is the second largest employer after agriculture. With the

    growth in the Indian Economy it is of need for the MSME to raise capital is becoming

    increasingly critical. He says that there is a need for the dedicated STOCK Exchange for

    the MSME sector to cater to their needs better which are different from the large

    industries.

    Rajesh.K. Pillania (2008)

    The author says In terms of relevance, latest and timeliness, Indian and international

    automotive components manufacturers pay little credence to the knowledge available

    through government institutions and industry associations. Industry associations and

    governments need to have a re-appraisal of their practices and make their working more

    useful, fast and updated.RBIs Report of Working Group on Rehabilitation of Sick SMEs

    (2008)

    A Working Group was constituted under the chairmanship of Dr. K. C. Chakrabarty,

    Chairman and Managing Director, Punjab National Bank to suggest measures for

    improving credit flow to the MSME sector as well as measures for early implementation

    of rehabilitation/nursing of sick MSME units by examining feasibility of bringing inadditional capital through alternative routes, such as, equity participation, venture

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    financing, etc. As an incentive for proper restructuring package at the time of

    rehabilitation, necessary support for business restructuring, modernization, expansion,

    diversification and technological up gradation as may be felt necessary by the lenders

    may also be encouraged. Support schemes like Credit Linked Capital Subsidy Scheme in

    case of units in other (than rural) areas, KVIC Margin Money Scheme (for units in rural

    areas) may be extended for rehabilitation packages also. Many other recommendations

    have also been given.

    Keshab DAS (2007)

    Despite an elaborate and dynamic policy framework, the progress of Indian MSMEs

    continues to be hindered by some of the basic constraints as poor credit availability, low

    levels of technology (hence, low product quality and limited exportability) and inadequate

    or no basic infrastructure, both physical and economic. It is too early to assess the impact

    and effectiveness of a plethora of new policy measures, announced very recently. He says

    that much of the potential of small firms to grow and nurture innovativeness is shaped by

    the kind of infrastructure, both physical and economic, available and can be accessed at

    reasonable costs. The MSMED ACT attaches importance to networking with stakeholders

    both upstream and downstream in the entire global value chain, from raw material

    procurement to processing/manufacturing to marketing to customer services.Madhu Bala (2007)

    The Government has recognized its importance for the economy and its intention towards

    promotion of SSIs is reflected in various Industrial policy Resolutions right from the year

    1948. The primary objective of the Small Scale Industrial Policy during the nineties was

    to impart more vitality and growth-impetus to the sector to enable it to contribute its mite

    fully to the economy, particularly in terms of growth of output, employment and exports.

    The sector has been substantially delicensed. Further efforts would be made to deregulate

    and debureaucratise the sector with a view to remove all fetters on its growth potential,

    reposing greater faith in small and young entrepreneurs. All statutes, regulations and

    procedures were reviewed and modified, wherever necessary, to ensure that their

    operations did not militate against the interests of the small and village enterprises.

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    Y.Srinivas (2005)

    MSMEs play a very significant role in the economy in terms of balanced and sustainable

    growth, employment generation, development of entrepreneurial skills and contribution toexport earnings. However, despite their importance to the economy, most SMEs are not

    able to stand up to the challenges of globalization, mainly because of difficulties in the

    area of financing. With the opening up of the Indian economy, it has become necessary to

    consider measures for smoothening the flow of credit to this sector. Small and Medium

    Enterprises (SMEs) play a very significant role in the economy in terms of balanced and

    sustainable growth, employment generation, development of entrepreneurial skills and

    contribution to export earnings. However, despite their importance to the economy, most

    SMEs are not able to stand up to the challenges of globalization, mainly because of

    difficulties in the area of financing.

    Sickness and Rehabilitation of MSMEs in India(2005)

    The author feels that the SMEs will fail in a sector for a variety of reasons. Global

    competitiveness has strained India s already weak infrastructure, which severely hinders

    the production of small scale industries. There are a multitude of reasons for failure,

    however, not all of them related to competition. Lack of knowledge, available capital,qualified workers or even motivation on the part of the owner are all viable reasons for

    business failure. Whatever the reason for failure, the business must have some sort of

    recourse to declare its sickness. In India, what constitutes this mechanism is relatively

    unclear, and despite current progress, has left much inefficiency.

    Krishna Kumar (2003)

    He views that In India foreign collaborations have generally been to have the

    technological transfer which involves high cost. It is important to understand the

    MSME s single handedly cannot afford this cost, however if a group of MSME s of

    similar nature of work come together the burden of the foreign collaborations can be

    shared effectively.

    Kristin Hallberg, (2000)

    Governments in both industrialized and developing countries provide a wide variety of

    programs to assist small- and medium-scale enterprises (SMEs). Despite the success of

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    SME strategies in a few countries, the majority of developing countries have found that

    the impact of their SME development programs on enterprise performance has been less

    than satisfactory? This paper investigates the economic rationale for intervention in

    support of small- and medium-scale enterprises, on both theoretical and empirical

    grounds. It also suggests a framework for SME intervention to help the Bank Group's

    client countries design SME strategies, gauge the effectiveness of assistance programs,

    and achieve the objective of raising SME competitiveness.

    Teijiro Uyeda and his associate (2002)

    As part of a review of international programme studied japans small industries. Small

    industries played an important role in japans industrialization. Their onslaught on the

    international market had created serious problems for the market economies. The

    study investigated the status and the representative character of the small scale

    industry in Japanese economy.

    Valasama Antyony,(2002)

    In her article titled Prospects and growth of SSIs in India: An overview . Observes

    that adequate and timely availability of working capital and marketing avenues for the

    SSI products should be ensured for improving their competitive strength in the

    domestic and global markets. There is the need for providing better information and

    efficiency networking for the SSIs besides development of quality infrastructural

    facilities.

    Panda (2003)

    In his case study of hotel industries in Nagaland examines marketing management in

    small service enterprises. He finds that sales activity in a majority of cases is managed

    by hired managers. The delegation of sales function is found to have a positive

    association with the level of formal education of entrepreneurs. The entrepreneurs

    appear to sell, rather than market their service. In the perception of the majority of the

    entrepreneurs, sales promotion activity is an unnecessary activity that invites the

    attention of extortionists. According to panda, 70 per cent. The present study lies in its

    incorporation of the need for the right type of marketing research into the industries

    development programme.

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    CHAPTER-6

    DATA ANALYSIS AND

    FINDINGS OF THE

    STUDY

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    As per the field survey conducted, access to finance & Lack of Man power is the

    most severe concern as well as constraint for MSMEs in India. However there are

    some differences regarding how different types of firms rate access to finance as an

    obstacle. 38 percent of micro-manufacturing firms report it as the most severe

    obstacle to operations & Manpower compared to only 6 percent of IT firms.

    Other obstacles identified as a major concern by MSMEs are poor delivery of

    electricity, corruption and high tax rates and onerous tax administration.

    Problems related to access to finance stems from two different sources. The first

    concerns involuntary exclusion, wherein banks discriminate against small borrowers

    because of higher transaction costs and information asymmetry. Secondly, MSMEs

    may not access finance because of voluntary exclusion. In this case, firms choose not

    to pursue formal financing for a variety of reasons, including the availability of

    informal lending sources or the lack of a desire to grow. We found evidence of both

    involuntary and voluntary exclusion in the case of MSMEs in India.

    Based on our Area-level analysis of access to finance & Lack of Manpower, there isconsiderable variation across states in lending to Micro &small enterprises. However,

    these differences are not a result of differences in financial laws across states. In

    India, relevant banking laws are promulgated at the national level. Thus, the wide

    disparities between states result from factors such as their respective bureaucratic

    effectiveness, degree of legal protection, and progress with economic development

    initiatives.

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    MARKETING PROBLEMS FACED

    Sl.no Marketing problems Percentage

    1 Low Quality 71.05

    2 Competitors 89.47

    3 Price Fixation 60.53

    4 High Cost of Marketing Personnel 55.26

    5 Sales promotion 60.53

    6 Distribution Channels 76.38

    7 Non Availability of Packing Material 65.79

    (Source: Primary Data)

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    71.05 percent of the sample units have faced heavy problems regarding the quality of

    their products. 89.47 per cent of the sample units have faced heavily problems with

    their competitors. 60.53 per cent of the units have faced moderately the problems of

    fixing he price for their product 55.26 per cent of sample units have faced heavily the

    problems of high cost of marketing personnel. 60.53 per cent of the sample units have

    faced heavily problems in sales promotion. 73.68 per cent of he sample units have

    heavily experienced the problems of distribution of their products. 65.79 per cent of

    the sample units in the district have experienced moderately the problems grouped as

    other

    Findings of the study

    The quality parameters do not meet the standards of the market due to poor quality

    inputs and lack of standardized skills of the workers.

    Big players outplay the small players in this sector as they lack proper marketing

    channels and portraying the products in the domestic and international market. Obsolete technology used in manufacturing the products result in the formation of

    poor quality products.

    Pricing is a major constraint as the price in manufacturing the product often exceeds

    the final product cost thus making these enterprises suffer loss

    No standard methodologies adopted for pricing of the product. The availability of raw materials in the premises of the establishment results in

    costly procurement of the raw materials. Promotional strategies are weak and lack of awareness among entrepreneurs results

    in the weak promotion of the products

    Lack of government support and ample funding in the industry as a whole is not

    expedited and industries are becoming sick in the frame of time.

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    Chapter-7

    Conclusion Suggestions

    and Limitations of the

    Study

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    LIMITATIONS OF THE STUDY

    Due to constraints of time and resources, the study is likely to suffer from certainlimitations. Some of these are mentioned here under so that the findings of the study

    may be understood in a proper perspective.

    The limitations of the study are:

    The research was carried out in a short period.

    The sample size and the parameters were selected accordingly so as to finish

    the work within the given time frame.

    The information given by the respondents might be biased as some of themmight not be interested to give correct information.

    Some of the respondents could not answer the questions due to lack of

    knowledge.

    Some of the respondents of the survey were unwilling to share information.

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    Conclusion

    Small and Medium Enterprises (SMEs) contribute to economic development invarious ways such as creating employment opportunities for rural and urban

    population, providing goods & services at affordable costs by offering innovative

    solutions and sustainable development to the economy as a whole. SMEs in India face

    a number of problems - absence of adequate and timely banking finance, non-

    availability of suitable technology, ineffective marketing due to limited resources and

    non availability of skilled manpower.

    Small and Medium Enterprises (SME) play an important role in the development of acountry. There are around 26 million MSME units in India, of which 13 million are

    SMEs. SMEs contribute nearly 45% share of manufactured output, accounting for

    40% in overall exports of the country and providing employment to about 32 million

    people.

    The Micro, Small and Medium Enterprises (MSME) sector contributes significantly

    to manufacturing output, employment and exports of the country. It is estimated that

    in terms of value, the sector accounts for about 45 % of the manufacturing output and

    40% of total exports of the country.

    To make this sector to become more vibrant and significant player in development of

    the Indian economy the Government of India has taken various initiatives. The

    definition and coverage of the MSME sector was broadened MSME Development Act

    2006 which recognized concept of 'enterprise' to include both manufacturing and

    service sector besides defining medium enterprises setting up a Board for developing

    policy frameworks and indicating pro curement policy

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    Reference

    BOOKS

    Kothari, C.R. (1995). Research Methodology. Edition 2005. New Delhi: Tata

    McGraw Hill.

    Lee, B.C. (2000). The Role of Smes in National Economies in East Asia..Edition

    2002.southampthon: Edward Elgar Publishing.

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    http://msme.gov.in/Outcome_Budget-MSME-2010-11.pdf

    http://msme.gov.in/MSME_AR_ENG_2009_10.pdf

    http://www.banknetindia.com/banking/91027a.htm

    http://www.indianexpress.com/news/special-status-plan-for-msme/737376/ http://www.dnb.co.in/MSME

    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1080505

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    http://www.msmechamberofindia.com/challenges_to_msme_sector.aspx

    www.indiansmechamber.com/challenges_to_msme.php

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