SUMMER INTERNSHIP PROJECT REPORT ON MAJOR MARKETING CHALLENGES FACED BY MSME SECTOR Submitted for the Partial Fulfillment

nt of the Requirement for the degree of MBA (Masters of Business Administration) 2011-2013

FACULTY GUIDE S.K SAHOO Asst. Professor(Marketing ) IIPM School of Management Kansbahal

SUBMITTED BY PRADEEP PANDEY Reg. No. - 1106262013 MBA (2011-2013)

BIJU PATNAIK UNIVERSITY OF TECHNOLOGY ROURKELA ODISHA

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ACKNOWLEDGEMENT
I express my sincere gratitude to MR. ANUPAM GAYEN ( Branch Manager of NSIC, Rourkela) for providing me an opportunity to work on this project. I am very grateful for their constant support and guidance throughout the duration of the entire project. Acknowledgements are also due to all the other staff in NSIC, Rourkela, Branch for providing information at various point of the project, especially the discussions on the market. I also express my sincere thanks to MR. S. K. SAHOO (Faculty Mentor) for his sincere cooperation, guidance and support. Lastly, I thank my parents, family members and friends for their constant support in my endeavour.

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DECLARATION
I PRADEEP KUMAR PANDEY declare that this project report entitled MAJOR MARKETING CHALLENGES FACED BY MSME SECTOR with reference to

NSIC Rourkela submitted by me to the BPUT university, Rourkela is bonafied work of own and it has not been submitted to any other or university for any degree or diploma.

Dated

pradeep kumar pandey Signature

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CERTIFICATE
This is to certify that Ms. Pradeep Kumar Pandey bearing registration number 1006262013, a Student of IIPM-School of Management under Biju Patnaik University of Technology, Rourkela has undergone his SIP (Summer Internship Project) entitled MAJOR MARKETING CHALLENGES FACED BY MSME SECTOR of NSIC under my guidance and supervision. The project Report is

original to the best of my knowledge and belief. I recommend the Project for Evaluation.

Date-

Prof. S.K SHAOO

IIPM School of Management

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EXECUTIVE SUMMARY
During the course of one months project, the detailed study of Major marketing challenges faced by MSME (micro, small and medium enterprises) sector was carried out in NSIC, Rourkela for determining the goodwill of NSIC and also to determine the potential and efficiency of NSIC registration schemes for development of small industries of Rourkela. The mode of sample methodology is random. The sample unit is small industries whether registered or not registered under NSIC. Research approaches observation and survey. The research instrument used is questionnaire. The geographical condition of Rourkela favours a lot in the field of industrial marketing. It provides great immense for the small scale industrial sector. The final conclusion after the analysis done on the data acquired during the survey is that Rourkela is a fast developing city with a great future for business units. All that needs to be done by the NSIC is that create an awareness about the prevailing schemes and also introduce new schemes prevailing to the market trend of Rourkela and they should even keep a keen watch over the activities and schemes of other players in the city. There are various steps that are being done to improve their marketing strategies as being the leader in Raw materials and government purchase in the region to make it customer friendly. NSIC is also giving its best effort to create awareness by conducting programmes like Entrepreneurship Development Programme (EDP) .

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TABLE OF CONTENTS
7 -15 1.Introduction 16 -18 2.Company profile 19 -20 3.Objective of the study 21 -24 4.Research methodology 25 -35 5.Litrature review

6.Analysis and findings

36 -39 40 -42

7.Conclusion suggestion and limitation of the study 43 8.Refrence

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CHAPTER - 1 INTRODUCTION

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INTRODUCTION TO MSMEs
Micro Small and Medium Enterprises (MSMEs) have played a significant role world over in the economic development of various countries. Over a period of time, it has been proved that MSMEs are dynamic, innovative and most importantly, the employer of first resort to millions of people in the country. The sector is a breeding ground for entrepreneurship. The importance of MSME sector is well-recognized world over owing to its significant contribution in achieving various socio-economic objectives, such as employment generation, contribution to national output and exports, fostering new entrepreneurship and to provide depth to the industrial base of the economy. Micro Small and medium-sized enterprises (MSMEs) are the backbone of all economies and are a key source of economic growth, dynamism and flexibility in advanced industrialized countries, as well as in emerging and developing economies. MSMEs constitute the dominant form of business organization, accounting for over 95% and up to 99% of enterprises depending on the country. They are responsible for between 60-70% net job creations in Developing countries. Small businesses are particularly important for bringing innovative products or techniques to the market. Microsoft may be a software giant today, but it started off in typical MSME fashion, as a dream developed by a young student with the help of family and friends. Only when Bill Gates and his colleagues had a saleable product were they able to take it to the marketplace and look for investment from more traditional sources. MSMEs are vital for economic growth and development in both industrialized and developing countries, by playing a key role in creating new jobs. Financing is necessary to help them set up and expand their operations, develop new products, and invest in new staff or production facilities. Many small businesses start out as an idea from one or two people, who invest their own money and probably turn to family and friends for financial help in return for a share in the business. But if they are successful, there comes a time for all developing MSMEs when they need new investment to expand or innovate further. That is where they often run into problems, because they find it much harder than larger businesses to obtain financing from banks, capital markets or other suppliers of credit. MAJOR MARKETING CHALLENGES FACED BY MSME SECTOR Page 8

MSMEs in India
India has a vibrant MSME sector that plays an important role in sustaining economic growth, increasing trade, generating employment and creating new entrepreneurship in India. In keeping in view its importance, the promotion and development of MSMEs has been an important plank in our policy for industrial development and a well-structured programme of support has been pursued in successive five-year plans for. MSMEs in India have recorded a sustained growth during last five decades. The number of MSMEs in India is estimated to be around 13 million while the estimated employment provided by this sector is over 31 million. The MSME sector accounts for about 45 per cent of the manufacturing output and over 40 per cent of the national exports of the country.

Figure -MSMEs in India

India embarked on the path of opening up its economy and integrating it with the global economy in 1991. The liberalization of economy, while offering tremendous opportunities for the growth and development of Indian industry including MSMEs, has also thrown up new challenges in terms of fierce competition. The very rules MAJOR MARKETING CHALLENGES FACED BY MSME SECTOR Page 9

which provide increased access for our products in the global markets also put domestic industry under increased competition from other countries. In todays world, access on a global basis to modern technology, capital resources and markets have become the most critical determinants of international competitiveness.

Defining MSMEs
In India, the enterprises have been classified broadly into two categories: (i) Manufacturing; and (ii) Those engaged in providing/rendering of services. Both categories of enterprises have been further classified into micro, small and medium enterprises based on their investment in plant and machinery (for manufacturing enterprises) or on equipments (in case of enterprises providing or rendering services). The classification on basis of investment is as under:

Table Classification Of Micro, Small And Medium Enterprises

Classification

Investment Ceiling for Plant, Machinery or Equipments Manufacturing Enterprises Service Enterprises Upto Rs.10 lakh

Micro Small

Upto Rs.25 lakh

Above Rs.25 lakh & upto Rs.5 Above Rs.10 lakh & upto Rs.2 crore crore

Medium

Above Rs.5 crore & upto Above Rs.2 crore & upto Rs.5 Rs.10 crore crore

SME would be meant to include Micro Small and Medium Enterprises (MSMEs). The above definitions of Micro, Small and Medium Enterprises would be in place of the existing definitions of Small & Medium Industries and SSSBEs/Tiny Enterprises.

Micro Enterprises would include Tiny Industries also.

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In Manufacturing, Small Enterprises would mean Small Scale Industries (SSIs) & Medium Enterprises mean Medium Industries (MIs).

In Services, Small Enterprises and Medium Enterprises would mean other Small & Medium Enterprises.

All advances to segments viz. Micro, Small and Medium Enterprises in the Manufacturing sector irrespective of sanctioned limits, (including advances against TDRs/Govt. Securities etc for business purposes to these categories of Borrowers), and

Advances to Services Sectors such as Professional & Self-Employed, Small Business Enterprises, and Small Road/Water Transport Operators and other enterprises, engaged in providing/rendering of services, conforming to the above investment criteria and enjoying borrowing/non-borrowing facilities with the Bank (including advances against TDRs/Govt. Securities etc for business purposes to these categories of Borrowers).

Those enterprises exceeding the investment ceilings would be categorized as Large Enterprises and be outside the purview of MSME.

The sanctioned limits would no longer be the criteria determining the status as micro or small or medium enterprises in these cases.

IMPORTANCE AND CONTRIBUTION OF MSME:

The Micro Scale and Medium Enterprises (MSMEs) play an important role in the economic development of any country. MSME enterprises can be rightly called as the backbone of the GDP of India. The MSME sector in India is growing at an exceptionally fast rate due to which it is proving to be beneficial to the Indian Economy. However, there are some important points that need to be considered for further development of the MSME sector. MSME contributes in the following: Rural industrialization Rural development and decentralization of industries Page 11

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Creation of employment opportunities and more equitable income distribution Use of indigenous resources; earning of foreign exchange (FOREXs) resources Creation of backward and forward linkages with existing industries Entrepreneurial development

The development of MSMEs is one of the sustainable ways of reducing the level of poverty and improving the quality of life in household through job and wealth creation. According to the United Nation Development program (UNDP), MSMEs have the highest capital, employment ratio and are a source of income for a lot of people World over. The most important thing is that MSMEs also act as safeguard in times of economic recessions. The MSMEs constitute over 90% of total enterprises in most of the economies and are credited with generating the highest rates of employment growth and account for a major share of industrial production and exports. In India too, the MSMEs play a pivotal role in the overall industrial economy of the country. In recent years the MSME sector has consistently registered higher growth rate compared to the overall industrial sector. With its agility and dynamism, the sector has shown admirable innovativeness and adaptability to survive the recent economic downturn and recession. This sector contributes 8% of the countrys GDP and employs around 60 million people, through 26 million enterprises. MSMEs in the country manufacture over 6,000 products.

Let us analyze the factors that have contributed to the growth of the MSME sector in India. MSME units in India are being funded by foreign and local fund providers. The advancement in technology has also contributed highly to the MSME sector. There are numerous business directories and trade portals available online that contains a rich database of manufacturers, sellers and buyers. To start and maintain these units, minimal investment is required. These MSME units are now being funded by many government and private banks. MAJOR MARKETING CHALLENGES FACED BY MSME SECTOR Page 12

The MSME sector is one of the greatest contributors of domestic production as well as the export earnings Many major mergers have taken place recently.

Major Problems of MSMEs

Despite its commendable contribution to the Nation's economy, MSME Sector does not get the required support from the concerned Government Departments, Banking Sector, Financial Institutions and Corporate Sector, which is a handicap in becoming more competitive in the National and International Markets and which needs to be taken up for immediate and proper redressal. MSME sector faces a number of problems - absence of adequate and timely banking finance, limited knowledge and non-availability of suitable technology, low production capacity, follow up with various agencies in solving regular activities and lack of interaction with government agencies on various matters. Some of the major problems are briefly as follows: a) Financial problems of MSMEs: The financial problem of MSMEs is the Root Cause for all the other problems faced by the MSME sector. The small and medium industrialists are generally poor and there are no facilities for cheap credit. They fall into the clutches of money lender

who charges very high rates of interest, or else they borrow from the dealers of their goods, who exploit them by completing them to sell their products at very low price. After the nationalization of 14 major Indian Banks in July, 1969, the Commercial banks were providing only a small proportion of SMEs financial requirements. Credit to the MSME sector continues to be non-commensurate with its contribution to the total industrial output. As against the share of the village and MSME at 40% in the industrial output, its share in total credit to the industrial sector is only about 30%. b) Raw Material problem of MSMEs: This difficulty is experienced in a very pronounced form. The quantity, quality and regularity of the supply of raw materials are not satisfactory. There are no quantity discounts, since they are purchased in small quantities and hence Page 13

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charged,

higher

prices

by suppliers. Difficulty is also experienced in procuring

semi-manufactured materials. Financial weakness stands in the way of securing raw materials in bulk in a competitive market. c) Production problem of MSMEs: MSME units suffer from inadequate work space, power, lighting and

ventilation, and safety measures etc. These short comings have tended to endanger the health of workmen and have adversely affected the rate of production. Many units are following primitive methods of production. Adoption of modern Wage rates and

techniques is either disliked by the entrepreneurs is not feasible.

service conditions of small industries are not attractive to skilled labor. d) Technological problem of MSMEs: Today technology is changing at a very fast phase; it becomes difficult for MSMEs to cope up with changing technology. Technology up gradation and the frequent need to renew the equipment has emerged as a big problem. d) Marketing problem of MSMEs: As marketing is not properly organized, the helpless artisans are completely at the mercy of middle man. The potential demand for their goods remains under developed. The MSMEs have to face the competitions from large scale units in marketing their products. It causes damage to the growth and stability of MSMEs. MSMEs cannot afford to spend lavishly for advertisement to promote their sales. e) Managerial problem of MSMEs: Small scale industries in our country have suffered from the lack of entrepreneurial ability to develop initiative and undertake risks in the unexplored industrial fields. The in efficiency in management comes first among managerial

problems. The entrepreneurial ability of promoters of cottage industries and MSMEs are handicapped by technical know how in the areas of production, finance, accounting and marketing management.

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f) Sickness of MSMEs: A serious problem which is hampering small and medium sector has been sickness. Many small units have fallen sick due to one problem or the other. Sickness is caused by two sets of factors, Internal and external factors. From among internal and external causes of the various

sickness the important ones are bud

management, high rate of capital gearing, inadequacy of finance, short of raw materials, outdated plant and machinery, low labor productivity etc.

Importance of the study

The researches that were conducted in past by the various professionals are in foreign context and not in Indian context. Study relating to MSMEs, their problems and source of financing has been done but regarding the MSME financial schemes of public sector banks has not been done. This gap has been identified and it has led to the present research to be undertaken. So, the need was felt to cover the areas neglected. Thus, here a study on major marketing problems faced by MSME.

Scope of the study

The scope of this study was limited to the whole world which are going to start Micro Small & Medium Enterprises.

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CHAPTER-2 COMPANY PROFILE

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COMPANY PROFILE
National Small Industries Corporation Ltd. (NSIC), is an ISO 9001-2008 certified Government of India Enterprise under Ministry of Micro, Small and Medium Enterprises (MSME). NSIC has been working to fulfill its mission of promoting, aiding and fostering the growth of small industries and industry related micro, small and medium enterprises in the country. Over a period of five decades of transition, growth and development, NSIC has proved its strength within the country and abroad by promoting modernization, upgradation of technology, quality consciousness, strengthening linkages with large medium enterprises and enhancing exports projects and products from small enterprises. NSIC operates through countrywide network of offices and Technical Centres in the Country. To manage operations in African countries, NSIC operates from its office in Johannesburg, South Africa. In addition, NSIC has set up Training cum Incubation Centre & with a large professional manpower, NSIC provides a package of services as per the needs of MSME sector.

ORGANISATIONAL SET-UP
The Policy guidelines to the Corporation are provided by the Board of Directors consisting of a full time Chairman-cum Managing Director; two Functional Directors; two Government Nominee Directors, one SIDBI Nominee Director and six Nonofficial Part-time Directors. The Corporation has a dedicated team of professionals at all levels and operates through 123 offices located all over India and one office located at Johannesburg (South Africa). NSIC offers small enterprises the following support services through its Technical Services Centres and Extension Centres 1. Advise on application of new techniques 2. Material testing facilities through accredited laboratories 3. Product design including CAD 4. Common facility support in machining, EDM, CNC, etc. 5. Energy and environment services at selected centres. 6. Classroom and practical training for skill upgradation. MAJOR MARKETING CHALLENGES FACED BY MSME SECTOR Page 17

PERFORMANCE AND ACHIVEMENT

National Small Industries Corporation Ltd (NSIC), a Government of India enterprise under the aegis of Ministry of MSME, achieved record operational and financial performance in terms of gross volume of business and profitability in the recently concluded financial year 2009-10. The year witnessed the Corporation achieved new heights on all parameters. There was substantial improvement in enhancing the companys outreach and its volume of operations. With the opening of new offices the Corporation expanded its reach to serve larger number of MSMEs, making the total number of NSIC offices 123. The Business Turnover of the Corporation for the year jumped to Rs. 4488 crore over the previous years turnover of Rs. 3508 crore. NSIC continued with its efforts to provide various raw materials like steel, aluminium, zinc, copper, paraffin wax etc to MSMEs through arrangements made with bulk manufacturers of these materials. In addition, the Corporation also started distribution of Coal to MSMEs in West Bengal. Total raw material facilitation to MSMEs increased from 302164 MTs in the year 2008-09 to 355719 MTs in the year 2009-10. NSIC organized 963 Marketing Promotion events including participation / organization / co-sponsoring of exhibitions, buyer-sellers meets and marketing campaigns as compared to 874 events in the previous year 2009-10. NSICs, Techmart 2009 organized at the India International Trade Fair during November, 2009 was awarded Gold Medal for outstanding display of the MSMEs technology and products. During the year, NSIC continued its initiative to set up new Training-cum Incubation centres under Public-Private Partnership (PPP) mode for the purpose of inculcating entrepreneurial skills in the youth by way of skill development through which they become employable or create their own enterprises. So far, 45 such centres have been established at various locations in the country. These are in addition to three incubation centres opened at our technical centres. During the year, 8364 candidates were trained at these centres.

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CHAPTER-3 OBJECTIVES OF THE STUDY

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Objectives of the study

Objectives are the guiding lights of a study. The present study was undertaken to achieve the following objectives:

To know about marketing challenges faced by MSME sectors. To know the effectiveness of various MSME marketing strategy.

To enhance marketing capabilities & competitiveness of the MSMEs. To update MSMEs about the prevalent market scenario and its their activities. To facilitate the formation of consortia of MSMEs for marketing of their products and service. To enrich the marketing skills of the micro, small & medium entrepreneurs. impact on

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CHAPTER - 4 RESEARCH METHODOLOGY

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RESEARCH METHODOLOGY
Research Methodology is a way to systematically solve the research problem. The Research Methodology includes the various methods and techniques for conducting a Research. Marketing Research is the systematic design, collection, analysis and

reporting of data and finding relevant solution to a specific marketing situation or problem. D. Slesinger and M.Stephenson in the encyclopedia of Social Sciences define Research as the manipulation of things, concepts or symbols for the purpose of generalizing to extend, correct or verify knowledge, whether that knowledge aids in construction of theory or in the practice of an art. Research is, thus, an original contribution to the existing stock of knowledge making for its advancement. The purpose of Research is to discover answers to the Questions through the application of scientific procedures. Our project has a specified framework for collecting data in an effective manner. Such framework is called Research Design. The research process followed by us consists of following steps:

RESEARCH DESIGN
This research was descriptive and conclusion oriented research.

Conclusion Oriented Research: -Research designed to assist the

decision maker in the situation. In other words it is a research when we give our own views about the research.

Descriptive Research: -A type of conclusive research, which has as its

major objective the description of something-usually market characteristics or functions. In other words descriptive research is a research where in researcher has no control over variable. It just presents the picture, which has already studied.

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Sources of data
Data Collection: Information has been collected from both Primary and
Secondary sources of data collection. Primary sources- Primary data are those, which are collected are fresh and for the first time and thus happen to be original in character. Primary data had been collected by conducting surveys through questionnaire, which include several questions and personal and telephonic interview. Secondary sources- Secondary data are those, which have already been collected by someone else, which already had been passed through the statistical process. Secondary data had been collected through websites, newspapers and journals.

SAMPLING DESIGN
Sampling can be defined as the section of some part of an aggregate or totality on the basis of which judgment or an inference about aggregate or totality is made. The sampling design helps in decision making in the following areas: -

Universe of the study-The universe comprises of two parts as theoretical universe

and accessible universe

Theoretical universe- It includes all the MSMEs throughout the universe. Accessible universe- It includes the MSMEs in Rourkela city.

Sample Frame-Sample frame was Small and Medium enterprises all over in
Rourkela .

Sample Unit- Sampling unit is the basic unit containing the elements of the
universe to be sampled. The sampling unit of the present study was MSMEs located in Rourkela. MAJOR MARKETING CHALLENGES FACED BY MSME SECTOR Page 23

Sample Size- Sample size is the number of elements to be included in a study.

Keeping in mind all the constraints 30 respondents were selected.

Sampling Techniques- The sampling techniques used were convenience

technique and simple random sampling technique.

Type of questionnaire used open and closed both question use to conduct this
research.

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CHAPTER 5 REVIEW OF LITERATURE

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REVIEW OF LITERATURE
A research literature review is a systematic, explicit and reproducible method for identifying, evaluating and synthesizing the existing body of completed and recorded work produced by researchers, scholars and practitioners. This report provides an organized critical account of information, ideas and knowledge that has been published (or is available in the public domain) on MSME access to credit. The empirical analysis has to be built on a comprehensive review of relevant in the area of the study. A review of the available literature on micro small scale industries is undertaken with a view to identify possible areas of enquiry. It also provides the necessary background for the present study.

Vijay Kumar (2011)

Talking about a few basic issues being faced by the MSMEs sector is lack of awareness, investment and resource, "Zero wastage and continuous design improvement hold the key to survival and growth of MSMEs."

Tarak Shah (2011)

The major problem of inadequate financing to MSMEs needs an urgent attention amongst the others such as adequate credit delivery to MSMEs, better risk management, technological upgradation of Banks esp. Public Sector Banks, attitudinal change in Bankers. The MSMEs sector is considered to be an untapped market for financial institutions in India. The only way out of the mire is that the Indian manufacturing sector could be strengthened by the existing rural systems and making them self-sufficient. This could take place only by helping Small and Medium Enterprises and the rural artisans (people with innate skills and talents) in becoming effective and competitive enough to face the future. A number of issues and business practices of global players and markets can be observed, learnt and adapted for ensuring competitiveness of Indian MSMEs.

Roopa Kudva (2011)

The Mangining Director of CRISIL says it is not easy to attract MSMEs to do a credit rating, however it is important to have the credit rating done if the MSMEs wants to position itself in the international market as well as there is a rebate from the bankers in the lending terms. Unfortunately the 75% subsidy is available only for the first time /year the MSME gets its rating done subsequently they have to bear the entire cost next year

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which is a strain on the purse strings. . Producing a new framework for rating SMEs is important, because most would receive low ratings on traditional scales solely because of their small size. The benchmarks used for large corporations have to be abandoned

MSME Chamber of India (2011)

MSMEs are now exposed to greater opportunities than ever for expansion and diversification across the sectors. Indian market is growing rapidly and Indian entrepreneurs are making remarkable progress in various Industries like Manufacturing, Precision Engineering Design, Food Processing, Pharmaceutical, Textile & Garments, Retail, IT and ITES, Agro and Service sector.

B. Yerram Raju (2011)

The problem which continues to be a big hurdle for the development of the sector is lack of access to timely and adequate credit. The Abid Hussain Committee on SSIs (1997) examined the problems of the SSI sector and recommended a package of policies to restructure the industry in the context of current global economic changes. The Expert Committee was of the view that the existing institutional structure for delivering credit to SSEs needs a thorough overhaul. It endorsed the recommendations of the Nayak Committee and urged the RBI to implement the same. The Committee recommended restructuring of financial support through SFCs and SIDCs, tapping of other sources of funding for SSEs, extending credit rating services to small units, and addressing the credit needs of tiny units to ensure that they are not bypassed by the commercial banking system.

Parijat Upadhyay, Saeed Jahanyan, Pranab K. Dan(2011)

The paper attempts to assess empirically the four factors like project execution competency; product and vendor perspective; organizational climate; and technical perspective which are most critical in the ERP implementation process from the perspective of the Indian MSMEs.

Govind Sharma(2011)
Do MSMEs Need to Strategize? Business Strategy Series, Vol 12, Issue 4, The author says that MSMEs need to strategize and a model should be created which will assist the top management and a low cost ERP model should be designed keeping in

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the need of the MSME. The practical implications are for the labour intensive countries which are not capital intensive but generate create employment

Mehul Kapadia (2011)

Every bit of capital investment is crucial for an MSME. Seasonal peaks are one of the greatest reasons for companies under-provisioning or over-provisioning. This can later result in a heavy loss and idle resources. All businesses undergo a transition at various points. Whether you run a full-fledged enterprise, a medium-sized business venture or even a smaller, relatively newer business, updating business IT processes is a critical step in your enterprise life cycle. In fact, some businesses even have to undergo multiple transformation phases. Large enterprises have the capability and the resources to execute such transformations smoothly, but MSMEs face a significant challenge in doing so, given their limited resources and capital.

Sangeeta Baksi (2010)

TIFAC is of the opinion that, there are few programs which are of utmost importance in the MSME- led technology development efforts, which promote the public private partnership. Moreso the technological development has never been a straight forwards process. Technological innovations have been the key to the survival of the MSMEs. Four decades of planned development have elevated India to a stage, where the country demonstrates some remarkable strength in modern technologies for achieving development goals.

C.B.Bhave(2010)
In is opinion the MSMEs are a catalyst in most of the economies and constitute a major part of the industrial activity. MSMEs generally face financial crisis. He foresees that the SME Stock Exchange will be a great boon to this sector as it will provide a wide pool of capital, increased status and credibility and other benefits.

Raja, MSME Times (2010)

The challenges that the MSMEs face today seem to be primarily in the area of ICT and to quote specifically, ERP. The MSMEs lament that whenever they approached the usual ERP firms, the first question they were faced with was that of their turn-over as they are quoted based on their turnover. The question that arises is does the Indian MSME

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presents an opportunity for Technology Startups to deliver smaller and much palatable solutions, which fit both the pocket and the background of the MSMEs

Seema Sharma & Milind Sharma (2010)

The purpose of this paper is to examine the relative production efficiency of state-wise clusters in the registered small-scale sector in India.The author says that, most of the states are found to be operating at decreasing returns to scale, which signifies the scope for investment and further employment generation.

Porter M. E (2010)
The author says the major objectives of the new industrial policy package should be to build on the gains already made, correct the distortions or weaknesses that may have crept in, maintain a sustained growth in productivity and gainful employment and attain international competitiveness.

Rajesh Dubey (2010)

The author says Actually, Private Equity and Venture Capitalists firms would be interested in investing in a listed company. Credit ratings would help an entity to get an exposureFirst of all, the fear is that the MSME may not get a good rating. Second is probably the financial statements that they have prepared to get rated do not reflect their true and fair picture of their performance. And, the rating agencies will not look beyond that. These could be the two main reasons why SMEs may not be interested while going for a rating. We need to look at what is their management and how sound a promoter is, or how resilient the SME has been and their overall performance.

Report of the Task Force on MSME (2010)

The MSME sector in India is highly heterogeneous in terms of the size of the enterprises, variety of products and services produced and the levels of technology employed. While one end of the MSME spectrum contains highly innovative and high growth enterprises, more than 94 per cent of MSMEs are unregistered, with a large number established in the informal or unorganized sector. Besides the growth potential of the sector and its critical role in the manufacturing and value chains, the heterogeneity and the unorganised nature of the Indian MSMEs are important aspects that need to befactored into policy making and programme implementation.

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Risk And Capital Management in MSMEs- by SIDBI (2010)

The advent of globalization offers both challenges and opportunity to MSMEs. The challenge for them is to remain competitive and consistently deliver value to customers. The opportunities available include tapping the global markets and growth in scale by forging strategic partnerships. Internationally, Risk Capital forms the basis of entrepreneurial ecosystem. Risk Capital is an important instrument for not only start-ups and innovative / fast growing companies but is also critical to those looking at growth. However the sources of risk capital are limited in developing countries. It is encouraging to note that with global integration of economy, emerging markets like India are sought after destinations for successful Private Equity (PE) funds. However, the PE Funds continue to focus on larger investments and bigger corporatised units though there are more success stories of software and other new economy enterprises in the medium sector being assisted by Venture Capital [VC] Funds. Majority of the MSMEs are owner driven with lesser inclination towards formal organizational structures. The non corporate structure and small size of the majority of MSMEs in India makes the venture capitalists and other risk capital providers reluctant to investing in them due to higher transaction costs and difficulties in exits out of such investments. Thus, it is critical to have appropriate risk capital products and focused funds for MSMEs of different size and constitution.

Shamika Ravi (2009)

The MSME sector has often been termed the engine of growth for developing economies. We begin with an overview of this sector in India and look at some recent trends which highlight the development and significance of this sector vis--vis the Indian economy. Over the last few years, there have been major policy changes at the federal and state level aimed at consolidating and developing this sector. The MSME Development Act of 2006 is perhaps the most crucial of these recent policy changes.

India Microfinance Editorial Board (2009)

Every crisis throws up an opportunity. And the global economic meltdown is no exception. The recession threw up a few such opportunities for passionate entrepreneurs who, undeterred by the turmoil outside their offices, built their businesses while many

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others were either collapsing or struggling to survive. A few passionate entrepreneurs are making the best out of recession

Krishnamurthy Subramanian(2009)
This article deals with some factors critical to the success of the mergers and acquisitions based on the comparisons between failed and successful deals. A merger / acquisitions would make sense only if it leads to certain operational and/or financial advantages that the individual entities could harness by themselves thereby creating value for shareholders of both protagonist firms.

Ramesh V Penumaka (2009)

It reflects that while the government can be a facilitator of growth and promoter of equity , the role of the large enterprises is also critical, The MSME could be the steroid the Indian economy needs at this juncture. The SME provides not only the much needed boost for growth, employment and exports but more significantly, contributes to geographical and social equity.

Krishna Tanuku (2009)

India can achieve its socio-economic objectives by focusing on gainful employment for millions of educated youth and by helping millions of others transition from an overburdened agricultural sector to the small-scale manufacturing and service sectors.

Sankar De (2009)
This article potrays the enormity of the challenge and outlines a possible partial remedy. MSMEs in India face may challenges, but perhaps none are as difficult as the challenge of financing , both short term and long term. Poor profitability and lack of access to formal capital markets and institutions result in heavy dependence on alternative financing challenges which is generally more costly than funding from normal sources and creates a vicious cycle in the pattern of funding.

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Krishna B Kumar (2009)

The author says that the challenge is to enhance economic participation among those at the bottom rungs and facilitate the climb, without tripping up those who are at higher rungs and encouraging entrepreneurship is one way of address this dilemma.

Ravi Jagannathan, Mudit Kapoor, Ernst Schaumburg (2009)

The author says, the global economy is in recession and unemployment rates are soaring, but the financial crisis is a mere symptom and not the disease itself. The fundamental cause of the crisis is the labour supply shock and not the glut in liquidity which is often blamed. A higher savings rate in the debt laden developed nation and greater capital flows to the developing nation will correct the structural imbalances in global capital flows.

Bhatendra Kumar Gupta (2008)

In India, the MSME sector is the second largest employer after agriculture. With the growth in the Indian Economy it is of need for the MSME to raise capital is becoming increasingly critical. He says that there is a need for the dedicated STOCK Exchange for the MSME sector to cater to their needs better which are different from the large industries.

Rajesh.K. Pillania (2008)

The author says In terms of relevance, latest and timeliness, Indian and international automotive components manufacturers pay little credence to the knowledge available through government institutions and industry associations. Industry associations and governments need to have a re-appraisal of their practices and make their working more useful, fast and updated.

RBIs Report of Working Group on Rehabilitation of Sick SMEs (2008)

A Working Group was constituted under the chairmanship of Dr. K. C. Chakrabarty, Chairman and Managing Director, Punjab National Bank to suggest measures for improving credit flow to the MSME sector as well as measures for early implementation of rehabilitation/nursing of sick MSME units by examining feasibility of bringing in additional capital through alternative routes, such as, equity participation, venture

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financing, etc. As an incentive for proper restructuring package at the time of rehabilitation, necessary support for business restructuring, modernization, expansion, diversification and technological up gradation as may be felt necessary by the lenders may also be encouraged. Support schemes like Credit Linked Capital Subsidy Scheme in case of units in other (than rural) areas, KVIC Margin Money Scheme (for units in rural areas) may be extended for rehabilitation packages also. Many other recommendations have also been given.

Keshab DAS (2007)

Despite an elaborate and dynamic policy framework, the progress of Indian MSMEs continues to be hindered by some of the basic constraints as poor credit availability, low levels of technology (hence, low product quality and limited exportability) and inadequate or no basic infrastructure, both physical and economic. It is too early to assess the impact and effectiveness of a plethora of new policy measures, announced very recently. He says that much of the potential of small firms to grow and nurture innovativeness is shaped by the kind of infrastructure, both physical and economic, available and can be accessed at reasonable costs. The MSMED ACT attaches importance to networking with stakeholders both upstream and downstream in the entire global value chain, from raw material procurement to processing/manufacturing to marketing to customer services.

Madhu Bala (2007)

The Government has recognized its importance for the economy and its intention towards promotion of SSIs is reflected in various Industrial policy Resolutions right from the year 1948. The primary objective of the Small Scale Industrial Policy during the nineties was to impart more vitality and growth-impetus to the sector to enable it to contribute its mite fully to the economy, particularly in terms of growth of output, employment and exports. The sector has been substantially delicensed. Further efforts would be made to deregulate and debureaucratise the sector with a view to remove all fetters on its growth potential, reposing greater faith in small and young entrepreneurs. All statutes, regulations and procedures were reviewed and modified, wherever necessary, to ensure that their operations did not militate against the interests of the small and village enterprises.

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Y.Srinivas (2005)
MSMEs play a very significant role in the economy in terms of balanced and sustainable growth, employment generation, development of entrepreneurial skills and contribution to export earnings. However, despite their importance to the economy, most SMEs are not able to stand up to the challenges of globalization, mainly because of difficulties in the area of financing. With the opening up of the Indian economy, it has become necessary to consider measures for smoothening the flow of credit to this sector. Small and Medium Enterprises (SMEs) play a very significant role in the economy in terms of balanced and sustainable growth, employment generation, development of entrepreneurial skills and contribution to export earnings. However, despite their importance to the economy, most SMEs are not able to stand up to the challenges of globalization, mainly because of difficulties in the area of financing.

Sickness and Rehabilitation of MSMEs in India(2005)

The author feels that the SMEs will fail in a sector for a variety of reasons. Global competitiveness has strained Indias already weak infrastructure, which severely hinders the production of small scale industries. There are a multitude of reasons for failure, however, not all of them related to competition. Lack of knowledge, available capital, qualified workers or even motivation on the part of the owner are all viable reasons for business failure. Whatever the reason for failure, the business must have some sort of recourse to declare its sickness. In India, what constitutes this mechanism is relatively unclear, and despite current progress, has left much inefficiency.

Krishna Kumar (2003)

He views that In India foreign collaborations have generally been to have the technological transfer which involves high cost. It is important to understand the MSMEs single handedly cannot afford this cost, however if a group of MSMEs of similar nature of work come together the burden of the foreign collaborations can be shared effectively.

Kristin Hallberg, (2000)

Governments in both industrialized and developing countries provide a wide variety of programs to assist small- and medium-scale enterprises (SMEs). Despite the success of

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SME strategies in a few countries, the majority of developing countries have found that the impact of their SME development programs on enterprise performance has been less than satisfactory? This paper investigates the economic rationale for intervention in support of small- and medium-scale enterprises, on both theoretical and empirical grounds. It also suggests a framework for SME intervention to help the Bank Group's client countries design SME strategies, gauge the effectiveness of assistance programs, and achieve the objective of raising SME competitiveness.

Teijiro Uyeda and his associate (2002)

As part of a review of international programme studied japans small industries. Small industries played an important role in japans industrialization. Their onslaught on the international market had created serious problems for the market economies. The study investigated the status and the representative character of the small scale industry in Japanese economy.

Valasama Antyony,(2002)
In her article titled Prospects and growth of SSIs in India: An overview . Observes that adequate and timely availability of working capital and marketing avenues for the SSI products should be ensured for improving their competitive strength in the domestic and global markets. There is the need for providing better information and efficiency networking for the SSIs besides development of quality infrastructural facilities.

Panda (2003)
In his case study of hotel industries in Nagaland examines marketing management in small service enterprises. He finds that sales activity in a majority of cases is managed by hired managers. The delegation of sales function is found to have a positive association with the level of formal education of entrepreneurs. The entrepreneurs appear to sell, rather than market their service. In the perception of the majority of the entrepreneurs, sales promotion activity is an unnecessary activity that invites the attention of extortionists. According to panda, 70 per cent. The present study lies in its incorporation of the need for the right type of marketing research into the industries development programme. MAJOR MARKETING CHALLENGES FACED BY MSME SECTOR Page 35

CHAPTER-6 DATA ANALYSIS AND FINDINGS OF THE STUDY

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As per the field survey conducted, access to finance & Lack of Man power is the most severe concern as well as constraint for MSMEs in India. However there are some differences regarding how different types of firms rate access to finance as an obstacle. 38 percent of micro-manufacturing firms report it as the most severe obstacle to operations & Manpower compared to only 6 percent of IT firms.

Other obstacles identified as a major concern by MSMEs are poor delivery of electricity, corruption and high tax rates and onerous tax administration.

Problems related to access to finance stems from two different sources. The first concerns involuntary exclusion, wherein banks discriminate against small borrowers because of higher transaction costs and information asymmetry. Secondly, MSMEs may not access finance because of voluntary exclusion. In this case, firms choose not to pursue formal financing for a variety of reasons, including the availability of informal lending sources or the lack of a desire to grow. We found evidence of both involuntary and voluntary exclusion in the case of MSMEs in India.

Based on our Area-level analysis of access to finance & Lack of Manpower, there is considerable variation across states in lending to Micro &small enterprises. However, these differences are not a result of differences in financial laws across states. In India, relevant banking laws are promulgated at the national level. Thus, the wide disparities between states result from factors such as their respective bureaucratic effectiveness, degree of legal protection, and progress with economic development initiatives.

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MARKETING PROBLEMS FACED Sl.no 1 2 3 4 5 6 7 Marketing problems Low Quality Competitors Price Fixation High Cost of Marketing Personnel Sales promotion Distribution Channels Non Availability of Packing Material Percentage 71.05 89.47 60.53 55.26 60.53 76.38 65.79

(Source: Primary Data)

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71.05 percent of the sample units have faced heavy problems regarding the quality of their products. 89.47 per cent of the sample units have faced heavily problems with their competitors. 60.53 per cent of the units have faced moderately the problems of fixing he price for their product 55.26 per cent of sample units have faced heavily the problems of high cost of marketing personnel. 60.53 per cent of the sample units have faced heavily problems in sales promotion. 73.68 per cent of he sample units have heavily experienced the problems of distribution of their products. 65.79 per cent of the sample units in the district have experienced moderately the problems grouped as other

Findings of the study

The quality parameters do not meet the standards of the market due to poor quality inputs and lack of standardized skills of the workers. Big players outplay the small players in this sector as they lack proper marketing channels and portraying the products in the domestic and international market. Obsolete technology used in manufacturing the products result in the formation of poor quality products. Pricing is a major constraint as the price in manufacturing the product often exceeds the final product cost thus making these enterprises suffer loss No standard methodologies adopted for pricing of the product. The availability of raw materials in the premises of the establishment results in costly procurement of the raw materials. Promotional strategies are weak and lack of awareness among entrepreneurs results in the weak promotion of the products Lack of government support and ample funding in the industry as a whole is not expedited and industries are becoming sick in the frame of time.

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Chapter-7 Conclusion Suggestions and Limitations of the Study

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LIMITATIONS OF THE STUDY

Due to constraints of time and resources, the study is likely to suffer from certain limitations. Some of these are mentioned here under so that the findings of the study may be understood in a proper perspective. The limitations of the study are:

The research was carried out in a short period. The sample size and the parameters were selected accordingly so as to finish the work within the given time frame.

The information given by the respondents might be biased as some of them might not be interested to give correct information.

Some of the respondents could not answer the questions due to lack of knowledge.

Some of the respondents of the survey were unwilling to share information.

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Conclusion

Small and Medium Enterprises (SMEs) contribute to economic development in various ways such as creating employment opportunities for rural and urban population, providing goods & services at affordable costs by offering innovative solutions and sustainable development to the economy as a whole. SMEs in India face a number of problems - absence of adequate and timely banking finance, nonavailability of suitable technology, ineffective marketing due to limited resources and non availability of skilled manpower. Small and Medium Enterprises (SME) play an important role in the development of a country. There are around 26 million MSME units in India, of which 13 million are SMEs. SMEs contribute nearly 45% share of manufactured output, accounting for 40% in overall exports of the country and providing employment to about 32 million people. The Micro, Small and Medium Enterprises (MSME) sector contributes significantly to manufacturing output, employment and exports of the country. It is estimated that in terms of value, the sector accounts for about 45 % of the manufacturing output and 40% of total exports of the country. To make this sector to become more vibrant and significant player in development of the Indian economy the Government of India has taken various initiatives. The definition and coverage of the MSME sector was broadened MSME Development Act 2006 which recognized concept of 'enterprise' to include both manufacturing and service sector besides defining medium enterprises setting up a Board for developing policy frameworks and indicating procurement policy

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Reference
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