Small and medium enterprises in Global Trade

Objectives

Definition Features Importance

Definition of MSMET

Government of India enacted the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 in terms of which the definition of micro, small and medium enterprises is as under:

a) Enterprises engaged in the manufacture or production, processing or preservation of goods as specified below:

(i) A micro enterprise is an enterprise where investment in plant and machinery does not exceed Rs. 25 lakh;

(ii) A small enterprise where investment is more than Rs. 25 lakh but does not exceed Rs. 5 crore; and

(iii) A medium enterprise where investment is  more than Rs.5 crore but does not exceed Rs.10 crore.

Definition of MSME

(b) Enterprises engaged in providing or rendering of services and whose investment in equipment (original cost excluding land and building and furniture, fittings and other items not directly related to the service rendered or as may be notified under the MSMED Act, 2006 are specified below.

A micro enterprise is an enterprise where the investment in equipment does not exceed Rs. 10 lakh;

A small enterprise where the investment in equipment is more than Rs.10 lakh but does not exceed Rs. 2 crore; and

A medium enterprise where the investment in equipment is more than Rs. 2 crore but does not exceed Rs. 5 crore.

The catalyst to growth

promoting equitable development. employment potential at low capital

cost. registered higher growth rate

compared to the overall industrial sector

agility and dynamism innovativeness and adaptability

The data

As per available statistics (4th Census of MSME Sector:2009), this sector employs an estimated 59.7 million persons spread over 26.1 million enterprises.

It is estimated that in terms of value, MSME sector accounts for about 45% of the manufacturing output

and around 40% of the total export of the country. 

Background

Pre 1951: Low entrepreneurial initiative

1951-91: Protection and growth Post 1991: Competition amidst LPG

and assistance

Objectives for Govt

· High contribution to domestic production· Significant export earnings· Low investment requirements· Operational flexibility· Location wise mobility· Less imports· Capacities to develop appropriate indigenous

technology· Import substitution· Contribution towards defense production· Technology – oriented industries· Competitiveness in domestic and export markets

Limitations of SMEs

· Low Capital base· Concentration of functions in one / two

persons· Inadequate exposure to international

environment· Inability to face impact of WTO regime· Inadequate contribution towards R &

D· Lack of professionalism

SMEs have been established in almost all-major sectors in the Indian industry suchas:·

Food Processing· Agricultural Inputs· Chemicals & Pharmaceuticals· Engineering; Electricals; Electronics· Electro-medical equipment· Textiles and Garments· Leather and leather goods· Meat products· Bio-engineering· Sports goods· Plastics products· Computer Software, etc.

. The domestic commercial banks are expected to enlarge credit to priority sector

and ensure that priority sector advances (which include the micro and small enterprises sector) constitute 40 per cent of Adjusted Net Bank Credit (ANBC

In terms of the recommendations of the Task Force   banks have been advised to achieve a 20 per cent year-on-year growth in credit to micro and small enterprises and a 10 per cent annual growth in the number of micro enterprise accounts

Public sector banks have been advised to open at least one specialized branch in each district.

As on March 2011 there are 1220 specialized MSME branches

Primary responsibility for promotion and development of SME: State Govt.

Role of Ministry of MSME to support the SG in their efforts to dev their MSMEs.

National Small Industry Corp ltd: NSIC Khadi and Village Industry commission :KVIC Coir Board And 3 National Level entrepreneurship

development Institutes National institute for entrepreneurship and small

business development (NIESBUD): NOIDA, UP NI-MSME: National Institute for MSME: Hyderabad Indian Institute of Entrepreneurship: Guwahati

Definition Entrepreneurship Identification and exploitation of

previously unexplored opportunities

Specifically.. It is concerned with ‘the sources of opportunities: the process of

discovery, evaluation, and exploitation of opportunities

And the set of individuals who discover evaluate and exploit them.’

These individuals are the entrepreneurs..

International Entrepreneurship

Is a combination of innovative, proactive and risk-seeking

behavior that crosses national borders and is intended to create wealth in

organizations..

Further we refer to entrepreneurial firm when referring to SMEs (fewer than 500 employees)

How institutions and resources affect Entrepreneurship

Institutions and Entrepreneurship Formal : how firm starts.. Registration,

licensing, incorporation, tax etc..▪ More friendly the better is SME growth

Informal Institutions: cultural values and norms..▪ Individualistic and low uncertainty-avoidance

societies foster SME growth and vice v ersa..

How institutions and resources affect Entrepreneurship

Resources and Entrepreneurship Value: Entrepreneurs resources must

create value: networks, contacts etc.. Rarity: special knowledge and insight of

business opportunities Inimitability: non imitable or

continuously innovative Organization: resources/talent must be

embedded..

Growing the entrepreneurial firm: major characteristics of Enterprise

Growth: different growth strategy Innovation: explore and flourish.. Ensure

sustenance.. Financing: formal (Sweden,US) and informal

finance(China). Recently MFI.. Internationalization..

Firms are born global… international joint ventures

Or firms internationalize

Internationalization

Entering foreign markets Staying in domestic markets

Direct Exports Indirect Exports (through export intermediaries)

Franchising/licensing Supplier of foreign firms

FDI (through strategic alliances, wholly owned subsidiary, foreign acquisition)

Franchisee/licensee of foreign brands

Alliance partner of foreign direct investors

Harvest and exit (through sell-off to and acquisition by foreign entrants)

Summary

Def: MSME Obj Advantages Disadvantages SMEs and globalization.. Why, how,

and will it be sustainable