Small and medium enterprise : concept

introductionThe small scale Industry sector holds the key

to economic prosperity of the Indian economy characterized by abundant labour supply, unemployment and under employment. This sector account for about 54% of the country total export. The emerging challenges to the small scale industries Sector are also due to the Impact of globalization and agreement under the WTO and GATT to which India is a signatory along with 134 member countries.

Concept of small scale industrySmall scale industries play a key role in the

industrialisation of a developing country this is because

1. Provide large scale employment 2. higher labour capital ratio 3. Shorter gestation period 4. Small market to be economic5. Mobilisation of resources of capital and

skill6. Need lower investment

Meaning of Small Scale Business Criteria of Small Business Size of the Business Qualitative

Characteristics (Ownership, Manager, Technology etc.)

Classification and definition of industries

SSI are broadly classified into two category

1. Manufacturing enterprise :- Which are engaged in production of goods pertaining to any industry.

2. Service enterprises:- defined in terms of their investment in equipment or which are engaged in providing services or enterprises involved in providing services.

Types of enterprises

Engaged in production

Engaged in providing service

Micro enterprise Dose not exceed 25 lakhs

Dose not exceed 10 lakhs

Small enterprise 25 lakhs to 5 crore 10 lakhs to 2 crore

Medium enterprise 5 crore to 10 crore 2 crore to 5 crore

This can be easily understood by following

table:-

Characteristics of small industries One man show : small scale enterprises which run by

a partnership firm in most cases the activities are mainly carried out by one of the partners

Personalised manner: the owner has first hand knowledge of aspects of enterprises and knows what is going on the business

Lesser gestation period: a small enterprises has lesser gestation period compared to a large enterprises

Labour intensive Balanced regional development: using local

resources, small unit are decentralise and dispersed to rural area

More flexible to adapt changes like diversifications to new products new market etc

Advantage of small enterprise Create greater employment opportunities Low gestation period Easily setup in rural area Need small market Encourage growth of entrepreneurship Decentralized pattern of ownership Diversification of economic activities Innovate and Introduce new product Improve standard of living of local people

Disadvantages of small enterprises Financial risk Stress Time commitment Undesirable duties Less stability Small room for progression Undercapitalization Inability to build brand USP Quickly

Enough

Need and rationale of small scale industry

1.Employment argument:a. Important argument put forth in aver of the

SSI’s in that they have a potential to create immediate large scale employment opportunities.

b. small scale units are more labour intensive than larger units

c. Employment ratio is the lowest in the small scale sector the employment generation capacity of small sector between 8 to 15 times that of the large sector for the same amount of capital investment for different types of industries

2.Eqality argument: Another argument put forward in favour of

the small scale industry is that they ensure a more equitable distribution of national income.

1. The ownership pattern of SSi’s is more widespread compared to the ownership of large scale units.

2. They are more labor intensive and are dispersal to rural and backward area provide more employment opportunities to the unemployed.

3. Decentralization argument:1. Large Industries are concentrated

every where in urban area but small enterprise can be located resources and to meet local demand

2. Decentralisation of industrial enterprise will help harnessing local resources such as raw material Idle capital, local talents and ultimately improves the socio-economic conditions and standard

4. Latent resources argument:1. This argument suggests that small

enterprise are capable of picking up latent and unutilized resources like hoarded wealth and Idle entrepreneurial ability.

2. latent resources argument lies in the existence of entrepreneurial skill