Wednesday, November 14, 2007

Taking Up The Global Challenge

While bringing bigger challenges, globalisation has opened up newer opportunities. MSMEs need to gear up for both if they want to survive and grow

Globalisation brings with itself both economic opportunities as well as potential threats, particularly for developing economies. It is setting free flow of goods/services, resources and knowledge like never before. Gaining access to global markets today serves as a strategic and essential move for not only large corporates but also for Micro Small and Medium Enterprises (MSMEs). Global markets offer MSMEs with multitude opportunities to enhance their business through larger and new niche markets, lowering R&D costs, diversifying risk, enhancing access to finance, etc. While globalisation is opening up many opportunities for MSMEs, it is also bringing with it threats and challenges.

Opportunities
Access to global markets can also offer a host of business opportunities, such as –
• New niche markets
• Possibilities to exploit technological advantages
• Upgrading technological capability
• Ways of spreading risks
• Lowering and sharing costs, including R&D
• Improved access to finance.

Threats & Challenges
• Exposure to heightened international competition
• Issues of standards & compatibility
• Business regulations & intellectual property concerns

• Implications for business and organisation models, managerial and technological capability
• Lack of competitive supply capability
• Inability to handle quick capacity expansion
• Technical problems in accessing international markets.

Emerging Business Models
Competitiveness is not limited by a restricted set of business variables; it is actually the ability to compete at national and international frontier of best practices. It can also be defined as sustained increases in efficiency. With the increasing integration between domestic & global markets, it is essential for firms to be competitive in export markets too. Enhancement of competitiveness through restructuring, upgrading & continuous improvements thus constitutes the foundations for success. MSMEs need to achieve higher productivity through modern management techniques & technologies, and exploit economies of scale or identify targeted niches. Productivity gains are the ultimate gauge of the impact of such interventions. Productivity growth for sustainable economic progress is now based on flexibility & specialisation, with higher inter-firm interaction.

MSME Development In India
It has been studied and revealed that the lack of reliable and stable economic infrastructure, reduced growth of credit inflow and technological obsolescence, together led to inferior quality and low productivity of the MSMEs in India during the closed economy era.
The highly competitive environment that Indian
MSMEs had to contend with in the liberalised (post 1991) era did lead to some adverse impacts. The increased and intense competitive pressures led to a decrease of growth in this sector’s contribution to the country’s employment, output and exports. The number of units also came down. However, keeping in view the rapid changes in the economy and by overcoming several challenges in the last decade, Indian MSMEs performed fairly well. Today, they contribute more than 90% of the private sector. The
contribution of over 12 million Indian SMEs in the total industrial production is approximately 40%. Removal of quantitative restrictions in the early 2000s and reduction of import duties in the last 10 years has opened the sector to severe competition in the domestic as well as foreign market. The sector has become more quality and product conscious due to tough competition. The growth of MSMEs in the last eight years has been more than the growth of the industrial sector.

The high growth in this sector contributes a lot to the policies, which were designed for this sector. The Government, along with major developmental and support institutions, has been focusing on the SMEs ever since the economic reforms have taken place and has been working as a facilitator to bring the MSMEs at par with the foreign players. MSMEs today get support from government in terms of credit & finance, technology, business development, infrastructure and other areas.
To create market leaders out of SMEs, Confederation of Indian Industry (CII) and ICICI Bank along with the Indian Institute of Management, Calcutta (IIM-C), are in the process of developing the ‘Visionary SMEs Programme’ (VSME). The programme is targeted at skilldevelopment among SME personnel. The VSME programme is most likely to begin by April next year. It targets SMEs which have the potential of becoming future ‘Sonys’ or ‘Toyotas’ in terms of an excellent R&D base. These SMEs should be able to reach world-class levels with inputs through this programme. They should be then able to create world-class brands in certain products and increase their market share globally.
Following the enactment of MSMED Act 2006 it is easier to cater customised solutions to MSMEs based on their size and sector much more easily than earlier. CII with its vast network of 52 offices across India and having its international linkages with 271 counterpart organisations in 100 countries across the globe, endeavours to make the SMEs self reliant and globally competitive at the forefront of change. It is imperative to create and have centres of excellence with international co-operation for basic research and joint developments for MSMEs to be continually competitive globally.
(source: Economic Times 13.11.2007)

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