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MICRO-ENTERPRISE
A micro-enterprise is a type of small business, often unregistered, having five or feweremployees. Micro
enterprises is an enterprise where the investment in equipment does notexceed Rs 10 lakh. They account for a
substantial share of total employment and gross domestic
product and they contribute significantly to poverty reduction. USAID defines “microenterprise”
as a firm of 10 or fewer employees, including unpaid workers, which is owned and operated bysomeone who is
poor.
MEDIUM ENTERPRISE
A medium-sized enterprise is defined as an enterprise which employs fewer than 250 persons.Medium enterprise
is that where the investment in equipment is more than Rs 2 crore but doesnot exceed Rs 10 crore.
SMALL ENTERPRISE
A small enterprise is defined as an enterprise which employs fewer than 50 persons.Smallenterprise is one where
the investment in equipment is more than Rs 10 lakh but does notexceed Rs 5 crore. The limit for investment in
plant and machinery / equipment for manufacturing / serviceenterprises, as notified,vide S.O. 1642(E) dtd.29-09-
2006 are as under:
Manufacturing Sector
Enterprises Investment in plant & machineryMicro Enterprises Does not exceed twenty five lakh rupeesSmall
Enterprises More than twenty five lakh rupees but does notexceed five crore rupeesMedium Enterprises More
than five crore rupees but does notexceed ten crore rupees
Service Sector
Enterprises Investment in equipmentsMicro Enterprises Does not exceed ten lakh rupees:Small Enterprises More
than ten lakh rupees but does not exceedtwo crore rupeesMedium Enterprises More than two crore rupees but
does notexceed five core rupees
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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 arenumerous business directories and trade
portals available online that contains a rich database of manufacturers, sellers and buyersTo start and
maintain these units, minimal investment is required.These MSME units are now being funded by many
government and private banks.The MSME sector is one of the greatest contributors of domestic production as well
as the exportearnings· Many major mergers have taken place recently.
Strengths:
The MSME sector is often driven by individual creativity.
It’s
potential for greater innovation both in terms of products and processes.Enterprises can be set up with very small
amounts of investments.Location flexibility to be located anywhere in the country. There is a well-spread
network at the national, state and the local level for providing a comprehensive range of supportservices under
marketing, technology, finance, and infrastructure and skill development.Maximum potential for employment
generation.Lowest Administrative cost & risk is lesser.Assist decentralization of power.Induce growth of
industrially backward regions ensuring balanced regional development.
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Weakness:
Small and Medium Enterprises (MSME), have inadequate access to finance due to lack of financial information
and non-formal business practices.
MSME’s also lack access to private equity and venture capital and have a very limited
access to secondary market instruments.
MSME’s face fragmented markets in respect of their inputs as well as products are also
vulnerable to market fluctuations.
MSME’s lack easy access to inter
-state and international markets. There is lack of awareness of global best practices.
The access of MSME’s to technology and product innovations is also limited.
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When we observe the general imbroglios associated with these segments of industries thefollowing strategies can
be proposed:
NICHE MARKET STRATEGY:
Launching a product into a niche market is far cheaper than launching a mass-market product.Potential customers
are easier to identify and to target. Niche markets often develop as a subsetof mass markets and mass marketed
manufacturers choose to launch niche products as well. Soin the context of creating awareness about their product
and also create a better platform to saletheir products, niche market strategy would be an appropriate plan.
FINANCIAL STRATEGY (CREATING SNAPSHORT OF COST, MARGIN,OPERATING
CAPITAL)
All small businesses need to have absolute certainty and clarity about their fixed costs and theirvariable costs into
the near-to medium term future and have mechanisms in place to review thison a regular basis. Cash flow
management is a basic and essential business requirement.If they need to borrow money as an overdraft or a
factoring arrangement or even off friends andfamily, it should be ensured that they are getting the best terms and
the maximum flexibilitypossible. They need to be allowed about eight weeks to arrange credit and plan
accordingly.Negotiations with the financial institution must include the flexibility to get out of thearrangements as
their cash reserves improve.It should be decided priory whether they are going to pay individual commissions,
team bonusesand special privileges. Are the special deals you are offering to employees sustainable in thelonger
term? All these factors must be considered.
COMPETITIVE STRATEGY:
Every organization faces competition and it is up to the organization to decide whether it usesprice or effective
distribution to position in front of the customers when there is a concernregarding the products. Here several factors
like understanding customer behavior and supplychain are important.
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Operations
–
(planning, scheduling, information sharing, inventory, forecasting)Delivery & logistics
–
(fulfillment, customer deliveries)
•
Supply chain
–
(information sharing, access to production planning data, inventoryreplenishment, order tracking, forecasting)
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Bibliography
http://msme.gov.in/msme_ http://news.franchiseindia.com/smallbusiness/MSME-contributes-over-45-in-India-s-
manufacturing-sector-
2353/ http://zambiachambers.org/index.php?option=com_content&view=article&id=737:msmes-policy-
opportune-initiative&catid=1:latest-news&Itemid=57 http://www.business-
standard.com http://www.thomex.com/trade-events/india-msme-summit-2009/index.html