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“FACT ORS INFLUENCING THE PERFORMANCE OF SMALL SCALE AND MEDIUM SCALE FIRMS IN AND AROUND MUMBAI”  Name of Student :  Nehete Rupendra Sharad Name of Guide :  Dr. B. E. Nark hede  Name of Co-Guide: Dr. S.K. Mahajan  Friday, November 18, 2011 1 R S Nehete VJTI

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“FACTORS INFLUENCING THE PERFORMANCEOF SMALL SCALE AND MEDIUM SCALE FIRMS

IN AND AROUND MUMBAI”

Name of Student : Nehete Rupendra SharadName of Guide : Dr. B. E. Narkhede Name of Co-Guide: Dr. S.K. Mahajan

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CONTENTS

Part 1: INTRODUCTION

Chapter One: Introduction i) Background to the Researchii) Research Problem

iii) Justification For The Research

iv) Scope of the Study

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Part 2: Literature ReviewChapter Two: Operation Level Factors Chapter Three: Entrepreneurial Skills

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Part 3: Research Framework and MethodChapter Four: Theory Development i) Development of Independent Constructs ii) Development of Dependent Constructs iii) Organizational Level Factors and Performance iv) Summery

Chapter Five: Research Methodology Chapter Six: Research Methods

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Part 4: Analysis and Results 38

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INTRODUCTION

This study examines the relationship between the operational level factorsand the operational performance for small and medium scale enterprises.The entrepreneurial skill needed to operate the SMEs is also important as

these industries are entrepreneur specific so this issue is also taken in thisresearch for study.The exploratory study is carried out to formulate the theoretical basis foroperational level factors important for SMEs and their operationalperformance (priorities).There after the model is formulated based on the research objectives and

the hypothesis coming out of literature review.The model is tested by structural equation method using AMOS 7 software

to find out the relationship between observed and unobserved (latent)variables.The second research problem of entrepreneurial skills is also studied

through exploratory study as well as statistical analysis.

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RESEARCH PROBLEM

What are the key operation level factorsimportant for business performance of SMEs?

What are the skills important for businessperformance of SMEs?

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OBJECTIVES

To determine the operational level factors thatinfluences the business performance of SMEs.

To find out the key operational level factorsinfluencing the business performance of SMEs.

To determine the skills that influences thebusiness performance of SMEs.

To determine the key skills that influences thebusiness performance of SMEs

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LITERATURE REVIEW

Type of Enterprise Investment in plant and machinery/equipment (excluding landand building)

Manufacturing Enterprises Service Enterprises

Micro Up to Rs. 25 lakh Up to Rs. 10 lakh

Small More than Rs. 25 lakh and up

to Rs. 5 crore

More than Rs. 10 lakh and up

to Rs. 2 croreMedium More than Rs. 5 crore and up

to Rs. 10 croreMore than Rs. 2 crore and up

to Rs. 5 crore

Definition of MSM Enterprises

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OPERATION LEVEL FACTORS

Skinner conceived a model for manufacturing strategy in which thecompetitive environment suggest a basic business strategy which in turnsuggest the manufacturing mission or strategy. This mission can beencapsulated in to choices made with respect to four competitive priorities:cost, quality, delivery and flexibility. The design of the manufacturing systemcan be made to fit the strategy by making appropriate tradeoff or decisions

in key areas.Further, Skinner suggested five areas where tradeoff decisions had to be

made to assure a fit between business strategy and manufacturing: 1) plantand equipment 2) production planning and control 3) labor and staffing 4)product design/engineering; and 5) organization and managementBryan D. Prescott (1995) has presented ten essentials for business

success such as customer centered organization, customer centeredleadership, customer centered strategy, management of people, training and developing people, management of resources, process control andimprovement, customer satisfaction, employee satisfaction and; communitysatisfaction.

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OPERATION LEVEL FACTORS

Hayes and Wheelwright (1984) have proposed that congruencyamong operations managers should exist at two levels. They shouldagree on (1) where the organization is trying to go (competitive goalsor priorities) and (2) the day-to-day decisions that involve trade-offsamong priorities and that, over time, create a pattern of manufacturing strategy.Various manufacturing practices such as TQM, JIT etc. are followed inindustries to excel in organizational performance. The objective of

the practices, as management commitment and training to workers,is to produce improvement in operative and business performance(Powell, 1995).

Literature review is carried out to find out the operation level factorsand are examined for six factors such as PC =Process control andimprovement, MR=Management of resources, MP=Management of people, TD=Training and developing people, TW= Team work,PS=Partnership with suppliers

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CONCEPTUAL FRAMEWORK FOR THE THESIS

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1. Process control & improvement

2. Management of resources

3. Management of people

4. Training & developing people

5. Team Work

6. Partnership with Suppliers

Operational performance

Cost, Quality, Flexibility, Delivery Growth in Productivity

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The first construct process control and improvement refers to the productivity andflexibility are as good as, or better than, the best of competition; processes are undercontrol and innovation and continuous improvement are encouraged (Bryan D.Prescott, 1995, Skinner W.,1974, Haynes R.H., Wheelwright S.C., 1984, T. J. Hill,1992, Eve D. Rosenzweig, and George S. Easton, 2010).The second construct management of resources refers to utilization of resources ison a par with the best of the competition and technology is effectively used toimprove productivity and flexibility (Bryan D. Prescott, 1995, Haynes R.H.,Wheelwright S.C., 1984, Eve D. Rosenzweig, and George S. Easton, 2010).The third construct management of people refers to the employing flexibleleadership style, insist on personal responsibility for quality and provide the tools,information, empowerment, and support required for people to participate in a questfor excellence in all aspect of the business (Bryan D. Prescott, 1995, SkinnerW.,1974, Haynes R.H., Wheelwright S.C., 1984, T. J. Hill ,1992, Buffa,1984, Fine &Hax, 1985, Peter T. Ward et.al.1990, Eve D. Rosenzweig, and George S. Easton,2010)

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The forth construct training & developing people refers to the supply of qualified, competent and flexible people which are sufficient to meetoperational demands and contingencies and training is cost effective andbased on company standards (Bryan D. Prescott, 1995, Fine & Hax, 1985,Ricardo M. Pino 2007, Eve D. Rosenzweig, and George S. Easton, 2010).The fifth construct team Work refers to the cumulative actions of the team(group of people) during which each member of the team subordinates hisindividual interest and opinions to fulfill the objectives or goals of the group(Besterfield Dale H. et.al., 2003, Flynn Barbara B; Sakakibara Sadao;Schroeder Roger G., 1995, Eve D. Rosenzweig, and George S. Easton, 2010)The sixth construct supplier partnership refers to long term commitment toachieve quality, increased efficiency, lower cost, innovation and continuous

improvement of products and services between two or more organizations(Ricardo M. Pino, 2007, Eve D. Rosenzweig, and George S. Easton, 2010)

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OPERATION LEVEL FACTORS STUDIES

Authors PC MR MP TD TW PS

Powell, T.C. (1995) X X X X X

Ahire, S.L., Golhar, D.Y., Waller,M.A (1996)

X X X X X X

John Miltenburg (2008) X X X X X X

Samson, D., & Terziovski, M.(1999)

X X X X X

Huarng, F., & Cheng, Y. (2002) X X X X X X

Li, J.H., Anderson, A.R., & Harrison, R.T. (2003)

X X X X X

Lagrosen S. (2002) X X X

Agus, A. (2005) X X X X X X

Li, J.H., Anderson, A.R., & Harrison, R.T. (2003)

X X X X X

Sadao Sakakibara, Barbara B.Flynn, Roger G. Schroeder(1993)

X X X X X X

J. Ukko, J. Tenhunen, H.Rantanen(2007)

X

Honggeng Zhou et.al.(2008) X

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OPERATION PERFORMANCE OR PRIORITIES

Skinner (1974) described common competitive performance criteria formanufacturing strategy such as short delivery cycles, superior quality andreliability, dependable deliveries, fast new product developments, flexibilityin volume changes and low cost.Hayes and Wheelwright (1984) have defined this term as price (cost),quality, delivery dependability, and flexibility.Ferdows and De Meyer (1990) identified four dimensions: cost, quality,dependability, and flexibility.Corbett and van Wassenhove (1993) point out that competitive capabilityrepresents, to a great extent, product, place, and price dimensions. Productrefers to the physical dimension, such as quality. Place includes deliveryissues and the availability of products. Price refers to the amount a

customer pays for the product or service. Additionally, they state that thesemeasures of capabilities have their counterpart in terms of competencies in the sense that capabilities are outward looking while competencies areinward looking. As an example, the counterpart of price is cost.

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OPERATION PERFORMANCE OR PRIORITIES

Wood et al. (1990) examined the dimensions of manufacturing capabilities that focus on the following capabilities: low price, high product performance,high durability, high product reliability, short delivery time, delivery on duedate, product customization, number of features, product cost, conformance

to design specifications, improved manufacturing quality, cost, on-timedelivery, product cost, quality consistency, quality perceived by customer,

and product priceVickery et al. (1993) suggest a list of production competence characteristicsincluding product flexibility, volume flexibility, process flexibility, low productcost, delivery speed, delivery dependability, production lead time, productreliability, product durability, quality, competitive pricing, and low price.Driven by its business strategies, a firm sets competitive priorities and

develops action plans. As action plans are implemented, manufacturing competencies are developed and these competencies allow a firm to buildmanufacturing capabilities that enable them to compete in the market(Koufteros et al., 2002).

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OPERATION PRIORITY STUDIES

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LITERATURE REVIEW ON ENTREPRENEURIALSKILLS

Business success is related to the achievement of goals andobjectives. The different stakeholders may have different goals andaspirations for the enterprise, and they may change over timeJennings and Beaver (1997, 67 - 68) suggest that it would beappropriate to regard an entrepreneur as the primary stakeholder

and to consider how she or he might define success or failureSome researchers have argued that success is driven by theentrepreneurial orientation (Covin & Slevin 1991; Lumpkin & Dess1996; Wiklund & Shepherd 2004)According to Lumpkin and Dess (2001), the concept of entrepreneurial orientation consists of five dimensions: autonomy,innovativeness, risk taking, proactiveness, and competitiveaggressiveness.According to de Koning and Brown (2001), the entrepreneurialorientation is positively associated with opportunity alertness.

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Shane (2000) has discovered that people recognize the opportunitiesrelated to the information and knowledge, they already possess.Small business success has often been classified into three categories of antecedents: the individual characteristics of the owner-manager, firmcharacteristics and environmental characteristics (Cragg & King 1988;Rutherford & Oswald 2000).Beal (2000) provides a similar model. He emphasizes that both external andinternal alignment influence a firm‟s performance. The external alignmentmeans the alignment between the competitive strategy and the industry lifecycle stages, and its effect on the performance. The internal alignmentmeans the competitive strategy and the small business manager‟sfunctional experience and its effect on the performance.

According to Jennings and Beaver (1997), a popular belief is that superiorperformance and competitive advantage in the smaller firm is invariablyequated with successful business development culminating in exceptionalreturn on the investment, sales growth, volume, profit and employment.

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MODELS OF FIRM’S SUCCESS

Van Vuuren and Niemen(1999) developed a threedimensional model in whichentrepreneurialperformance is a function of motivation timesentrepreneurial andbusiness skills, as shown

belowE/P = aM x bE/S x cB/S

E/P is defined as increase in entrepreneurialperformance which is based on the starting of a business, utilizing an opportunity and growthof the business idea.M = Motivation ,this includes inner control,persistence, leadership, decisiveness,determination and sheer guts, achievementimagery, ability to inspire, ability to overcomeobstacles or blocks, ability to get help, reaction to success or failure.E/S = Entrepreneurial skills cover the ability

turn their business idea into feasible businessopportunities, to start and to grow a businessenterprise. It includes creativity, innovation,risk taking, and the ability to take successfulentrepreneurial role models and identificationof market opportunities.B/S = Business skills covers ability to formulatebusiness plans, financial, marketing,operational, human resources, legalcommunication and management skills.a,b,c are constant coefficient.

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MODELS OF FIRM’S SUCCESS

Wickham (2001) stated the entrepreneurialperformance results from a combination of industry knowledge, general managementskills, people skills, and personal motivation. Itcan be represented as;

Performance = W (industry, management,

interpersonal, motivation)

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MODELS OF FIRM’S SUCCESS

Ucbasaran et al (2004) identified three distinct capabilities that the entrepreneur requires to succeed:The entrepreneurial role, which assist with businessdevelopment.

The managerial role, which assists functional, needs whichinclude human resources management, marketing,operations, administration, finance and planning.The technical role, which needed for functioning andproducing products.

Ucbasaran et al model can be represented in mathematicalform as;Success = U (E/S, B/S, Technical)

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MODELS OF FIRM’S SUCCESS

Darroch and Clover(2005) model describesSME success as a function of preference forself employment, motivation, entrepreneurialskills(energizing behaviours) and businessskills, moderated by background and firm levelfactors. Their model can be represented in

mathematical form as;Success = D (motivation, E/S, B/S)

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MODELS OF FIRM’S SUCCESS

Perks and Struwig (2005) list personal, technical, business operations andmanagement skills as the four categories of skills that are needed to ensureentrepreneurial success. Their model can berepresented in mathematical form as;

Success = P (personal, management, B/S,Technical)

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INTEGRATATED MODEL

Considering all the above model an integrated model can beformulated which explains entrepreneurial performance is dependenton the availability of product differentiation competencies andenterprising competencies and functional competencies. Product and

service differentiation is the ability to ensure that the product orservice is produced at an acceptable quality. This solely depends ontechnical skill . Entrepreneurial competencies depend onentrepreneurial and personal skills . Functional competencies assist

the entrepreneur to function the business and find the balancebetween opportunity, resources, and the entrepreneurial team.Functional competencies depend on business skills.

E/P = (a.P/S x b.E/S) x c.(B/S) x d.(T/S)Where: E/P is increase in entrepreneurial performance, P/S ispersonal skills, E/S is entrepreneurial skills, B/S is business skills,and T/S is technical skills

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MODELS OF FIRM’S PERFORMANCE BASED ON

ENTREPRENEURIAL SKILLSModel by Model summery

Glancey et al(1998) Increase in performance = G (traits, motivation, management) xh(market)

Van Vuuren and Niemen(1999)

E/P = aM x bE/S x cB/S

Wickham(2001) Performance = W (industry, management, interpersonal, motivation)

Erikson (2002) Performance = E (opportunity) x M x (B/S + opportunity-id x resource)

Man et al model Performance = G (firm competitive scope) x M (O/C,E/C)

Ucbasaran et al(2004) Success = U (E/S, B/S, Technical)

Darroch and Clover(2005) Success = D (motivation, E/S, B/S)

Perks and Struwig (2005) Success = P (personal, management, B/S, Technical)

Combined model E/P = (a.P/S x b.E/S) x c.(B/S) x d.(T/S)

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SKILL NEEDED TO IMPROVEENTREPRENEURIAL PERFORMANCE

Personal skills

Business management skills

Entrepreneurial skills

Technical skills.

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SKILL NEEDED FOR IMPROVING ENTREPRENEURIALPERFORMANCE

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Personal skills(P/S) Business management skills(B/S)

Entrepreneurial skills(E/S) Technical skills (T/S)

Key skills Key skills Key skills Key skills

Motivation (need forachievement)

Marketing mgt. Opportunity recognition Ability to use tools, procedure& techniques

Financial mgt. Ability to gather & control

resources

knowledge of industry its

standard & practices Human resource mgt.

Supportive skills Supportive skills Supportive skills

Adaptability to change General management Creativity

Communication ICT skills Innovation

Decision making Legal Role model interpretation

Negotiating skill Networking Calculated risk taking

Learning ability Operational

Numeracy Planning Problem solving Research & development

Time management Business system

Value chain management

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RESEARCH PROPOSITIONS (HYPOTHESIS)

H1: Process control and implementation is positively related to operationalpriorities of SMEs.H2: Management of resources is positively related to operational prioritiesof SMEs.H3: Management of people is positively related to operational priorities of SMEs.H4: Training and developing people (continuous improvement) is positivelyrelated to operational priorities of SMEs.H5: Partnership with supplier is positively related to operational priorities of SMEs.H6: Teamwork is positively related to operational priorities of SMEs.

H7: Operational priorities have a strong impact on growth in productivity.H8: An operational priority mediates the operational level factors andoperational performance.

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Based on entrepreneurial skills required to run the SMEsand in accordance with second research problem of thisstudy following hypothesis can be proposed;H9: The following skills are not likely to be considered as keyskills:

o Proposition 9.1 Marketing o Proposition 9.2 Tehnicalo Proposition 9.3 Motivationo Proposition 9.4 Human resourceo Proposition 9.5 Opportunity identificationo Proposition 9.6 Financeo Proposition 9.7 Gathering of resources

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H10: The following supportive skills are not likely to be considered as importantsupportive skills:

o Proposition 10.1 Numeracy and literacyo Proposition 10.2 business systemo Proposition 10.3 computer literacyo Proposition 10.4 operations managemento Proposition 10.5 strategy and business planning o Proposition 10.6 Risk taking o Proposition 10.7 Life skillso Proposition 10.8 Communicationo Proposition 10.9 Business linkageso Proposition 10.10 Legalo Proposition 10.11 Research and developmento Proposition 10.12 Supplier managemento Proposition 10.13 Role models

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RESEARCH METHODOLOGY

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QUESTIONNAIRE: CONTENT, DESIGN, ANDSTRUCTURE

The final questionnaire has total 20 question some of which are subdivided in to sub questions.Question number 16 assesses operational level factorsnecessary for business performance which consist of

total 75 sub questions rated on a six point Likert scale.Also there is one question number 17 which consist of five sub questions to assess the operationalperformance.Question number 18 consists of 20 sub questions toassess important skills required for businessperformance, which is assessed based on whether notvery, moderately, very, and extremely important basis.

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SETTING AND DATA COLLECTION

The initial sampling that is list of SMEs inMumbai and nearby areas such as Thane andNaviMumbai is obtained from the DIC,

confederation of Indian industries and theMaharashtra chamber of commerce. Thecriterion of selection is the turnover of industryas per the definition of SMEs in Indian context.

This left a final list of 2100 sampling unitswhich includes metal processing andmachinery manufacturers.

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PROCEDURE

Anticipating 15-18 percent response ratepostal questionnaires were sent to 1560owners. The questionnaire was addressed

personally to the CEO or owner of each firm. In the first six weeks, 231 SMEs responded, arate of 14.80 percent.

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DATA ENTRY

Each business owner was required to makeresponses on the questionnaire, which werecoded and manually entered into SPSS version

15.0. Accuracy of the data file was ensured bycareful proofreading of the original data against

the computerized data file, as well as

examination of descriptive statistics andgraphic representations of the variables

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DEVELOPING AND SPECIFYING MEASURES

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CONSTRUCTS MEASURED BY THE SURVEY

INSTRUMENT

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ANALYSIS AND RESULTS

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RELIABILITY AND VALIDITY ANALYSES

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CORRELATIONS AND CRONBACH ALPHA

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RESULTS FOR STRUCTURAL MODELING

The structural equationmodeling approach isemployed to test thehypothesis and to gaininterpretational clarityof the relationships

among the constructs.The figure shows thepath analysis model for

the constructs. Theoverall fit for the modelwas very good chisquare=27.776; df=24;CFI=0.921;RMSEA=0.048;GFI=0.936 andAGFI=0.824).

e1e2e3e4e5e6

.00

pc

.00

mr

.00

mp

.00

Td

.00

tw

.00

ps

.09

flex

.22

quality

.09

cost

.10

delivery

.29

Productivity

e8

e9 e10 e11

e12

Chi square=27.776df=24

p=.270

AGFI=.824CFI=.921GFI=.936RMSEA=.048

.30.12-.06 .16.18-.10-.06

.45.22-.06.29

-.25.01.23 .22.11-.18 .00-.14.02 -.09.10 -.02.03.22 .04 -.16 -.08

.32

.25

-.27

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PATH COEFFICIENTS OF THE MODEL

44

Impact of Path coefficientProcess control and implementation on

CostQuality

Flexibility Delivery

-.10289642 .29965303

.16153149

.18115451

Management of resources on CostQuality Flexibility Delivery

.05661217 -.24941077 .01111151 .22799770

Management of people on CostQuality Flexibility Delivery

-.17514994 .21973219 .11225527 .11980642

Training and developing people on

CostQuality

Flexibility Delivery

-.05878985 -.00364437

-.13722079 -.08715154

Partnership with supplier on CostQuality Flexibility Delivery

.21592144 -.07625419 -.15656011 .03600243

Teamwork on CostQuality Flexibility Delivery

.03135462 -.02490837 .09528353 .01571512

Cost on

Growth in productivity .28846117

Quality on

Growth in productivity .44590453

Flexibility on

Growth in productivity .21791484

Delivery on

Growth in productivity -.05576850

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HYPOTHESIS

H1: Process control and implementation is positively related to operational prioritiesof SMEs. For this hypothesis to be supported, at least one significant path from the processcontrol and implementation to the operation priority should exist. The result from

table shows that all the path except cost are positive and supporting the hypothesis.

H2: Management of resources is positively related to operational priorities of SMEs. Management of resources not significantly affects the cost, quality and flexibility butaffects significantly delivery of operation priority. So this hypothesis is supported .

H3: Management of people is positively related to operational priorities of SMEs. Quality, delivery and flexibility is significantly affecting the operation priority whilecost is not affecting significantly, so this hypothesis is supported .

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H4: Training and developing people is positively related to operationalpriorities of SMEs. This hypothesis is not supported as no path significantly affects theoperation priority.H5: Partnership with supplier is positively related to operational priorities ofSMEs. This hypothesis is supported as cost is affecting operation prioritysignificantly while others not so significantly.H6: Teamwork is positively related to operational priorities of SMEs. This hypothesis is not supported as none of the component of operationpriority is significantly affected by teamwork.H7: Operational priorities have a strong impact on growth in productivity. Cost, quality, flexibility are significantly affecting growth in productivity whiledelivery not affecting significantly, so this hypothesis is supported .

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.08

operations priority

e1e2e3e4

e5e6

.09

pc

.45

mr

.11

mp

.05

Td

.00

tw

.18

ps

.00

flex

.00

quality

.01

cost

2.10

delivery

.01

Productivity

.02

e8e9 e10 e11

e7

e12

.00

operation level factors

.43 .05 .23 .34

.67

Operational performance

.08e13

-.12 1.45

.30

-.04

.28 -1.00

Chi square=33.354df=37p=.641

AGFI=.857CFI=1.000GFI=.920RMSEA=.000

-.31

.25

-.33 .45

.16-.25

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.05

operations priority

e1e2e3e4e5e6.10

pc

.45mr

.11

mp

.05Td

.00tw

.19

ps

.00

flex

.00

quality

.01

cost

3.08

delivery

.00

Productivity

.05

e8e9 e10 e11

e7

e12

.00

operation level factors

.43 .05 .22 .33

.67

Operational performance

.00e13

-.08 1.76

.32

-.04

.23

Chi square=32.250df=36

p=.648

AGFI=.858CFI=1.000GFI=.923RMSEA=.000

1.00

.15

-.33.44

.25

-.33

.18-.26

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.22

operations priority

e1e2e3e4

e5e6

.10

pc

.45

mr

.12

mp

.06

Td

.00

tw

.17

ps

.01

flex

.00

quality

.04

cost

.73

delivery

.04

Productivity

-.01

e8e9 e10 e11

e7

e12

.00

operation level factors

.42 .06 .25 .34

.67

Operational performance

.21e13

-.20 .85

.32

-.09

.47 -1.08

Chi square=32.682df=36

p=.627

AGFI=.854CFI=1.000GFI=.920RMSEA=.000

-.33

.23

-.35 .46

.19-.21

.79

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PERFORMANCE OF THREE MODELS

1) There is a significant differencebetween the performances of models Aand C. The χ 2 (MA– MC) is .672, which issignificant in χ 2 (DF=1, P<0.05).(2) There is no significant differencebetween the performance of models Band C. The χ 2 (MB– MC) is .432, which isnot significant in χ 2 (DF=1, P<0.05).

When the modification indices areexamined for model A based on modelB, the indices suggest that there exists arelationship between operation levelfactors on operational performance.When the modification indices areexamined for model C based on modelB, the indices suggest that there is norelationship between the operationalpriority and operational performance.The results of model B support thatoperation level factors have directrelationship with operation priorities.The path coefficient is .23 where thestatistical significance at p<.001. Thepath coefficient between operation levelfactor and operational performance is1.00 which is also significant at the levelp<0.001.

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H9: The following skills are not likely to beconsidered as key skills: Proposition 9.1 Marketing Proposition 9.2 TechnicalProposition 9.3 MotivationProposition 9.4 Human resourceProposition 9.5 Opportunity identification

Proposition 9.6 FinanceProposition 9.7 Gathering of resources

H10: The following supportive skills are notlikely to be considered as important: Proposition 10.1 Numeracy and literacyProposition 10.2 business systemProposition 10.3 computer literacyProposition 10.4 operations managementProposition 10.5 strategy and business

planning Proposition 10.6 Risk taking Proposition 10.7 Life skillsProposition 10.8 CommunicationProposition 10.9 Business linkagesProposition 10.10 LegalProposition 10.11 Research and development

Proposition 10.12 Supplier managementProposition 10.13 Role models

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KMO AND BARTLETT'S TEST

52

Kaiser-Meyer-Olkin Measure of Sampling Adequacy.

.576

Bartlett's Test of Sphericity Approx. Chi-Square 1296.428

df 190

Sig. .000

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ROTATED COMPONENT MATRIX

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CRONBACH ALPHAS

Cronbach alphas for factor 1, 2and 3 are acceptable. On theother hand for factor 4 and 5was not acceptable as it isnegative. Low Cronbach alphasand eigenvalue<1 indicate lowvalidity and reliability of thefactor. Normally such a factorwould be excluded in a researchstudy.We have decided to include the4 th and 5 th factor because theeigen value is more than 1 andit is identified in literature asimportant skills.

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THE CHI-SQUARE TEST

55

Skill variables Successful group Less successful group Chi- square P valueNotat all

Moderately

Very Extremely

Not atall

Moderately

Very Extremely

Business linkage 5.63 21.12 71.83 1.40 20.20 22.12 42.10 15.48 46.127 <0.0001

Communication 11.26 40.84 33.00.

14.08 39.34 28.10 26.18 6.38 18.070 <0.0001

Creativity 14.08 42.25 38.02 5.63 42.18 28.80 16.12 12.90 27.310 <0.0001

Humanresources

4.22 32.39 49.29 14.08 40.12 27.80 17.74 14.34 33.958 <0.0001

Life skills 5.63 19.71 54.92 19.71 21.10 22.43 30.40 26.07 37.676 <0.0001

Literacy 5.63 25.35 54.92 14.08 27.15 28.18 30.10 14.47 39.479 <0.0001

Operations 5.63 5.63 47.88 40.84 13.48 18.30 39.12 27.10 43.310 <0.0001

Risk taking 5.63 12.67 56.33 25.35 21.10 27.43 30.40 21.07 42.859 <0.0001 Resources 5.63 22.53 52.11 19.71 18.20 24.12 38.10 19.48 32.493 <0.0001

Planning 5.63 29.57 46.47 18.30 18.10 29.40 37.20 15.30 25.620 <0.0001

Technical 5.63 23.94 47.88 22.53 5.63 8.63 44.88 40.84 25.732 <0.0001

Motivation 5.63 9.85 71.83 12.67 19.48 18.30 39.12 21.10 83.761 <0.0001

Role models 5.63 29.57 43.66 21.22 38.12 30.80 19.74 11.34 21.563 <0.0001

Marketing 7.04 26.76 57.74 8.45 15.48 16.30 39.12 27.10 47.479 <0.0001

Financial 5.63 23.94 59.15 11.26 17.10 23.30 34,12 25.48 49.169 <0.0001

Computer

literacy

23.94 52.11 23.94 - 39.32 28.10 22.40 10.18 11.268 <0.0001

Legal 5.63 29.57 52.11 12.67 31.32 28.10 30.40 10.18 36.437 <0.0001

Research &Development

11.26 43.66 36.61 8.45 19.48 18.30 39.12 21.10 26.859 <0.0001

Value chain 5.63 39.43 46.47 8.45 38.12 34.80 19.74 7.34 37.451 <0.0001

Business system 9.85 25.35 57.74 5.63 21.10 25.43 31.40 22.07 89.169 <0.0001

Confidence interval: 95% α=0.05

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H9: The following skills are not likely to beconsidered as key skills: Proposition 9.1 Marketing - rejectedProposition 9.2 Technical - rejectedProposition 9.3 Motivation- rejectedProposition 9.4 Human resource - rejectedProposition 9.5 Opportunity identification-

rejectedProposition 9.6 Finance- rejectedProposition 9.7 Gathering of resources-rejected

H10: The following supportive skills are notlikely to be considered as important: Proposition 10.1 Numeracy and literacy -

rejectedProposition 10.2 business system- rejectedProposition 10.3 computer literacy- rejectedProposition 10.4 operations management-rejectedProposition 10.5 strategy and businessplanning- rejectedProposition 10.6 Risk taking- rejectedProposition 10.7 Life skills- rejectedProposition 10.8 Communication- rejectedProposition 10.9 Business linkages- rejectedProposition 10.10 Legal- rejectedProposition 1011 Research and development-rejectedProposition 10.12 Supplier management-rejectedProposition 10.13 Role models- rejected

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The extremely important factor for SMEs isseems to be the operations (40.84%). Themajority of SMEs considered 17 of the 20 skills

categories to be very important (43.66%-71.83%). Computer literacy (52.11%), creativity(42.25%) and communication (40.84%) are

moderately important to the SMEs, whilecomputer literacy (23.94%) is not veryimportant to the SMEs.

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GENDER DISTRIBUTION OF SUCCESSFUL SMES

58

81%

19%

Male

Female

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GENDER DISTRIBUTION OF LESS SUCCESSFULSMES

59

84%

16%

Male

Female

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AGE OF RESPONDENT

RespondentGroup

Frequency Mean Median Std.deviation

Minimum Maximum

Successful 164 43.40 42 10.33 22 70

Less

successful

67 40.54 40 12.67 19 80

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EDUCATION BACKGROUND

The majority of the successfulgroups were on average moreeducated than the less successfulgroup whose large majority haveonly matric and below. More than58 percent of the successful SME

respondents were of B.E.background with M.B.A. or M.E.qualification.It can be stated that successfulSMEs are led by managers witheducation level above matricmostly graduates, while lesssuccessful SMEs have educationlevel at matric or had otherqualification.

61

11

36

1

16

22

38

17

3127

4

117

3

0

5

10

15

20

25

30

35

40

Less successful

Sucessful

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WORK EXPERIENCE OF THE RESPONDENTS

More of the successful groups(51%) had on average workedmore than 6 years prior tostarting their own business ascompared to the less successfulgroup whose majority (43%)indicated they had two or lessyears of experienceIt can be stated that successfulSMEs are led by mainlymanagers with more than 4years of work experience whileless successful SMEs have less

than 4 years experience.

62

43

12

9

36

1719

13

51

0

10

20

30

40

50

60

0 to 2 yrs 2 to 4 yrs 4 to 6 yrs > 6 yrs

Less successful

Sucessful

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NUMBER OF YEARS IN BUSINESS

The number of years inbusiness was three yearsor more for the successfulSME sample. Figure 6.5shows all the successfulSMEs were 3 or moreyears old. Figure 6.6shows 35% lesssuccessful SMEs were of less than 3 years old,while 65% of SMEs were3 or more than 3 yearsold.

63

successful

<3 yrs

3 or more yrs

35%

65%

Less successful

<3 yrs

3 or more yrs

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NUMBER OF EMPLOYEES

Number of employees

Frequency Mean Median Std.deviation

Minimum Maximum

Successful 164 41.40 23 62.24 6 290

Less

successful

67 4.54 2 7.65 3 110

Average number of peoples employed by successfulSMEs was 41 while those employed by lesssuccessful employees was 4.

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ANNUAL INCOME

The majority of therespondents in thesuccessful samplesindicated that their

annual turnover was more than 1 crore rupees. Incontrast most of the lesssuccessful SMEs wereunder 1 crore rupees with

the majority earning less than 50 lakhs rupees.

65

53

42

4

1

43

39

18

0

10

20

30

40

50

60

< 50Lakhs

50 to 100Lakhs

1 to 5Crore

5 to 10Crore

> 10Crore

Less successful

Sucessful

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FORM OF BUSINESS

The majority of respondent in thesuccessful SME samplehad all formallyregistered and eitherprivate limited or limitedcompanies, whilemajority of the firms are

from other category thatis not registeredcategory.

66

12

2 2

32

2

52

5 4

36

55

0

10

20

30

40

50

60

Less successful

Sucessful

MEANS OF SMALL AND MEDIUM SCALEFriday, November 18, 2011R S Nehete VJTI

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INDUSTRIES.

Construct Mean

Std. Deviation Small scaleindustries

Medium scaleindustries

Manufacturing functions:

Process control and implementation (Pc) 5.03 1.374 4.79 5.21

Management of resources (Mr) 4.44 1.468 4.23 4.59 Management of people(Mp) 4.66 .935 5.00 4.40

Training and developing people ( Td ) 4.69 1.113 4.35 4.95

Partnership with supplier (Ps) 5.00 1.239 4.60 5.30

Teamwork (Tw) 5.27 1.346 5.09 5.40

Operation priorities:

Cost 3.80 1.257 3.92 3.70

Quality 3.49 .992 3.10 3.79

Flexibility 3.94 1.293 3.71 4.11

Delivery 3.70 1.407 3.05 4.19

Growth in productivity 3.71 1.335 3.35 3.98

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COMPARISON OF MEANS OF OPERATIONSPRIORITIES.

68

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

Cost Quality Flexibility Delivery Growth inproductivity

Small scale industries

Medium scale industries

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COMPARISON OF MEANS OF MANUFACTURINGFUNCTIONS

69

0

1

2

3

4

5

6

Process controland

implementation(Pc)

Managementof resources

(Mr)

Managementof people(Mp)

Training anddeveloping

people ( Td )

Partnershipwith supplier

(Ps)

Teamwork (Tw)

Small scale industries

Medium scale industries

PUBLICATIONSFriday, November 18, 2011R S Nehete VJTI

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PUBLICATIONS

National ConferencePresented a paper on related literature review entitled “Technology, Innovation and Entrepreneurship Development: ACritical Review” in „PRODOLOGY‟a National level paper presentation competition conducted by ProductionEngineering Department V.J.T.I. Mumbai on 28 th -29 th March 2009.Presented a paper on related literature review entitled “Industrial Sickness: Concept, Causes, Consequences andRemedial Measures”, at CEO‟s conference by IIIE, at Manali on 23 rd -24 th May 2009. The same paper is published inindustrial engineering Journal of IIIE in July 2009 special issue (ISSN 0970-2555) Presented a paper on related literature review entitled “HRD strategies for effective implementation of benchmarking in SMEs”, at national conference on recent trends in engineering and technology at Agnel polytechnic, Vashi , on 30-31 Oct.2009.Presented a paper on related literature review entitled “Productivity Enhancement through Industrial Safety as a Toolfor Motivation of Employees” at 51st NATIONAL CONVENTION OF INDUSTRIAL ENGINEERS & National Seminar on'INDUSTRIAL PRODUCTIVITY,SAFETY ANDDISASTER MANAGEMENT' Organized by the Indian Institution of IndustrialEngineering, Nagpur Chapter on 4-5 December 2009.Presented a paper on “Total Productive Maintenance: a critical review” at the national conference held atRamdeobaba Kamla Nehru college of engineering, Nagpur held on September 24-25, 2010.A paper presented at the National Conference to be held at Tiwari college of Engineering on „Improving the Process Capability of a Edm Operation by the Application of Statistical Techniques‟, on 11 March2011.

A paper presented on „Key Skills for Business Performance of SMEs‟ at the National conference to be held atsinhagad institute of administration and Computer management, Lonawala held on 25-26 February 2011.Theproceedings are published under ISBN:978-93-5024-792-1.

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PUBLICATIONS

International Conference Presented a paper on related literature review entitled “Factors Influencing Performance of Small and Medium ScaleTechnological Industries”, in GLOWGIFT 09 conference at NITIE,Powai on 12-14 Nov. 2009Presented a paper on related literature review entitled “Factors influencing the survival and growth of small andmedium industries in Mumbai and suburban region”,in 13 th SOM conference at IIT,Chennai on 20-21 December2009

Paper Publication (National/ International) A paper entitled “Industrial Sickness: Concept, Causes, Consequences and Remedial Measures”, is published in

industrial engineering Journal of IIIE in July 2009 special issue (ISSN 0970-2555) A paper published in „Expression‟ a CSR journal on titled “CSR and SMEs: perceptions and Initiatives”, published inissue 2 April-October 2011 ISSN 2229-4384 An international paper accepted and to be published in International Journal of Engineering Science and Technologyon “Investigation of Entrepreneurial Skills for Better Performance of Manufacturing SMEs” in July 2011 issue ISSN0975-5462 .An international paper under review in International Journal of Production Economics on “Manufacturing functionsand plant performance: an empirical study in manufacturing SMEs in Mumbai” ISSN 0925-5273 .An international paper under review in International Journal of Manufacturing Technology and Management on

“Manufacturing functions and plant performance: an empirical study in manufacturing SMEs in Mumbai” ISSN 1741-5195, ISSN 1368-2148 .

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THANK YOU

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