PRESENTATION ON PROBLEMS AND OPPORTUNITIES OF SMALL BUSINESS

SUBMITTED TO :Mr. Pankaj Goel SUBMITTED BY ::Anu Tayal Navdeep Sharma

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CONTENTS

 Introduction to Small Business  Problems of Small Business in India  Opportunities for Small Business in India  Indias rapidly growing sectors

INTODUCTION TO SMALL BUSINESS

Small business enterprises play an important role in the industrialization of India. They provide large scale employment and have a comparatively higher labour capital ratio. They need a shorter gestation period, lower investments and ensure a equitable distribution of income and facilitate an effective mobilization of resources of capital and skill. According to GOI-2000, An undertaking having an investment in plant and machinery of not more than Rs.1 cr. The GOI has also given an important place to small business in framework of Indian Economy. As a result, Small business enterprises have achieved an impressive growth in number of units over the period of time.

PROBLEMS OF SMALL BUSINESSES IN INDIA

The growth of entrepreneurship in India , directly or indirectly depends upon the growth of small business units .The small business enterprises have their own set of problems which are faced by them. Previously such problems were not considered seriously, but GOI is keen on providing solutions to such problems through various departments.

Problems of small businesses

Problems related to Marketing

Problems related to Production

Problems related to Finance

Problems related to Human Resources

Other Problems

PROBLEMS RELATED TO MARKETING

 Poor product quality :- There is generally low demand of the products produced by small business units due to poor quality. There are various reasons for low quality * Lack of quality consciousness * Dependence on manually operated machines * Lack of skilled labour workforce * Lack of technical education * Insistence of buyers for low price Poor sales promotion :- Many small business units do not want to spend any amount on sales promotion activities such as advertising ,after sale services etc due to lack of awarness .

Contd..

Absence of suitable marketing channels :- Marketing problems of these units vary not only by size of these units but also by the pattern of distribution channels necessary to reach the customer. Lack of marketing opportunities :- Small units set up in rural and back word areas face the problem of finding market opportunities within local areas and have to search for outlets elsewhere for which they do not have adequate resources.

PROBLEMS RELATED TO PRODUCTION

Shortage of raw material:- Non-availability of quality raw materials on a timely basis in an adequate quantity is one of the main problem faced by these units. Sub-Standard quality of raw material is supplied to them. Obsolescence of Technology being used :- Majority of small scale units use old techniques of production & outdated machinery and equipment. They are not able to afford new machines and equipments and therefore not in position to use the latest techniques of production. Therefore productivity and quality in small scale units tends to be low while unit cost of production is generally high.

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Gestation period:- Means gap between establishment and production of a unit. Many small scale units having long gestation period because there is procedural delay in sanctioning the loan, power connection, shortage of raw material etc. High production cost:-Two main inputs of cost of products are labour and raw material. Various problems related to raw material and labour are * Poor quality of material * Insufficient supply of raw material * High transport cost * Unskilled labour * labour strikes All these problems are result in low productivity and high production cost.
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Contd..
Electricity:- Power is major input to many industries and its shortage can cause failure in the industry. Many small scale units have become sick and have closed down due to * Delay in getting new connection * Inadequate supply * High costs

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PROBLEMS RELATED TO FINANCE

Inadequacy of funds:- Finance is one of the critical inputs for growth and development of industry. Inadequate access to credit is a major problem facing small units. They are unable to procure adequate financial resources for purchase of machinery, equipments as well as for meeting day-to-day expenses. Due to their low goodwill ,little fixed investment ,they find it difficult to borrow at reasonable rates. Hurdles in getting loan sanctioned:* Personal qualification of entrepreneur * Firms accounting policy * Size of enterprise * Nature of product & market prospects etc

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Contd..
Pattern of repayment of loan:- The amount of installment and repayment schedule are fixed by financial institutions. If a unit fails to repay the installment then the institution can take serious action. Improper utilization of funds:- If a unit is not able to manage its funds effectively it may get sick. Inappropriate financial structure:- In small units, the usual course of sickness is due to under capitalization, inappropriate finance mix and high cost of capital. Many small scale entrepreneurs lack knowledge of these facts.

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PROBLEMS RELATED TO HUMAN RESOURCE

Non-availability of skilled man power:- As small units located in backward areas may get abundant supply of unskilled labour. Professional managers, engineers, qualified staff is not willing to work in a backward places. The enterprise have to pay more to retain the skilled labour force. Labour related problems:- Labour related problems are absenteeism, high wage rate, training cost, indiscipline etc. In various small units these problems have led to low productivity, increase in wastage, high maintains cost, deterioration of quality results in decline profitability of units. Less no. of employees:- The organization structure of small units is simple due to presence of few employees. The owner himself manage all the activities. However the business grow, the owner finds it difficult to manage all the activities. For this, it become necessary to increase the amount of manpower in enterprise.
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OTHER PROBLEMS
Infrastructure facilities:- Adequate infrastructure facilities are necessary for the overall development of business. But the small scale units face various problems related to this, that are * Shortage of power supply * Lack of proper airways and waterways * Non-existence of basic roads and highways * Small units associated in rural areas find it difficult to communicate with other regions due to lack of telecom network. Lack of technology up gradation:- The technology use by small units is generally not globally competitive. Without technology up gradation these units not survive in global market.

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Contd Low level of ICT adoption:- Information and Communication Technologies (ICT) adoption by Indian small enterprises is very low compared to advanced countries. The main reason for low adoption is the small units are not technology savvy and are resistant to change. Without ICT adoption they are unable to get the various advantages which these technologies can bring to a small business enterprise. Research & Development:- Indias small businesses are not inclined towards research & development initiatives. There is no proper linkage between academic institutions, research and development institutions and industry.

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Contd..
License system:- Obtain license from authority is other problem faced by small units. A lot of time and energy is required. This is a major handicap which hinders the growth of small units.

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OPPORTUNITIES FOR SMALL BUSINESSES

The Government of India has undertaken several reforms to attract more investors to the small business sector in India. The Indian business opportunities is huge in possibly in every sector       Financial services Telecom Auto Mobiles Media IT Real Estate etc.
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FAVOURABLE BUSINESS OPPORTUNITIES IN INDIA

Improvement in the infrastructure and intellectual capital. Progressive tax reforms. Tailor made policies as per investor requirements. Massive young skilled work force. Increasingly Indians have become more brand conscious, resulting in increased growth for retail sector. Introducing the concept of Public Private Partnership(PPP). More mergers and acquisitions to build brand value of the individual Co.s and in turn creating the Indian brand value.
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Contd..
Indias competitive advantage in Information Technology can be used to enhance productivity in industries. Availability of huge pool of technical manpower . India is rich in natural resources and self sufficient in agriculture. A well established banking system consisting of public and private banks and other financial institutions. The capital market in India are one of the fastest growing market in the world, attracting huge investments from FIIs. India is a well established democratic country, with free and fair judiciary.
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INDIAS RAPIDLY GROWING SECTORS

Indian Retail Industry Indian Software Industry Indian Pharmaceutical Industry Indian Automobile Industry Hospitality Industry in India

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Indian Retail Industry

The Indian retail industry is the largest among all the industries, accounting for 10% of the countrys GDP and around 8% of the employment. The India Retail Industry is gradually inching its way towards becoming the next boom industry. Indian retail is expected to grow 25 per cent annually. The future of the India Retail Industry looks promising with the growing of the market, with the government policies becoming more favorable and the emerging technologies facilitating operations.

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Indian Software Industry

The software industry is the main component of the information technology in India. Presently there are more than 2000 software firms in the country. It is expected that the Indian software industry will generate a total employment of ten million people by 2012

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Hospitality Industry in India

The successful growth story of hospitality industry in India seconds only to china in Asia pacific. Hospitality segment, just like many other segments in India is booming. The world travel and tourism council, India data says, India ranks 18th in business travel and will be among the top 5 in this decade. Hospitality industry in India is set to grow at 15% a year

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Indian Pharmaceutical Industry

A highly organized sector, the Indian pharmaceutical industry is estimated to be growing at about 8 to 9 percent annually. The Indian pharmaceutical industry ranks very high amongst all the third world countries, in terms of technology, quality and the vast range medicines that are manufactured. The Pharma industry in India is one of the major foreign direct investments encouraging sectors

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Indian Automobile Industry

Indian automobile industry has grown leaps and bounds since 1898,a time when car had touched the Indian streets for the first time. Automobiles industry of India can be broadly classified under passenger vehicles, commercial vehicles , three wheelers and two wheelers. Some of the leading names in Indian automobile industry Maruti, Tata Motors, Mahindra & Mahindra, Hero. The auto mobile sector of India is the seventh largest in the world.
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CONCLUSION
The growth & development of small scale units has been constrained by several factors including technological obsolescence, inadequate & irregular supply of raw material, imperfect knowledge of machinery, constrains of infrastructure facilities, lack of managerial skills, low quality products and high production cost. Instead of this Government of India undertake several reforms which include provisions of training facilities , availability of machinery, special bonus for setting small business in backward areas, tax deduction for small scale business.

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