Small Enterprises in International Business
Introduction
India
today operates the largest and oldest programme for the development of small
scale enterprises in any developing country. The small enterprises have made an
impressive and phenomenal growth in units, production and employment, exports
over the years. The small sector has now emerged as a dynamic and vibrant
sector of the Indian economy in the recent years.
Export
Performance and Trends of Small Enterprises
Exports
from small enterprises have been on increase registering an annual growth of
about 171 percent during 1978 -1994. One way to view the impressive growth of
exports from small enterprises is their increasing share year after year to the
total exports from the country. The percentage of share of small enterprise
exports to the total from 1971-1972 onwards is presented in Table,
'P -
Provisional'
Increasing
Exports from Small Enterprises
It is
interesting to that the total exports of the country increased by 43 times,
while 'the exports from small enterprises increased by about 155 times',
information given in the table is from direct exports only small enterprises
also makes indirect exports through merchant exporters, trading houses and
large enterprises.
'Indirect
exports is 10% of total exported' (estimated)
It is
expected to increase in future when the ongoing economic reforms in the country
start giving
results.
India's
share in world exports is very low, at about 0.5 percent. India is now the
member of World Trade Organization-WTO. It has to improve its share in world's
exports to be a global player. Given the large industrial sector's attention
focused more on internal market than the international market, on the one hand
and decreasing exports of primary products and traditional items on the other
hand, we need to concentrate on small enterprises to increase our exports as
its hold potential for it.
In view
of the wide range of items produced by small enterprises, only of few items i.e
sports goods, readymade garments, leather products, processed food, plastic
goods, engineering goods, elastic and electronical goods, basic chemical and
pharmaceuticals and cosmetics. These items, thus, hold good promise for
increasing exports in future also. Exports of traditional products like cashew
and lac is not less encouraging.
However,
the export performance of smalls sector exhibits some disturbing features also
(1) About 83% of total exports from small sector accounted for by four items
alone denotes the lack of diversi cation in export items of small sector. Even
the items having good potential for exports like leather products, account for
3 to 4 percent of global exports. (2) Hence, in order to boost the SSI exports,
the new potential markets need to the explored and tapped.
Major
Constraints
The major constraints encountered by the small
scale units in exporting their products are as follows
Credit
Policy
The small
scale units have very weak base of their own funds on the one hand and have no
access to other sources of funds like capital market, on the other. Hence, they
have to depend upon the state nancial corporations (SFCs) and the commercial
banks to meet their long term and short capital requirements. The actual
availability of credit from the nancial statements, institutions was very low
at 8.1 percent of output. In case of tiny units, it was merely 2.7% of their
output.
Infrastructure
Lack of
infrastructure facilities like power supply, transportation and communication
aduersely a ect the quality and quantity of production, its cost and delivery.
These, in turn, tell upon the export performance of small scale units. The
launching of new scheme of 'Integrated Infrastructure Development' in rural and
backward areas is a right step in right direction.
Technology
Technology
is the crux of quality and competitiveness. However, the adoption of technology
in small scale industries hampered due to lack of infrastructural facilities,
on the one hand and the present investment ceiling of the small scale industry
on the other. Nevertheless the government has setup several tool rooms,
production-cum-process development centres, regional testing centres and
workshops, schemes of industrial parks and 18,09,000 to break the prevailing
inertia and promote exports from small scale units.
The
recent telecommunication revolution has o ered hi-tech application for market
research which is most cost e ective substitute for exploratory personal visits
abroad. As a matter of fact, conventional method of market explorations through
trail and error and private contracts has been replaced by the electronic
network exchanging business queries between the trading parties.
Export
Potential of Small Scale Units
Given the
constraints and weakness of small sector, one cannot conclude the small scale
sector has no strong point which help it emerge as a global player. The small
units are inherently exible to react to market signals and changing tastes.
This makes the small enterprise more innovative and open to new ideas.
Opportunities exist for small scale sector to emerge a strong global player
especially in the exports of the following products.
Food
processing industries
India has
been the second largest producer of a very wide variety of fruits and
vegetables in the world. But it processes less than 1% of production. At the
end of 1992, the number of processing units registered under fruit products
order was 4,057 of which 87% belonged to small scale and cottage industries
sector.
The major
reason for country's low share in the international market have been
over-dependence on a few recognized international markets, lack of quality
control, poor packaging, high cost of production, inadequacy of infrastructure
like transport and power and non-availability of required inputs at right time
and prise. Considering the growing international demand for processed foods,
the items which hold good potential for exports from India are sea-foods,
spices, cashews, nuts, fruits and vegetables, fruits pulp, juices, jams,
pickles, canned fruits and vegetable dehydrated vegetables and gaur gums.
Leather
Goods
India has
the largest cattle population and thus has a substantial raw material base for
leather based industries, At present, the country's share in the world leather
market is about 4 percent and the target is to raise it by 10 percent by 2000's
because this sector holds potential for exports. The sector is plagued by
weaknesses like low volume of production units, poor quality, lack of
standardization poor delivery and absence of technological upgradation. These
weaknesses need to be attended to expeditiously and adequately tap the export
potential of leather goods in the country.
Electronic
Goods
The
electronic industry has registered a phenomenal compound growth rate of 35%
during the last decade 1981-1990. The share of small sector in 1993-1994 was
40% of output and 30% of exports of electrical industry 80% of exports of
electrical goods are from 'Export Processing Zone' alone. The electronic
industry holds tremendous potential for exports in electronics, software and
contract manufacturing. This potential needs to be tapped.
India has
the third largest technical manpower in the world. Recently, the technically
quali ed people have started assuming the role of exports. Some of them have
made an impressive head-way in export within a short period what is needed, is
to provide them support in terms of developed industrial shed/ plants and
credit facility.
Plastic
Goods
At
present, out of 18500 units manufacturing various industrial and consumer plastics,
around 18000 units are in small sector. The items of plastic exports include
carry bags, garbage bags, shopping bags, woven sacks, plastic moulded household
items like insulated thermoware, pens, spectacles frames, PVC hoses, PVC
leather cloths etc. In 1992-1993, the small sector accounted for 45% of these
exports. There still exists enough scope to diversify the products and
penetrate new markets. There main problems in this industry is facing is
shortage of plastic raw materials, (i.e) polymer. But, this has, in turn helped
the development of recycling of plastic waste industry and eco-friendly
measure.
Small
Scale Enterprise Shares
The
government of India has accorded high priority to the development of small
scale industries in the country. Under the protective and promotional policies
of the government, the small scale enterprises in the country's exports had
made their presence felt nationally and internationally.
Realising
the good export potential of small sector, the board of Trade & Ministry of
Commerce have identi ed 8 sectors and 15 items respectively for boosting
exports from the small scale sector. The bug bear of the sector has been the
inadequacies of the capital, technology and marketing. If the export potential
of small scale enterprises is to be tapped to the full extend, then the issues
like simpli cation of procedures, easier access to the bank and institutional
credit, improvement in infrastructure and marketing issues need to be attend to
expeditiously and adequately we wish our small enterprises a " Vibrant
Player in the International Business".
Related Topics
Privacy Policy, Terms and Conditions, DMCA Policy and Compliant
Copyright © 2018-2024 BrainKart.com; All Rights Reserved. Developed by Therithal info, Chennai.