Policy Perspectives of SME's Economics Management

Policy Perspective of SME’s EconomicsManagement

AbstractDespite the worldwide prominence of SMEs, they face challengesof entry, survival and growth in most of the countries.Studies have shown that about 50% SMEs cease to exist withinfirst three years as most of them operate without a properbusiness policy. The paper identifies survival strategies toprevent economy from going down. The objective is to examinethe use of entrepreneurship approach among SMEs as a tool formeeting their challenges related to administration, marketingand financing and trade liberalisation, as well as increasingtheir competitiveness. This paper used is a literature reviewbased on research objectivity, coverage and authority. Fieldsurvey of SMEs, running successfully, conducted to suggestthat an entrepreneurship’ policy brings additional positiveeffect to ailing SMEs in industrialized economies. This paperwill add in the context of expanding knowledge in relation tothe impact of entrepreneurship on SME’s economy management.

Key Words: Policy, Perspective, SME’s, Economics, ManagementINTRODUCTIONSmall and Medium Enterprises (SMEs) play a catalytic role inthe development of any country. Having recognized as theengines of growth, these SMEs contribute in developing andtransition economies. They give socio-economic benefits whichcome in the form of monetary gain that is distributable amongthe society and quantifiable in terms of revenue, net cashflow or net income accrued through authorized means. In Indiathey account for a significant proportion in manufacturing,exports and employment, and are major contributors to GDP.While entrepreneurs drive the economic growth, innovation,regional development and job creation, they need to survive inthe continuously changing environment. During the Bankers’meet held at Pune, India, in January 2015, ETOI (2015)reported that industrial loan recovery has reduced down which

evolved major concerns in the sphere of the Government.Problems of capital blockage diminished the chances ofreinvestment and are a serious concern to the nationaleconomy. Need has therefore arisen for the Government to lookinto the details of current policies particularly in respectof the SMEs. In another instance, Mark Stephens reported inEconomia (2013) diverse challenges of being an SME. The reportstates that current environment is making it harder than everfor entrepreneurs and small and medium-sized businesses in theUK to operate. SMEs are the lifeblood of the UK economy and itis imperative they are given the right support for the economyto continue its recovery. Research has shown that, majority ofthe SMEs avail the benefits of financial facilities offered bythe Government to develop the economy. The SMEs easily fallprey to these schemes due to their fascination without fullyunderstanding and analyzing the after effects while willing todevelop new business that creates jobs. Literature on SMEs hasrevealed that setting the manufacturing business on right pathrequires more than three years. During planning and executionstage the external business environment and the governmentmechanism as well as the market keep continuously changingthereby posing fresh tribulations. These deviations induce theentrepreneurs to alter the course of action in order tobalance with the external environment. The business plans thenno longer remain valid and pose the SME to causediversification of funds to contest newly evolved businesschallenges. Already with limited financial resources, theseSMEs find obligation in using loan funds granted by the banksin new priorities and thus they get into debt trap whichevades the intended flow of cash. The proportion of SMEsfailing this way is fairly large. SMEs which survived in thisexercise are those which took studied course of action. Thispaper attempts to suggest policy aspects to addressing thechallenges that lead to survival and growth. Entrepreneurshipthat utilizes well structured business process is winning. Thedevelopment of the instrument is based on the process involvedin founding sound economics. For that matter the enterpriseneeds to tackle root causes that may well be affirmed on thebasis of particular revenues and expenditure model.

Literature Review Challenges in FinancingSrivastava (2012) reports that industrialists have thepractice of holding the difficult business environmentaccountable or the administrative delays or even on the lackof management skills for failure of their businesses. But, thetruth is that 79 small business units happen to turnfinancially unviable every day in the country. This translatesto three units falling sick every hour, according to datacompiled by the Micro SMEs-Development Institute (MSME-DI). Ofthe total 13.3 million SMEs in the country, more than 200,000are sick now. Around 29,000 units are being added to the sicklist every year. It has also led to an outstanding bank creditof over Rs 70,000 million.

Development Commissioner (2010) highlighted that amongst allthe problems faced by the MSEs, non-availability of timely andadequate credit at reasonable interest rate is one of the mostimportant. One of the major causes for low availability ofbank finance to this sector is the high risk perception of thebanks in lending to MSEs and consequent insistence oncollaterals which are not easily available with theseenterprises. The problem is more serious for micro enterprisesrequiring small loans and the first generation entrepreneurs.

McMahon (2009) portrayed a case of Sunbeam, “SMEs RecessionSurvival Tips”. According to him, many businesses greater andsmaller and many in between get caught with this same problemof “cash flow” because they fail to understand that income isnot really income until it is cash in the bank.

Ates et al. (2013) surveyed to bring out eight featuresinfluencing SME managerial practices. These are the factorswhich happen to damage business development. The significantissue highlighted is that of poor management skills. Themanagement practices of SEMs are closely linked to theindividual’s skills and the characteristics of theentrepreneur. They are often multi-tasking, holding multiple

roles and in charge of both operational and strategicfunctions. Yet, they usually do not have the necessary timeand heterogeneous skills, and often neglect the managerialissues.

Challenges in Marketing

Khosla (2012) has opined, after studying the currentglobalization scenario, that marketing is the toughestchallenge in any business, and when it comes to SMEs, this isthe area where they lack most. Resource constraint isrepeatedly cited as the underlying cause, but there is anothermajor challenge to deal with is, their myopic vision aboutmarketing. Although the SMEs go for some form of marketing orother, their conception is, in general, too limited andsubstantially different from that proposed by intellectuals oradopted by large firms. Informal organizational structure,resource constraint, high level of risk aversion, and lack ofmarketing knowledge and specialized expertise push most ofthem toward adopting a marketing approach that is loose,unstructured and spontaneous. This, in turn, leads to decisionmaking in a haphazard and chaotic way, and as a result, themarketing results usually suffer. To some extent, however, thesimplicity of this marketing approach helps SMEs fill thevoids arising from the approach's limitations. For example,high level of flexibility resulting from their informalorganizational set-up helps SME owners make most decisions ontheir own, making the decision making process highlyefficient. Also, the reactive nature of their marketingapproach assists them to respond quickly to currentopportunities and circumstances. In fact, more often than not,these benefits have remained key factors for SMEs to energizetheir marketing in a simple but cost-effective way. Given thisphenomenon, SMEs should avoid continuing with their primitiveconception of marketing. Due to some emerging drivers ofmarket change in the recent years, particularly withincreasing competition from global players and diffusion of ITin business, this traditional SME marketing concept has lostits relevance to a great extent. In this scenario, SMEs can nolonger afford to cling to this somehow-useful approach.

Challenges Faced by the SMEs in India

Financing issues such asa) Lack of availability of adequate and timely credit, b) High cost of credit and lack of collateral requirements, c) Limited access to equity capital and lack of sufficient

finance at affordable interest rates, d) Incentives, backfire beyond a specified level leading to

loss in valued benefits,

Marketing issuese) Problems in supply to government departments and agencies f) Issues of storage, designing, packaging and product display g) Lack of access to global markets h) Customers demanding long credit period for payments

Pricing issuesi) Procurement of raw materials at a competitive price, j) Discounts are offered only while purchasing in large

quantitiesk) Product prices go very high and don’t remain competitive

Infrastructural issuesl) Inadequate infrastructure facilities like power, water and

roads, m) Rigid labour markets and infrastructure issues like power

tariff and n) Lack of export infrastructure

Technical issues o) Low technology and lack of access to modern technology, p) Delays in getting environmental clearances during start ups

Labour issuesq) Problems of getting skilled labour for manufacturing,

services and marketing, r) Multiplicity of labour laws and complicated procedures

Absence of Government Mechanism

s) Absence of quick revival of sick enterprises t) Absence of measures to close down the unviable entities u) Issues relating to direct and indirect taxation and their

tiresome procedures v) The government policy towards SMEs is not very encouraging

for further expansionw) SMEs lack export competitiveness due to product reservation,

regulatory policies at the entry and exit stages,

Issues at National Level

x) SMEs face multiple challenges like regionalism, revolutionin information and communications technology,

y) Challenges of national reforms and modernization, political,economic, and technological environment, foreign trade,industrial, monetary and legal surroundings.

z) Problems in government policies invariably emerge likelengthy procedures & formalities, extensive paper work, highimport duty, excise duty, custom duty, sales tax

aa) Stringent labour norms, wrong interpretation of laws &policies of the govt. by the enforcement agencies

bb) Environmental control norms and various insurance schemesare stringent; Vigilance teams conduct frequent raids &check taxation.

cc) Greater challenges of competence, due to price, qualityand delivery period, to survive in the competitive nationaland global market.

Objectives of the Study:A) To explore basis of addressing the challenges of SMEsB) To settle on making choice of strategy for survival of SME C) To look for consensus of experts on the solution D) To recommend the solutions towards the challenges

Research MethodologyThe study conducted a literature survey of published materialsand field survey of SMEs to collect data. Performing theliterature analysis, based on research objectivity, coverageand authority considered important to get to know the work inthe past. This research conducted field survey to identify thebusiness policy implemented by the SMEs to managing theireconomy. Randomly selected 107 SMEs in manufacturing sectoragreed to respond to the request of investigation in Pune-region of India. SME owners acted positively in response tothe questionnaire to assist this study.

FINDINGS

A)Basis of Addressing the Challenges

Core and Complementary Approaches:

The study proposes need based strategy wherein the dual needshave been identified as (a) building economy for the SME and(b) addressing challenges. Core & complementary strategies(Deshpande, 2011) are suggested which as well create selfreliance and sustainability. The core strategy for type (a)need is based on entrepreneur’s philosophy, with a view tocreate sustainable economy while for type (b) needcomplementary strategies to address challenges and supportachieving the core strategy as well are considered.

Core Strategy

Settled approach to Building Economy is Generating Revenue from Business

Strong marketing system is essential for generating revenuefrom business. OECD (2004) has revealed that, economy for theSMEs is buildable by creating revenue for the enterprisethrough variety of businesses to make them global.

Identification of customer base, sources and ability to makevoluminous sale is all stated in the marketing plan whichcovers feature of product mix, competitiveness in quality andprice, size to be sold and the recovery of payment. Viableprice comes from innovative practices while volume of saledepends upon market geography and size of market. As sucharticulated marketing strategy can only generate revenue forthe SMEs to survive and grow.

Complementary Strategies

Knowledge of Indian MSME Act 2006

Kothari (2009) discussed various schemes run by the IndianGovernment to boost the SME's in the country to help thembecome more innovative, efficient and competitive. Theenactment of the Micro, SMEs Development (MSMED) Act, 2006 wasa landmark initiative taken by the Government of India toenable the SMEs' competitive strength, address the issues andchallenges and reap the benefits of the global market. SMEpolicy initiatives at the national and state level are aimedat strengthening the role of SMEs at the base as well as atthe higher level.

Fundamental Principles to Address Challenges

Positive attitude as a major approach Michigan.gov (2014) has revealed that, every business,wherever in the globe, is risky and challenging whether it bea large, medium or small scale. A person’s positive attitudeis the course of action taken with a view to hope for the bestoutcome. This strategy as well reveals risk taking attitudeand can be affirmed by the entrepreneur through pastdecisions.

Self financing only survives the ownership

Ebringa (2011) has reviewed literature on SME self financingand reported its advantages. Cook & Nixon (2014) also reviewed

the position of finance and SME development to suggestimplications of type of financing on growth prospects.Giuseppe (2014) has also highlighted using self financing oftraditional and R & D investments. Likewise many researchershave reported the advantages of self financing to seekingownership in SME business.

Entrepreneur must promote analytical attitude

Analytical attitude is the reasoning or acting from aperception of the parts and interrelations of a subject.Joseph (2013) has reported the need of analytical skills inbusiness with a view to bring in effective decision making.This approach makes the person think, on a particularsituation, and derive to find probable outcomes that may bepositive or negative. The entrepreneur needs this skill tocross-over the challenges. Albeit the government makesfavourable policies, the entrepreneur needs to be smart andattentive. So that entrepreneur as much as necessary wouldcontest these challenges through own sources to run iteffectively on lifetime basis.

Systematic management

Wheelwright (2012) reports that, the business owner shouldfocus on using all of the resources available. The strategyshould involve establishing a wealth team that includes keyemployees who manage the business. By using formal andinformal agreements with team members communication isimproved, systems put in place that includes internalcontrols, so everyone in the business understands properoperating procedures. With such systems in place, SME ownerscan spend time managing the system, putting reporting in placeso information is readily available to make timely decisions.

Time is Precious and Finance is a Limited Resource

Revkin (2011) has explained that time is a most preciousresource of all. Literature has as well shown that, all thechallenges are functions of time and finance. Issues requireenough time to resolve. Adequate time is essential to settlefinancial, technological, marketing or administrative issues.Planned use of adequate time and finance is necessary and iscomputed in advance since it is a limited resource.

Borrowings Create Challenges for SMEs-Start-Ups Bitszenis and Nito (2005) determined the financial problems ofSMEs. Lack of financial resources and problems of taxationwere faced by SMEs in Albania. Results showed that growth wasnegatively related to firm size and age. This study confirmedthat firms under limited liability displayed higher growth. Inview of market uncertainty, SMEs face challenge of marketingthe products owing to competitive environment by whichsustainability is lost. Today’s business environmentinvariably calls for cost cutting approaches. In that context,huge cost of interest, in a slow moving business, spoils theprobability of competitiveness and growth and by which all thecapital gets increasingly done away with. SMEs whichsuccessfully run their businesses avoided loans as a measureof cutting the cost of interest which improved the economicsof business.

Piecemeal Strategy

Recklies (2001) opined that the principal objectives for anentrepreneurial business are profitability and growth. Theowners often prefer a more relaxed and less aggressiveapproach to running their business. Hence, the degree ofentrepreneurial spirit in an SME is largely determined by theintentions of the owners. Challenges are big and they need tobe addressed and settled out one by one through step by stepapproach. Other experts have also reported the success of stepby step approach to securing a competitive global advantage ina turbulent SME environment. Brien (2014) has shared hisexperience that his clients almost always start small and then

grow big. Once their venture is giving them a return they aremore than happy to invest a little more in developing orpromoting their business online.

Gestation Strategy

Experience is built through knowledge and practice. SMEswithout or with limited business background learn throughinformation and experience. Understanding the information tobuild knowledge requires sufficient time. Time is preciousresource reported by Revkin (2011) and other experts havesuggested making effective use of time to build theenterprise. Emphasis is, thus, placed on selecting a long termgestation strategy to come out from the challengingcircumstances. This strategy stands on the principle thatrapid development in SME manufacturing sector is impractical.In fixing the strategies, for that reason, sufficient time isallowed to settle the challenges owing to the long cycle ofrecuperation.

Organizing Capital for Business

RBI (n.d.) has issued information on SME’s capitalstructuring. SMEs require capital to start and run thebusiness. Start up capital, is suggested to cover (a) businessoperating expenses until the project is effectively put onstream and (b) the fixed capital for purchasing assets and (c)working capital. Research has shown that, in most of thecountries of the globe, SMEs require three years to settle allissues of the business and making provision to sustain thatlong period is essential.

Share financial risk

Sharma (n.d.) has reported various schemes of insurance tocontribute to financial risk. The SME industrial sector isequally prone to risk owing to diverse causes. In thatcontext, reliable and capable sources for sharing thefinancial risk have been considered vital. Design of the

strategy, in this regard, calls for shielding the entrepreneurfrom financial losses. Diverse insurance companies offer risksharing benefit by which SMEs can take advantage of this. As aresult, remedy is provided to sharing the financial lossesthrough an insurance company. European GSA (2013) has alsoreported risk sharing instrument for innovative SMEs.

Financial Support System for SMEs

Yanjuan et al. (2010) usefully revealed that, financialsupport system and strategy of SMEs in the incubation based onbusiness life cycle. SMEs in the incubation are the maininnovation of a nation, and the new product is not withoutSMEs technology innovation. The conclusion is that differentdevelopment phases need different financial support becauseSMEs in the incubation face different financial cycles. Thefinancial support system is set up to fit the cycle needs ofSMEs in the incubation, and then the suggestions areillustrated.

Ganeshenoy (2011) elaborates that many SMEs in emergingmarkets often rely on informal sources of capital, such asborrowing from relatives, to meet finance needs. However, whena small or medium enterprise does access formal channels, ittypically looks to a bank as its primary source of financialservices. Although, numerous issues surface when it comes toSME lending, banks, by employing a range of measures, such asrisk adjusted pricing, credit scoring models, and SME-tailorednon-lending products are developing ways to mitigate risks,lower costs, and increase the overall benefit accrued from SMEbanking.

Kapoor (2012) in his research, based on random sampling of 200SMEs including hotels, retail shops and stores, tradingagencies, small to medium manufacturing industries, factories,and hydro power projects found that there are variousfinancing options for SMEs but access to these funds has beendifficult inspite of government initiatives. SMEs are observedraising funds from both informal and formal sources and try to

strike a balance between the two. SMEs rather should considerall financing options that maximize the value of the businessenterprise.

Fundedbyme (2013) have been advertising their new concept ofcrowd equity. They provide guidance to the entrepreneursseeking to organize funding for startups. According to them,people want to be part of the next big thing. While definingcrowd equity, they say, ‘Crowd equity is bridging the gapbetween the crowd and a great idea’. They connectentrepreneurs with everyday business angels globally andprovide a unique platform for crowd equity.

TMB (2013) discussed that current buzzword in banking industryis “SME Financing” after Government of India’s initiatives tostep up credit flow to SMEs through bringing out a newlegislation named Micro, Small and Medium EnterpriseDevelopment (MSMED) Act 2006. Unlike large industries, whichhave access to various domestic and international sources offinance, SMEs are dependent largely on Bank Credit. The TMBSME Credit scheme is an instant hit among all the branches andwell received by the SME borrowers on account of its hasslefree features.

B)Choice of SME-Business Strategy

Models suggested by experts have various bases such ascapability and strength, unique technology, focus on customerneeds and opportunity for business and so on. Choice is an ownjudgment of the entrepreneur.

Emerging Approach Recommends Smart Choices

A smart choice is a prudent selection of a course of action,amongst those accessible to the enterprise and the one whichsuits it entirely. Strategy development essentially goes withan inquiry (Deshpande, 2011) of the type, what, why and howsince they derive meaningful response to hit on a resolution.Belief is that, successful strategy lies not in having all the

right answers, but rather in asking the right questions helpmaking smart choices.

Various schemes are politically promoted and motivated by thenational and regional parties for SMEs. The Government, moreoften than not, tries to encourage SME schemes with ananticipation to create jobs and improve economy of the nation.Despite promoting financial schemes for the SMEs, however, theresults of the past decade to developing SMEs have shown thathuge capital is blocked owing to non recovery and for thatreason the situation of catch-22 continues to exist withoutarriving at a permanent solution.

The entrepreneurs performing well in the business are thosewho stayed away from such fascinating schemes. Case studieshave shown that businessmen with studied courses of actions toaddress challenges became greatly winning to create job forself and others in so recuperating the national economy.

C)Consensus on the Choices of Business Strategies

Literature Survey Findings

Table-1 shows the forums of private equity investors in Indiawhich are serving the needs of the SMEs. Gandhi (2012)highlighted the importance of SMEs in India and suggesteduseful sources of private equity investors. Equity funding inthe Indian life sciences SME segment does look very positiveand there is a definite increase in interest from investmentfunding organizations, which are looking for various viableopportunities. A few of the global and Indian private equityor VC funds, which have invested in the Indian SME lifesciences industry over the last three-four years, are shown inthe Table-1.

Company Private Equity InvestorsSai Advantum Pharma Ltd.

MPM Capital, Sequoia Capital India

Indegene Nadathur Holdings, Kotak Mahindra

Unimark Remedies Ltd. Citi Venture Capital International

Plethico Pharmaceuticals Ltd.

Arum Investments Pvt Ltd. Volrado Venture Partners

Celon Laboratories Ltd. Sequoia Capital IndiaCentaur PharmaceuticalsPvt Ltd.

SME Growth Fund

Parabolic Drugs Ltd. BTS India Private Equity Fund

Table - 1

Field Survey Findings

Table-2 is an exhibit of the response collected from SME ownersin Pune region in India where the sector of automobilecomponents is relatively vibrant. Innovations in the processto bring in competitiveness and generating novel resources tocost cutting are the approaches introduced by theirphilosophy. This paper has revealed that there is asubstantial consensus of the SME owners who have succeeded inrunning their firms. Table-2 shows the prominence ofEntrepreneurship policy.

S.No.

Type of Approach toBusiness

Response

%Outcome

1 Sustainable approach 10 9

2 Entrepreneurship approach 41 39

3 Resource based approach 23 21

4 Opportunity based approach 1 1

5 Historical evidence based 5 5

6 Innovative and flexibleapproach 12 11

7 Strength based approach 2 2

8 Joint working approach 2 2

9 Customer focused approach

11 10

10 Total 107 100Table - 2

The Emerging Model of Managing the Economy of SME

Figure 1

The model of manufacturing firm is depicted in Figure-1, whichshows a business process flow diagram that exhibits therelevant and essential steps of “plan-entry-survival-growth”that is the scheme framed for the whole life of the firm. Themodel categorically demonstrates inputs of knowledge duringthe stage of development since it is considered essentiallyimportant to bring in sustainability. Once planning stage iscrossed, the entrepreneur makes an entry into the business forthe purpose of manufacturing and trading the products whencapital is organized and supplied as per requirement and alsosmart and innovative systems are installed in place. The modelfurther exhibits that when the products are manufactured there

is value addition by which higher earnings are obtainable thanthe cost incurred in producing them, thereby generatingprofitability. This scheme shows development of economy sinceit makes provision for revenue generation while covering thecosts incurred and savings generated from the businessdealings. Growth is next step which is achieved aftercontinuously managing the knowledge and putting investments.Finally the link in the model culminates in showing ‘Growth ofEconomy’ that leads to improve the society as well. This modelportrays the modus operandi to achieving ‘Economy’ = (Revenue—Cost---Savings)

D)SOLUTION and RECOMMENDATIONS

Needs well structured business process

The scheme reflects on crucial steps of business for the SMEssuch as plan, entry, survival and growth. Depending on therequirements of the user, diverse policies could be mapped.The goal of those policies is securing the limit of theworkflow under different restrictions. Good business outcomesare most often achieved through a well structured designprocess based on the entrepreneur’s philosophy than the beliefof good design. Success has many parents and good design isjust one of them.

Entry with sustainable infrastructure

Every SME should follow and imbibe the principle ofsustainability right from the beginning. Similarly it shouldfollow a principle of step by step approach and starting smallto grow big approach to organize such that the infrastructuralrequirements for the enterprise are completed using thesufficient funding and within reasonable period of time. Thisbecomes the start of raising other assets of businesseffectively.

Use of minimum credit-facilities

Entrepreneurs raising high interest monies through privatelenders, bank or a financial institution create high risk.Strict use of credit maintains financial discipline in thebusiness. This reality makes them effective because of theuncertainty of the recovery of bad and doubtful debts. Propercredit policies and procedures can help minimize their cashflow risk, financial management. However, reality is that,interest on borrowed capital wipes out all profits ifrecoveries get longer, irrespective of high margins and posesexcessive risks in the period of lull. Interest burden is thekey hazard in paralyzing the business. Therefore effectiveSMEs critically uphold strict credit policy.

Persuasion strategy for marketing

Marketing is a difficult art for every business. Where tosell, what to sell, how to sell and how much to sell are theprimary questions every SME faces. As such, market researchfor marketing the products is essential. This makes itconvenient to make a marketing plan. Market size, competitiveprice, quality, market geography and market promotions are thestrategies need to be planned well in advance to market theproduct effectively. Robert Middleton (2008) has veryremarkably stated about the aspects of marketing in which manyof the SMEs fail to develop. According to him this law ofconsistency works as persuasion strategy. He further statesthat, easiest process of marketing the products is to makesmall or incremental requests to the prospective customer.Because once people agree to do something small; they tend tobe consistent with their words and actions when asked to dosomething bigger. One of the biggest keys to marketing successis to offer small things, make small requests and then followthese up with bigger things and bigger requests.

Strategy of flow of value added materials

In this strategy, SMEs create material flow for trading theirproducts through search and purchase from the market in therequired capacity. Accordingly materials flow to the place ofSME. Depending the type and sources, few enterprises engagesuppliers’ chain to get materials landed into their premises.The SME puts own efforts to cultivate business activitiesusing these materials by which newer products are createdthrough innovative SME-techniques. While using suppliers’chains the SMEs frequently needs to work out and verify theeconomics. Value added materials are sold to the customergroup or through other suppliers’ chain to earn revenue therefrom. Material prices and their qualities keep varying fromsource to source in view of this challenge a resource basedapproach gives better planning for the SMEs. This approachidentifies multiple resources suitable to be purchased.

Creating Positive Cash- Flow Strategy

Cash flow occurs, when cash incoming from the business inparticular time period is greater than the cash outgoing thatis utilized to satisfy business obligations in the same month.Thus cash flows are functions of time and value. SME strategycalls for controlling cash receipts and payments. Generatingedge in the price of products and services by which theincoming cash always remain greater than the outgoing isessential to create returns to the stakeholders. Highermargins also produce large savings to make further investmentto grow the enterprise. Value addition is introduced, in everyfeature of business covering product, process, price,promotion and people through innovative approaches. Goodquality product brings added value owing to competitiveness.

Strategy of resource cards

SME owners face challenges on various accounts. Therefore, thechallenges are identified and organized in line withrequirement. Seeking expert advice to address challenges is

suggested. Resource cards are generated for information onexperts. These cards display the contact and proficiencyparticulars. The entrepreneur has to make a provision to payadvice fees in the project budget.

Strategy of reliable resources

SMEs require variety of resources. Few of them might be ownedby them personally however outsourcing is inevitable toconduct the business in entirety. Main resource is howeverfinancing since it is a chief constituent to run the business.Owing to the evidence of futile experiences, SMEs should keepbusiness with reliable external resources to improvesustainability and as such this strategy is important.

LIMITATIONS

Although SMEs face diverse challenges, they may not be commonto all. Every SME may not face the same challenges owing totheir personal capability and strength, as such SMEs need toidentify their weak areas which need them to refurbish.Geographical location constraint of SME can arise to add tothe challenges presented in this paper. Upcoming SMEs need towork out viability of their business at every step to build uptheir economy.

CONCLUSIONS

The paper reveals various solutions over the challenges facedby the SMEs, majority of which are, related to organization offinance and marketing to run and sustain it for a long. Thestudy provides full recourse on what needs to be done and whatneeds to be avoided since that only form comprehensive remedyto win over the challenges. It also makes specific andimportant recommendation of knowledge management during thestage of planning and while making growth of the enterprise.Circular economy approach has been highlighted to generaterevenue, spend for cost, save for opportunity and reinvest for

growth. Effectiveness of cash and material flows are essentialfor survival. The paper also highlights strategies to avoidexcess loans to save the SME from a financial disintegration.It will add value to the body of knowledge since diversestrategies, which are simple for SMEs to understand and easilyadaptable have been stated and explained for the survival andgrowth.

References:

1. Alexander Cobham (1999), Finance as determinant of Investment,Finance and Trade Policy Research Centre, University ofOxford LA

2. Andy Lockett (2002). Venture Capital, International Journal of Entrepreneurial Finance, Volume 4, Issue 3, 2002

3. Ates, A. & Bititci, U. (2011). Change process: a keyenabler for building resilient SMEs. International Journal ofProduction Research, 49(18), 5601-5618.

5. Robert Middleton (2008). “Marketing Ideas for attracting moreclients”. Retrieved on 29.1.2014 fromhttp://actionplan.blogs.com/

6. Baporikar Neeta (2007), Entrepreneurship Development, NewDelhi, Himalaya Publishing House

7. Bitszenis and Nito (2005). Surveillance Systems and Early WarningSystemsRetrieved from https://books.google.co.in/

8. Brien D.O. (2014). Start Small Grow Big. Retrieved on Dec 2014from http://www.dmacmedia.ie/

9. Cook Paul & Nixon Fred (2014). Finance and SME Development.Accessed, (Jan 14, 2015) from http://www.gdrc.org/icm/

10.Deshpande M. & Baporikar N. (2011). Case Studies inManagement, Contemporary Perspectives, 1st ed., Faridabad;Humming Words

11.Deshpande M. (2011). Designing policies for Business, PhD Thesis,University of Pune.

12.Development Commissioner (2010). Credit Guarantee Fund Scheme forMSME, http://www.dcmsme.gov.in/

13.Ebringa O.T. (2011). Synthesis of Literature on SMEstart-up FinancingInt. J. Eco. Res., 2011. 2(1), 85-95; ISSN 2229-6158

14.Economia (2013). The challenges of being an SME. Retrieved fromhttp://economia.icaew.com/

15.ETOI (2015), Bankers Summit, “Gyan Sangam” Pune. (January2, 2015) Economic Times of India

16.Fundedbyme (2013). Crowd Equity. Retrieved from https://www.fundedbyme.com/

17.Gandhi Vishal (2012). Bank Repository. Retrieved from http://www.yesbank.in/

18.Ganeshenoy (2011). A Report on SME Financing in Indi. Retrieved from http://www.studymode.com/

19.GSA (2013). Risk Sharing Instrument. Retrieved fromhttp://www.gsa.europa.eu/

20.Hamel & Pralhad (1989). Business-Concepts. Retrieved from http://www.mbaskool.com/

21.Joseph John (2013). Analytical Skills. Retrieved fromhttp://www.lavastorm.com/

22.Khosla Bikky (2012). SME Marketing Avoid a Faulty Approach.Retrieved (2013) from

23. http://www.smetimes.in/

24.Kothari Bhavesh (2009), Government Schemes for SMEs,Retrieved from http://www.smeworld.org/

25.Kapoor A. (2012). Financing Strategies for SMEs in India-A Way Out.International Journal of Research in Commerce &Management,Vol(3), Issue(11) , 104-111.

26.McMahon LM (2009). “SMEs Recession Survival Tips” Retrieved fromhttp://www.biz.com/  

27.MPR(2013), Grant Strategies for SMEs, Retrieved from http://www.mprgroup.com.au/

28.Munshi Parth (2011). Funding a business through private investors, Retrieved from (Dec-2011) Khabar.com

29.Michigan.Gov (2014). Positive Techniques to Address Challenging Behaviour. Accessed on Jan 15, 2015 from https://www.michigan.gov/

30.OECD (2004). Promoting Entrepreneurship and Innovative SMEs in A Global Economy. 2nd OECD Conference of Ministers Resoibsuvkefir SMEs. Istanbul, Turkey 3-5 June 2004

31.Pathak Nishant (2009). Alternative Sources of Funding for SMEs in India, Milagrow Business & Knowledge Solutions, Gurgaon Retrieved from http://www.milagrow.in/

32.Recklies Dagmar (2001).Small Business as a Chance or Handicap.Retrieved in Jan 2013 fromhttp://www.themanager.org/resources/Small%20Business.htm

33.RBI (n.d.) MSME. Retrieved fromhttp://rbi.org.in/Scripts/FAQ

34.Revkin A. C. (2011). The Most Precious Resource. Retrieved onJan 15, 2015 from http://dotearth.blogs.nytimes.com/

35.Sharma Swami Sharan (n.d.) Essential Insurance Guide for SMEs.ABVP Pvt.Ltd. , New Delhi

36.Shigehiro Shinozaki. (2012). A New Regime of SME Finance in Emerging Asia: Empowering Growth-Oriented SMEs to Build Resilient NationalEconomies, Asian Development Bank

37.Srivastava Ishan (2012). 79 SME Units Fall Sick A Day (Retrievedon 25.12.2013) from http://timesofindia.indiatimes.com/

38.Srivastava R. & Mishra A.(2011), Financial Management,Oxford University Press, New Delhi

39.TMB (2013), SME Business Credit. Retrieved from http://www.tmb.in/

40.Giuseppe Torluccio. (2014) Self Financing of Traditionaland R & D Investments Retrieved fromhttp://www.academia.edu/ 10th Dec 2014.

41.Venkatesh Sudha, Muthiah Krishnaveni (2012) SMEs inIndia: Importance and Contribution, Asian Journal ofManagement Research, Volume 2 Issue 2, 2012 795

42.Wheelwright Tom (2012). Wealth Strategy. Retrieved (December2014) from http://www.provisionwealth.com/

43.Yanjuan Cui et.al (2010), Financial support system and strategy ofSMEs in the incubation based on business Life Cycle, InternationalBusiness Research Vol. 3, No. 4; October 2010, CanadianCenter of Science and Education 119