An audit of SME bottlenecks

Published: 30th April 2010
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Summary
Small and Medium Enterprises (SME) sector is the key driver of any economy but are facing many problems in globalized market. Hurdles faced by Indian SMEs are even more serious.

An audit of SME bottlenecks

Small and Medium Enterprises (SME) sector is the key driver of the Indian economic growth with a input of over 40 per cent to the country's industrial output and around 35 per cent to direct exports. It accounts for over 90 per cent of the industrial units in the country. In terms of employment, this sector plays a very crucial role, being the second largest employer after agriculture.
Despite their economic significance, SMEs face a number of bottlenecks that prevent them from achieving their full potential. Major obstacles for business development for SMEs relate to a wide range of issues:

LOW UTILIZATION OF INSTALLED CAPACITY
Industrial success depends upon a maximum utilisation of installed capacity.

POOR AWARENESS ABOUT INTELLECTUAL PROPERTY RIGHTS (IPR)
IPR protection plays a key role in gaining competitive advantage in terms of technological gains for achieving higher economic growth in a market driven economy. The Indian MSME sector needs more information, orientation and facilities for protecting their intellectual powers.

PROBLEM OF SPECIALISED TRAINING
In a present global scenario there is an urgent need for creating skilled human resources so as to build capacity and develop the SME's sector that is compatible with commercialization requirements. To achieve this objective there is need to conduct training programmes for enhancement of knowledge and capacity building of SMEs sector in all fields of Intellectual Property.

PROBLEM OF SKILLED MANAGEMENT
In a market with low entrance barriers, trained apprentices usually leave the enterprise to start their own. Management constraints include inter alias the lack of skills in basic business management, accounting, book keeping and the lack of accessible consulting and support services.

ACCESS TO CREDIT FACILITIES
The non-availability of institutional finance on affordable and easy terms is hindering access to new technologies. In India the situation is further complicated by the fact that the preferred mode of finance is either self or other sources.

LESS INNOVATIVE ACTIONS IN SME's
Innovation is the means by which the entrepreneur either creates new wealth producing resources or endows existing resources with enhanced potential for creating wealth. There is need of Product innovation, Process innovation and Organizational innovation.

LACK OF PROPER MARKET INFORMATION
Information about market is the core factor of any business activity. Even it is an essential part of marketing strategy. But, according to the survey of ministry of small scale industries, nearly two-thirds of small businesses consider the lack of market information to be a very severe constraint.

RESEARCH AND DEVELOPMENT (R&D)
Another hurdle faced by the SMEs is low levels of research and development (R&D). R&D is most important requirement of the industrial and service units in the era of globalized market. SMEs are still falling down on R&D due to weak links between business and academic research.

Small and Medium enterprises are facing many problems in globalized market. But hurdles faced by Indian SMEs are even more serious. While government are taking many initiatives to help entrepreneurs at a macro level, SMEs should themselves should understand the global change and try to change self for survival & growth in the changing world.

About the Author:
Manish Bang is a SME Expert from India. Being a technocrat and businessman, he empathises with the limitations and problems faced by small to medium scale enterprises. He has taken the leadership to spread the professional approach in SME organisations and supporting them to use their entrepreneurship skills to the fullest. He writes and speaks with his own experience and convictions, to find out more http://www.smeexpert.in


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