MSMEs: GROWTH STRATEGIES

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Transcript of MSMEs: GROWTH STRATEGIES

  • 1.MSMEs: GROWTH STRATEGIES
    • Manish P Kiri
  • Kiri Dyes and Chemicals Ltd. / DyStar

2. Index MSMEs Barriers to Growth Growth Imperative Growth Strategies 4 1 2 3 3. Barriers to Growth Growth Imperative Growth Strategies MSMEs 4 1 2 3 4. MSMEs

  • The definition of MSMEs/SMEs differ from country to country. Most countries have adopted the benchmarks of employment . Some define them in terms of assets, a few in terms of sales and yet others, in terms of shareholders fund.
  • MSMEs comprise widely divergent spectrum of establishment engaged in economic activities ranging from micro and rural enterprise to modern industrial units using sophisticated technologies. They comprise of half to two third of the business globally.
  • Definition differ across countries, but they have one thing in common; the vast majority of MSMEs are relatively small (in terms of employee strength).

5. MSMEs in India Employs More than 60 Million 45%- Total Industrial Output40%- Total Exports Creates more than 1 Million jobs annually. Contribution to GDP set to expand to 22% by 2012 from current 17%. 6. MSMEs: Advantages

  • Generates more jobs per unit of capital investment.
  • Requires relatively less start-up capital.
  • Facilitates entrepreneurship.
  • Promotes / accelerates growth of the region.

7. MSMEs: Characteristics

  • Traditionally Indian SMEs have had the following characteristics:
  • Born out of individual initiatives &skills
  • Greater operational flexibility
  • Low cost of production
  • High propensity to adapt technology
  • High capacity to export
  • High employment orientation
  • Utilization of locally available human & material resources
  • Critical for poverty reduction *

* - Source: World Bank 8. MSMEs: Characteristics

  • Indian MSMEs can be divided into three classes:
  • Predominantly rural , traditional household industries,
  • Small and medium industries functioning with obsolete technologies,
  • Modern, small and medium enterprises which are owned and operated by mostly young techno-entrepreneurs operating in relatively newer fields like Bio-technology.

9. MSMEs Barriers to Growth Growth Imperative Growth strategies 4 1 2 3 10. MSMEs: Growth Imperative

  • In 1989 / 90s, SMEs accounted for:
  • 93% of registered factories
  • 66% of employment
  • 44% of value of production
  • 52% of gross value added.
  • However, after the economic liberalization by the Govt. of India the share of SMEs reduced in all the above indicators.

11. MSMEs: Growth Imperative

  • India has emerged as a dominant growth engine of the world.
  • India steered through the worst global financial crisis with 8-9% growth of GDP when many developed countries saw their economies shrink.
  • Recent visit by various country heads to link their economies strongly with ours is clear recognition of our growing economic prowess.
  • Today even a Goolge, Microsoft or Dell understand the importance of Indian SMEs and have separate business strategy to cater to this segment.
  • India has signed economic pacts / agreements with various nations to facilitate increased cross border trade / cultural engagements.

12.

  • At a time when even the advanced nations and its companies are looking to India with hope to support their faltering economies and trade barriers are set to dilute, it is relevant to ask the question:
  • Are we ready for the challenge with our Growth Strategies

MSMEs: Growth Imperative 13. Barriers to Growth Growth Strategies Growth Imperative MSMEs 4 3 2 1 14. MSMEs: Growth Strategies

  • MSMEs growth is often closely associated with firms overall success and survival.
  • Strong growth may reduce the firms profitability temporarily, but increases it in the long run.
  • The path to growth for a MSME may differ depending upon various factors like the age of firm, its size, location, industry affiliation, stage of its life cycle, etc.

15. MSMEs: Growth Strategies

  • Necessity for sustained Growth:

Entrepreneur's growth orientation Adequate Firm resourcesMarket Opportunity

  • Factors shaping growth orientation:
  • Ownership structure
  • Motivation
  • Education
  • Resources:
  • Financial
  • Policy Framework
  • Human
  • Market:
  • Ability to identify customer needs and need-gaps.
  • Market accessibility

16.

  • Organic Strategies

Growth Strategies a.New Product / Technology b.New Market c.New Customer 17. Organic Growth

  • New Product/Technology:
  • Beginning
  • New Search algorithm
  • Start-up of a company in a garage 12 years back by two PhDs.
  • Today
  • $ 200 billion enterprise
  • and growing
  • Today the name is used as generic for search on the internet.
  • The company leads the rankings when it comes to product/technology innovation.

18. Organic Growth

  • New Markets:
  • Different geography or different channels
  • Sales channel for India
  • Sales Channel Direct/Retail/Outlet
  • Result No.1 PC/Laptop brand in India within 8 years despite stiff competition from entrenched foreign and local low cost competitors.
  • Sales Channel Direct

Indian Global 19. Organic Growth

  • New Customers:
  • Range of product in different product categories.
  • 14000+employees
  • Revenue: Rs. 4500 Crore +
  • One product washing powder.
  • Single entrepreneur
  • Facility: own premises

Today Start-up Market is not just finding a customer but finding need gaps that can be satisfied in a economically viable way. 20. MSMEs: Growth Strategies

  • Understanding the customer:
  • MSMEs should focus not only on finding solution for its customers but also take care of their preferences.
  • The company adapted to different sales channels for its customers in different regions (Europe and America).
  • Order book: more than Rs.1000 Crore.
  • Market standing: Preferred supplier for to all major global retailers
  • Order book: Rs. 6 Lakh
  • Market standing: Newcomer

Today Start-up 21. MSMEs: Growth Strategies

  • Indian industry and MSMEs in particular needs to better understand about IPRs. Majority of countries specially developed are resorting to stringent IPRs for protecting their industries.
  • IPRs help SMEs in value creation by enabling them to capitalize on their intangible assets.
  • Govt./Industryshould make concerted efforts to spread awareness about IPRs.
  • One industry that definitely needs to understands and use IPR is Handicrafts. Machine made fakes are eating into the potential market for genuine Indian Handmade handicrafts.
  • Another way in which IPRs can be of immense help is Geographical Indications. For e.g. Pashmina Shawl or Banarsi Silk.

22. MSMEs: Growth Strategies

  • To connect more closely with its customers it is important for MSMEs to leverage Branding. A strong brand build reassurance, credibility and reliability among its customers.
  • Branding creates goodwill and good will helps entrench the position of the product in the market

23. Growth Strategies

  • 2. In-organic Growth

a.Mergers & Acquisition b.Strategic Partnership c.Joint Venture 24. In-organic Growth

  • Mergers and Acquisitions:
  • Control of target firm by buyer firm.
  • Arise from buyers deep desire to expand.
  • TATA + Corus = TATA
  • Union of two firm. Often on equal terms.
  • Often arise out of business necessities.
  • Nissan + Renault = Nissan-Renault

Acquisition Merger 25. In-organic Growth

  • Strategic Partnership:
  • Typically companies with complementary business
  • assets ally to harness the available market opportunity.
  • In mid 2009 Intel joined hands with Nokia for developing a new class mobile computing device and chipset architectures.
  • The devices will combine the performance of powerful computers with high-bandwidth mobile broadband communications and ubiquitous Internet connectivity.

26. Inorganic Growth

  • Joint Venture:
  • Established when two parties come together to set a new project.
  • The partners share markets, IP, other business assets and profits as per the agreed-uponarrangement.
  • 1. Tata Teleservices+ Virgin Group = Virgin Mobile India Limited
  • 2. Bharti Enterprises + Wal-Mart = Best Price Modern Wholesale

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