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Abstract

The socio-economic policies that India has adopted since the Industries (Development and Regulation) Act, 1951, have emphasized on Micro, Small and Medium Scale Enterprises (MSMEs) as a means to improve the country’s economic condition. The MSME sector makes a significant contribution to the manufacturing output, employment, and exports of the country. As per the MSME Annual Report 2011, the sector accounts for about 45 per cent of the manufacturing output and 40 per cent of the total exports of the country. The sector is estimated to employ about 59 million persons in over 26 million units throughout the country. Further, it has consistently registered a higher growth rate than the rest of the industrial sector. Over 6,000 products are being manufactured by the MSMEs in India, ranging from traditional to high tech ones. In India, after the agriculture sector, the MSMEs provide the maximum opportunities for both self-employment and jobs. In spite of its growth and contribution, the segment has faced several issues. Since the early 1990s, after the post-liberalization era, Indian SMEs were exposed to various problems and difficulties. They faced a number of difficulties in starting up, keeping existing operations running, and growing businesses. For them, availability of funds was the most important issue and a major problem. Apart from low availability of funds, SMEs faced a number of other problems such as absence of adequate and timely banking finance, limited capital and knowledge, non-availability of suitable technology, low production capacity, lack of a marketing network, ineffective marketing strategy and identification of new markets, constraints on modernization and expansions, non-availability of highly skilled labour at affordable cost, follow up with various government agencies required to resolve problems, lack of knowledge about governmental measures, promotions in rural MSMEs, incidence of sickness, and poor infrastructure. The threshold of tolerance of the MSMEs was so low that any adverse environment could have serious consequences, leading to sickness or even closure. The services sector was growing at a far higher pace than the manufacturing sector. This offered huge and exciting challenges to the MSME Ministry. The Ministry wanted to understand the factors that kept the MSMEs from moving up to the mutual benefit of themselves and the nation to achieve equitable and inclusive growth. MSMEs sought to know the areas which they needed to cover to offset their size and possible limited experience in business. Industry experts were skeptical about whether the Indian MSMEs would be able to thrive in light of changing market dynamics and the strong need for a sound technological base and willingness to restructure themselves. The case will help the students to: 1) Understand the issues and challenges in MSME Management; 2) Appreciate the importance of industry environment analysis; 3) Understand the application of PESTEL, Porter’s Five Forces, and Porter’s Diamond Models; 4) Discuss and debate whether the Indian Government’s policy framework is inducing the growth of MSMEs; 5) Explore ways in which the Indian Government can support MSMEs and also explore strategies that will enable the growth of MSMEs. The case is meant for MBA/MS level students as part of a business strategy curriculum.
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About

Abstract

The socio-economic policies that India has adopted since the Industries (Development and Regulation) Act, 1951, have emphasized on Micro, Small and Medium Scale Enterprises (MSMEs) as a means to improve the country’s economic condition. The MSME sector makes a significant contribution to the manufacturing output, employment, and exports of the country. As per the MSME Annual Report 2011, the sector accounts for about 45 per cent of the manufacturing output and 40 per cent of the total exports of the country. The sector is estimated to employ about 59 million persons in over 26 million units throughout the country. Further, it has consistently registered a higher growth rate than the rest of the industrial sector. Over 6,000 products are being manufactured by the MSMEs in India, ranging from traditional to high tech ones. In India, after the agriculture sector, the MSMEs provide the maximum opportunities for both self-employment and jobs. In spite of its growth and contribution, the segment has faced several issues. Since the early 1990s, after the post-liberalization era, Indian SMEs were exposed to various problems and difficulties. They faced a number of difficulties in starting up, keeping existing operations running, and growing businesses. For them, availability of funds was the most important issue and a major problem. Apart from low availability of funds, SMEs faced a number of other problems such as absence of adequate and timely banking finance, limited capital and knowledge, non-availability of suitable technology, low production capacity, lack of a marketing network, ineffective marketing strategy and identification of new markets, constraints on modernization and expansions, non-availability of highly skilled labour at affordable cost, follow up with various government agencies required to resolve problems, lack of knowledge about governmental measures, promotions in rural MSMEs, incidence of sickness, and poor infrastructure. The threshold of tolerance of the MSMEs was so low that any adverse environment could have serious consequences, leading to sickness or even closure. The services sector was growing at a far higher pace than the manufacturing sector. This offered huge and exciting challenges to the MSME Ministry. The Ministry wanted to understand the factors that kept the MSMEs from moving up to the mutual benefit of themselves and the nation to achieve equitable and inclusive growth. MSMEs sought to know the areas which they needed to cover to offset their size and possible limited experience in business. Industry experts were skeptical about whether the Indian MSMEs would be able to thrive in light of changing market dynamics and the strong need for a sound technological base and willingness to restructure themselves. The case will help the students to: 1) Understand the issues and challenges in MSME Management; 2) Appreciate the importance of industry environment analysis; 3) Understand the application of PESTEL, Porter’s Five Forces, and Porter’s Diamond Models; 4) Discuss and debate whether the Indian Government’s policy framework is inducing the growth of MSMEs; 5) Explore ways in which the Indian Government can support MSMEs and also explore strategies that will enable the growth of MSMEs. The case is meant for MBA/MS level students as part of a business strategy curriculum.

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