BUSINESS DEVELOPMENT NEEDS OF SMES | SETTING UP MSME
Economic growth has resulted in an immediate diversity in the industrial sector. With the increased trends of liberalization, privatization, and globalization (LPG policy), the Indian industrial scenario has given space to let these trends prevail in the economy. The impact of business-friendly policies in the Indian economy can be seen with the rise of enterprises of all sizes and forms. This (emergence of enterprises of different sizes) is a sufficient indicator to judge what is the quality and scope of entrepreneurship in a country. We can also comprehend the level of innovation that is considered to be significant in developing and developed Nations and economies on a global level.
SME: Small and Medium Enterprises
SMEs in India is defined in section 7 of the MSMED (Micro, Small, and Medium Enterprises Development) Act 2006. SMEs are classified on the basis of their investment size in their sectors. The threshold limit investment in MSEs is given below:
|SECTOR||THRESHOLD (IN RS.)|
|Small Enterprises||1-10 crores (in Investment)|
|Medium Enterprises||10-50 crores (in Investment)
50-100 crores (Turnover)
The industries are a significant part of the Secondary, Tertiary, and Quaternary Sectors of the economy and that is the main reason why they are found in both manufacturing as well as service sectors.
Furthermore, because of their importance in the economy, they have been left out from the restrictions that are generally imposed on the other actors.
That is the reason you can see the number of SMEs such as proprietorship firms, companies, cooperatives, Hindu Undivided Family (HUF), and so on. What is important to note is that the definition of MSEs is not based on the number of persons that are employed or the amount of electricity that firms consume which was the previous convention and still remains vogue in other nations around the world including nations in the European Union (EU).
Liberalization has resulted in the exclusive listing under the category of SMEs which this sector has always deserved from the pre-liberalization period & as this sector got liberalized, it got released from the constraining shackles of governmental regulations too.
To get a better understanding on what are the different SMEs in India, you can take a look at the following tables. These threshold limits are effective from 01.07.2020 onwards:
|COMPANY||THRESHOLD LIMIT (in Rs.)|
|Investment Limit||Turnover Limit|
|Micro-Enterprise||< 1 Crores||< 5 Crore|
|Small Enterprise||1-10 Crores||1-50 Crores|
|Medium enterprise||10-50 Crores||25-250 Crores|
SIGNIFICANCE OF THE SME SECTOR IN INDIA
Until and unless there is no growth in industries and liberalization, this nothing can be done to create employment and enhance the prosperity of a nation. Although large companies do contribute to the economy’s health if there still remains no opportunities for the small enterprises to establish & grow in the industry field, there will be no future prospectus for the economy to grow on a demographic level and no economic freedom and opportunity in the name of one and all. For this very reason, the growth and development of the SME sector are so significant.
CONTRIBUTION IN GDP
At present, SMEs contribute approximately 24% of the total GDP in the service sector and nearly 6% of the total GDP that is accountable from the manufacturing sector. This percentage in itself is enough to understand the importance of the small industries in the economy.
Other than contributing to the total GDP of the economy, small and medium Enterprises also produce employment opportunities. It employs around 12 crore individuals as well as has a contribution and 45% in the gross national export. This way, the sector contributes to economic growth and national income as well as in the social responsibility bye by employing a large number of populations. There are around 6.30 crore registered and unregistered small and medium enterprises.
These enterprises (SMEs) are independent firms that usually employ few numbers of employees & their number varies across different nations. In the European Union, the upper limit to categorize an SME = is 250 employees. Although it is 200 employees in some countries while in the USA the SMEs also include some firms that employ around 500 employees.
There are some other countries that categorize these small & medium enterprises as per the economy’s financial state or the money amount which is involved in these enterprises. e.g. in Nigeria, these SMEs are defined by the National Council of industries which describes the business enterprises as such whose total cost (excluding the value of land) is < two million nairas (N 2,000,000) only.
In the process of business development, there is an involvement in the number of tasks and processes which are aimed at the development and implementation of growth opportunities inside organizations as well as among the organizations.
It is basically the process of creating organisational long-term value from customers, markets, and relationships.
It is also considered as a marketing tactic whose objectives include establishing the brand, expanding markets, acquiring new users, and spreading awareness. Among these functions, the main focus of business development is to use the partners to sell to the right customers. It is important to have strong relationships to have success in business development.
Without any doubt, small and medium-scale enterprises play a major role in developing countries.
MAJOR IMPACTS OF SMEs IN THE ECONOMY:
You can read the major impact of small and medium enterprises from the following points:
- Provides employment: They are a major source of employment Seen The Economies which are in the process of development.
- Source of Innovation: The create local Innovation and competition in many sectors of the economy.
- Indigenous Entrepreneurship: They happen to promote indigenous entrepreneurship and also serve as an import substitute and also encourage Exports from the country.
The above reasons make the survival of these SMEs survive an important feat in the developing countries in particular.
Read Also:- IIBF MSME STUDY MATERIAL 2021-2022
BUSINESS DEVELOPMENT NEEDS OF SMEs
Even though SMEs are the main focus in developing countries, they still have to face major challenges in the path of growth which prevents them to compete with large-scale companies on an equal level. This is also the reason why we must identify the needs of SMEs and take steps for the fulfillment of their growth & to help them grow.
FINANCE: Finance like most businesses is also a major need for SMEs. Even though government and non-government parties have taken so many steps to reduce the financial problem that is faced by SMEs, this remains unresolved. The main reason for this problem application of stringent measures that these small and medium enterprises have to face while getting access to loans and grants.
The business owners of these Enterprises have always been thinking that the Financial Institutions have twins and conditions and terms whereas, the later parties trim that these SMEs do not have viable projects to present.
To help these enterprises in the finance aspect, Texas should be reduced or altogether scrapped for them to allow them to stabilize their business in the market.
INFRASTRUCTURE: Other than the finance, nice Enterprises also need adequate infrastructure, that is, power, water, and transportation so as to reduce your production and services cost thereby increasing the margin of profit and to compete favorably with existing businesses inside and outside India.
When production cost is high, the standard falls down in the goods and services quality could not be compared with the foreign products and services, which leads to less demand for these production services.
RESEARCH AND DEVELOPMENT FACILITIES. R&D is very important for the development of a product and to search unexplored areas. It helps in increasing the capacity and having quality control to ensure that the products and services are of local as well as international standards.
LEADERSHIP AND MANAGEMENT SKILLS: Being an entrepreneur required sound knowledge of Management and leadership, as well as proper technical, know- how of management. Having proper management and entrepreneur skills is very much important for the growth of SMEs.
CREATIVITY: Small and medium enterprises also need to be innovative in their ideas. Creativity but also is required in rebranding the existing brands. This is a reason why Business Development skills are also provided to the entrepreneurs to help them improve their businesses by increasing their productivity, lowering their costs, and to enter into profitable markets.
BUSINESS AND COMPETITOR ANALYSES: Small and Business entrepreneurs need to instill in their minds who are their customers and competitors i.e the drivers of the market. Their major focus should lie in getting an edge over the market competition.
EFFECTIVE COMMUNICATION SKILLS AND STRATEGIES: As a saying goes, the first impression is the last impression, it is important for these Enterprises to gain the attention and interest of the potential clients. Having effective communication skills helps in the same. Employees & employees who are involved in small and medium-sized enterprises should therefore go through training in communication to enhance their skills.
COLLABORATION AND PARTNERSHIP: Having strong relationships with the enterprises or companies who are in the business of complementary products or services also helps in boosting their sales and spreading awareness about their products and services.
These enterprises are important for the growth and development of economies that are still developing. Government should put more effort and make more strategies to ensure that these enterprises thrive and to raise the level of employment.
Development of Business paves way for the future course and increases the performance of any company and in today’s time, it is specifically important to cope up with the changing and increasingly global business environment.
Business leaders, therefore have to possess strong skills to identify new business development opportunities, assess the potential risks, define a business strategy, bring the strategy to life (implementation), and adjust the course according to changing business conditions.