Entrepreneurship Management Micro, Small & Medium Enterprises Prof Bharat Nadkarni.

Entrepreneurship Management

Micro , Small & Medium Enterprises

Prof Bharat Nadkarni

Entrepreneurship Management

Types of Start-ups1. Lifestyle Firms

A small venture that supports the owner and usually does not grow.Privately held.May grow after several years to 30 to 40 employees and turnover of about Rs One/ Two crores

2. Foundation CompanyA manufacturing with a steady growth, may also created from a innovation or R & D set up and lays foundation for a new area. This venture can grow from 10/50 employees to 500 employees in 10 years and turnover of about Rs 10 to 25 crores.Rarely goes public. Private investors,

Entrepreneurship Management

Types of Start-ups . . . contd.3. High Potential Venture

A venture that has high potential for growth and therefore receives great investor interest.Its growth is far more rapid and after 5 to 10 years may employ more than 1000 employees and turnover of more than Rs 100 crores.These are the most important for the economic development.Resource utilisation is maximum and always aim for sustainable growth. Diversify into many industries.Aims for a Global Business group.

Entrepreneurship ManagementForms of Organisation

1. Sole ProprietorshipIs that form of business organisation which is owned and controlled by a single person. He receives all the profits and bears all the risks in the success or failure of the enterprise.”

2. Partnership Firms“The relation between persons who have agreed to share profits of business carried on by all or any one of them acting for all.”

3. Joint Stock Company“A company is an artificial person created by law having perpetual succession and a common seal.”

Entrepreneurship Management

4. Co-operatives“An association of persons, usually of limited means who have voluntarily joined together to achieve a common economic end, through the formation of a democratically controlled organisation, making equitable contribution to the capital required and accepting a fair share of risks and benefits of the undertaking.”

Entrepreneurship Management

Small Scale Enterprises1. Manufacturing2. Trading3. Services

1. ManufacturingVillage & Cottage IndustriesHandloom & HandicraftsModern SSIa. Small scale unitsb. Ancillary unitsc. Tiny units

Entrepreneurship Management

Small Scale Enterprises2. Trading

WholesaleRetailCommission Agents

3. ServicesProfessional Services ex. Doctors, Lawyers etcCommercial Services ex. Real estate, Warehousing etcPersonal Services ex. Fashion shop, Laundry etc

Entrepreneurship Management

Definition Small Scale Industries. Definition: ‘Small –Scale Industrial Undertakings are those which are engaged in the manufacturing, procession or preservation of goods and in which investment in plant and machinery (original cost) excluding the cost of land and building does not exceed Rs. 1.5 crore. Those would inter –alia, include units engaged in mining or quarrying, or servicing of machinery. (Limit up to Rs 5 crores in respect of 71 hi-tech export oriented items.)’’ Tiny Industries. Definition: ‘Tiny or Micro industries are those, whose investment in plant and machinery is up to Rs. 25 lakhs, irrespective of the location of the unit. These include artisans, Khadi & Village industries, handloom, sericulture, handicrafts coir , manufacturing etc.

Entrepreneurship Management

Small, Medium & Tiny Enterprises

Investment in Plant and Machinery/ Equipment(excluding land and building)

as on 2007 - 2008

Manufacturing Enterprises Service Enterprises

Micro (Tiny) Up to Rs 25 lakhs Up to Rs 10 lakhs

Small More than Rs 25 lakhs and up to Rs 1.5 crores (5 crores – export oriented)

More than Rs 10 lakhs and up to Rs 2 crores

Medium More than Rs 1.5 - 5 crores and up to Rs 10 crores

More than Rs 2 crores and up to Rs 5 crores

Comprehensive policy package for SSI & Tiny Sector

Entrepreneurship Management

Comprehensive policy package for SSI & Tiny Sector• The Small scale industry (SSI) has emerged as India’s engine of growth in the new millineum. By the end of March 2000, SSI sector accounted for nearly 40 % of gross value of output in the manufacturing sector and 35 % of total exports from the country. There are around 32 lakh SSI/ tiny units in the country employing more than 18 million people. • The most important challenge faced by the SSI and tiny sector is that of growing competition both globally and domestically. The sector has also been facing problems which relate to 1) Credit 2) Infrastructure 3) Technology4) Marketing 5) Delayed payment 6) Hassels on account of so many rules and regulations

Entrepreneurship Management

In order to enable this sector to avail the opportunities and play its role as an engine of growth, it is essential to address to the problems effectively and urgently.For having a focused attention on the development of SSI and tiny sector, GOI has created a new ministry of SSI & Agro and Rural industries in october 1999.Interim report of the S P Gupta study team constituted by the planning commission provided the background material for the consideration of the group of ministers under the chairmanship of Mr L K Advani.The team was put together by the then PM Mr A B Vajpayee.On the recommendations from the team, a comprehensive policy package for the SSI and tiny sector was announced on 30 August 2000 by the PM.

Entrepreneurship Management

Characteristics of Small Scale IndustriesSmall scale industries are the backbone of the Indian traditional structure. They provide a variety of non-traditional, low technology product. Small-scale industries constitute an important and crucial segment of the industry sector. It has all the characteristics of the decentralized sector such as small size and employment intensity and the entire lot begins to private sector. The contribution of SSI sector to employment is next only to agriculture as a dynamic and vibrant sector of the economy. Small –scale and cottage industries are the most important employment providing sectors of the economy. 1.Small capital investment.

Small scale industries require less capital as compared to medium or large-scale industries. E.g. an artisan’s family can start their business with just few hundred rupees.

Entrepreneurship Management

2. Generate Employment.Small scale industries are generally labor intensive and hence create employment opportunities which is the need of the hour. It helps in developing country to solve the problem of unemployment.

3. Personal Contact.There is personal supervision of all activities i.e. production, purchase, labour, and marketing of goods and it is done by the entrepreneur himself.

4. Location.Small scale industries are generally located in rural and semi –urban areas.

Entrepreneurship Management

5. Exploitation of human resources.Child and women labor in particular are exploited by small scale industries.

6. Growth.The small scale industrial activity has been growing at faster rate even than the large-scale sector.

7. Technology.Small scale industries do not require high level of technology.

8. Dispersal of Manufacturing Activity.Small- scale industries make it possible to transfer manufacturing activities from congested metropolitan cities to the rural and semi urban areas.

Entrepreneurship Management

9. Poor Organization and Management. The management and organization of small-scale industry is poor and negligible. There is no delegation of authority.

10. Ownership.Most of the small-scale industries are privately owned and organized as sole proprietorship. The owners and the family workers generally form the largest component of small- scale force.

Entrepreneurship Management

Importance of small scale industrySmall scale industries play an important role in the process of country’s industrial development. It accounts for 40% of the total values of industrial production and contributes directly about 33% of aggregate exports.In a developing country like India it is a small scale industry that constitutes the backbone of industrial structure. Its development has created vast employment opportunities and has also brought about decentralization.The following are the importance of SSI.1.Labour intensive: - SSI do not require large amount of capital. They are labour intensive and can provide employment to large amount of people. The energy of the unemployed and the underemployed may be utilized for productive purpose in the economy.

Entrepreneurship Management

2. Equitable distribution of income and wealth: - By creating opportunities for small business, small enterprises can bring about a more equitable distribution of income and wealth which is socially necessary and desirable.

3. Production: - SSI projects can be undertaken in a short period and hence can increase the production in the short run and the long run. The small sector produces a large production of the national products.

4. Dispersal of manufacturing activities: - SSI will make possible transfer of manufacturing activity from congested cites to the rural and semi urban areas. This will help in bringing about a balanced regional growth.

Entrepreneurship Management

5. Linkages: - The large scale industries create an opportunities or facility for growth of small scale industry. The growth of large motor industry will create opportunities for setting up of small service station and repair centers.

6. Own identity: - Small scale enterprises have their own place in the country’s economy. Imperfect competition protects the small firms market and enables them to exist even if they are not efficient in terms of cost.

7. Mobilization of services: - In the rural areas savings are generally used in unproductive consumption. The growth of cottage and small scale industry can offset the investment opportunities to people living in under developed countries.

Entrepreneurship Management

8. Export potential: - Nearly 20% of the total value of export comes from small scale industry. The main items of export of small scale sectors include engineering goods, diamond cutting, pharmaceuticals , sports goods , finished leather, ready made cotton garments , processed foods , etc.

Apart from this, the small scale enterprises have the following advantages too :

• They are innovative and productive.• The products of these enterprises earn a substantial foreign

exchange.• They have a favorable capital output ratio.• They meet substantial part of increasing demand for consumer

goods including human consumption goods.• They require a short gestation period.

Entrepreneurship Management

OpportunityThe opportunities in the small-scale sector are enormous due to the following factors:Less Capital IntensiveExtensive Promotion & Support by GovernmentReservation for Exclusive Manufacture by small scale sectorProject ProfilesFunding - Finance & SubsidiesMachinery ProcurementRaw Material ProcurementManpower TrainingTechnical & Managerial skillsTooling & Testing support

Entrepreneurship Management

Reservation for Exclusive Purchase by GovernmentExport PromotionGrowth in demand in the domestic market size due to overall economic growthIncreasing Export Potential for Indian productsGrowth in Requirements for ancillary units due to the increase in number of greenfield units coming up in the large scale sector.

Small industry sector has performed exceedingly well and enabled our country to achieve a wide measure of industrial growth and diversification.

Entrepreneurship Management

Business Incubation Programfor SSI

Prof Bharat Nadkarni

Entrepreneurship Management Small – Scale business entrepreneur is a lone force behindstarting, sustaining and running his firm. Therefore, if he is strengthened the business would automatically become strong on its own. Hence, for sustaining the enterprise it is very important to equip him with the support system. It was found that the mortality rate in SSI is very high. TheGovernment, therefore, planned Business IncubationPrograms to help small businesses by providing support at Start up or when they find themselves unable to sustain.

Entrepreneurship Management The Incubation program provide consultancy support infollowing forms :1. Basic benefit of Office space2. Coaching3. Funding4. Technical, Financial and Managerial5. Marketing Research Study and Forecasting6. Modernisation schemes and financial & technical help for

the same7. Growth Strategy8. Other common services

Entrepreneurship Management

Support Organisations for SSI & Tiny Sector1. Small industries development organisation (SIDO)

Apex body for formulating policies for SSI.2. Small industries service institute (SISI) - it’s a service agency

provides tech. and mgmt consultancy services3. National small industries corpn. Ltd. (NSIC)

helps SSI securing govt orders4. Small industries development bank of India (SIDBI)

Micro financing, bill discounting5. Technology bureau for small enterprises ( TBSE) technology transfer, facilitating joint ventures

Entrepreneurship Management

Support Organisations for SSI & Tiny Sector6. Maharashtra industrial development corpn. (MIDC)

development of industrial areas by acquiring land,developing infra stucture

7. Maharashtra small scale industries development corpn. Ltd. (MSSIDC)supply of raw material credit, bank guarantees, credits, warehousing services.

8. Maharashtra industrial & technical consultancy services ltd. (MITCON)policy and macro studies, region and industry studies, long range planning, computer services, market research.

THANK YOU!!