VITALITY OF MARKETING TOOLS IN PROMOTION OF INDIAN MSMEs
Volumn 2

VITALITY OF MARKETING TOOLS IN PROMOTION OF INDIAN MSMEs

dr. Bhavana Khapekar

(Asst. Professor, L.A.D & Smt. R. P College for Women, Nagpur)

bhavana.khapekar@gmail.com

ABSTRACT

The Micro, Small and Medium Enterprises (MSMEs) plays a vital role in the Economic and Social Development of the country, often acting as a nursery of entrepreneurship and innovation. They also play a key role in the development of the economy with their effective, efficient, flexible and innovative entrepreneurial spirit. The MSME sector contributes significantly to the country’s manufacturing output, employment and exports and is credited with generating the highest employment growth as well as accounting for a major share of industrial production and exports. In coming years India is expected to witness significant demographic growth and a disproportionate expansion in working age population. As if now itself, almost 60% of the total population falls under the age group of 15 to 30 years. To absorb much of this labour force the MSME sector is of vital importance. Despite its relevance, the MSME sector has for long faced various obstacles to growth. Thus Marketing management capabilities in terms of marketing research, marketing strategy, planning and implementation, control and evaluation play a key role in the MSMEs performance in the market. The existing marketing strategies reached the saturation point, where new innovative strategies need to percolate where so many MNCs have entered and created a heavy competition which has become important to understand about the strategies followed by Indian MSMEs to promote and make their products compatible in the market.  This paper focuses on the marketing strategy used for Micro Small and Medium Enterprises to face stiff competition and promote their products in the market which can be develop in a suitable business environment.

KEYWORDS: MSME Sector, Marketing, Marketing Strategies, Economic and Social Development.

Introduction

Micro, Small and Medium Enterprises (MSMEs) in India have evolved considerably since independence. From being referred to merely as the Small Scale Industries (SSI) sector in the 60s and 70s, the MSME sector has progressed in scale and in the scope of business activities over the years. Today, MSMEs are present across manufacturing, trade and services sectors in India, thereby constituting a significant component of the country’s economic growth. While a key achievement of MSMEs over time has been their talent in utilising available domestic resources to deliver quality products and services, these firms have made their presence felt across India’s key sectors as well as in prominent export markets. MSMEs have made an impact on a range of issues, from industrial progress to entrepreneurship and from job creation to economic empowerment. Despite its relevance, the MSME sector has for long faced various obstacles to growth. In recognition of these difficulties and succumbing to a long sustained lobbying, the Government of India passed the MSME Development Act of 2006 which brought about major changes in this sector. The basic achievement was a clear and decisive definition of units that fall under micro, small and medium category. The definitions are based on total investment in plant and machinery for manufacturing units and investment in equipments for service units.

In accordance with the provision of Micro, Small & Medium Enterprises Development (MSMED) Act, 2006 the Micro, Small and Medium Enterprises (MSME) are classified in two Classes:

  • Manufacturing Enterprises- The enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the first schedule to the industries (Development and regulation) Act, 1951) or employing plant and machinery in the process of value addition to the final product having a distinct name or character or use. The Manufacturing Enterprise are defined in terms of investment in Plant & Machinery.
  • Service Enterprises:  The enterprises engaged in providing or rendering of services and are defined in terms of investment in equipment.

The limit for investment in plant and machinery / equipment for manufacturing / service Enterprises engaged in the manufacture or production, processing or preservation of goods are as under:

  • A micro enterprise is an enterprise where investment in plant and machinery does not exceed Rs. 25 lakh;
  • A small enterprise is an enterprise where the investment in plant and machinery is more than Rs. 25 lakh but does not exceed Rs. 5 crore; and
  • A medium enterprise is an enterprise where the investment in plant and machinery is more than Rs.5 crore but does not exceed Rs.10 crore.

The limit for investment in plant and machinery / equipment for Enterprises engaged in providing or rendering of services are as under:

  • A micro enterprise is an enterprise where the investment in equipment does not exceed Rs. 10 lakh;
  • A small enterprise is an enterprise where the investment in equipment is more than Rs.10 lakh but does not exceed Rs. 2 crore; and
  • A medium enterprise is an enterprise where the investment in equipment is more than Rs. 2 crore but does not exceed Rs. 5 crore.

OBJECTIVES OF THE STUDY

  1. To analyse the role of MSME Sector in creating employment opportunities in the country.
  2. To study the various marketing strategies for promoting MSMEs.

METHODOLOGY FOR DATA COLLECTION

The study is based on secondary data. Relevant data are availed from various sources of information such as Research Papers, Books, Bank websites etc.

LIMITATIONS OF THE STUDY

  • The study is undertaken by the use of secondary data collected by other sources which may have some deficiencies.
  • Due to the limitation of time and monetary resources, Researcher unable to collect primary Data by visiting industries in MSME Sector.
  • Another major limitation was non-availability of resources to undertake the survey because this project was not sponsored and all the costs were to be borne by the Researcher only.

ROLE OF MSME SECTOR IN EMPLOYMENT GENERATION IN INDIA

The Micro, Small and Medium Enterprises (MSMEs) have witnessed the highest growth rate in manufacturing sector employment in recent years. As per the Annual Report of 2014 of the Ministry of MSME, Government of India, the sector is estimated to employ about 73 million workers in over 31 million units throughout the country. MSMEs have consistently registered a higher growth rate in the industrial sector. There are over 6,000 products ranging from traditional to high-tech items, which are being manufactured by the MSME’s in India. The sector also offers maximum opportunities for both self-employment and jobs in India, after the agriculture sector. MSMEs are critical for the country’s economic and social development. They significantly contribute to the GDP, manufacturing output, exports and employment. In India, MSMEs account for eight per cent of GDP, 45 per cent of manufacturing output and 40 per cent of exports. Also, the labour-capital ratio is much higher in MSMEs than larger industries. Furthermore, they are considered budding grounds for entrepreneurs, thus encouraging innovation in the country. Hence, it is imperative to focus on growth in MSMEs that, in turn, would provide a fillip to the manufacturing sector as well as raise the level of employment. Globalisation has resulted in several opportunities, such as access to supply chains worldwide, for SMEs and MSMEs. However, for the sector to reap benefits from the fruits of globalisation, it is important to enhance the sector’s competitiveness. One of the options for SMEs to improve competitiveness is to adopt the cluster approach, which addresses the general problems of taxation, interest rate or FDI policies as well as harmonises and simplifies procedures including those related to labour laws. It is also important to increase the availability of bank credit for the SMEMSME sector. Even though the sector falls in the category of priority sector lending, only 8 per cent of the total bank credit finds its way in to the sector. This is miniscule given the fact that almost 95 per cent of the total industrial sector is in the SME – MSME sector. Apart from encouraging bank lending to the sector, it is also important to look at other ways of financing in the sector. One way could be the venture capitalist funding for SME – MSME sector, which is practiced in developed countries. Other option can be better regulation and monitoring of micro finance institutions. Currently most of the micro finance institutions operating in India are either too small to make an impact or are operating with welfare motive. But despite its relevance and significance in employment generation there has been tremendous problems faced by MSME due to Industrial Sickness. Although, during the past decade there has been surge of entrepreneurship across Indian geography; the total working enterprises has increased from 377.37 lakh for 2007-08 to 447.73 lakh for 2011-12. However, on the other hand the number of sick MSMEs in the country is also growing substantially. As on 31March 2013, there were 2,48,890 sick enterprises in India. There are many reasons which contribute to the rising sickness prevalent in the MSME sector. However, the main reason is unavailability of adequate resources against rising demand. Given the size of the business the MSMEs have very limited resources in terms of availability of finance, technology, manpower etc. and hence are also susceptible to a slightest change in its environment. Added to this is delayed realization of receivables from the large corporate as well as the government, power shortage, labour problem, non-availability of raw materials which further worsens the condition of MSMEs.

ACCESS TO MARKETS FOR MSMEs

Understanding of the market, competitors, technology, marketing tools and business environment are determinants of success of the MSME sector. Some of the evolved marketing strategies like niche marketing, database marketing, cluster specific marketing, guerilla marketing and relationship marketing are vital for flourishing the business without any significant hit to the bottom line. These marketing strategies, if implemented, can give the MSMEs a platform to go beyond the generic marketing applications, create greater acceptance, strengthen the brand, devise a focused approach and compete globally. Brands like Nirma, Moov, Hi-Design and Fevicol started off as MSMEs in the recent past and have successfully reaped the benefits of strategic marketing to enter, compete and gain market share from the likes of Unilever and P&G. In 1959, a small time glue manufacturer thought of marketing his products to the masses and taking his business to the next level. With successful product strategies, marketing efforts and operational efficiencies, the brand has today created a strong foothold in the market. The company’s most successful brand Fevicol and its sub-brands such as Feviwik, Fevibond, Fevigum, Fevistick and Fevicryl have consistently commanded over 70 per cent of the total market share. The company has also been able to stay ahead of its competitors in both the organized and unorganized segments. To build a competitive edge, MSMEs must tap opportunities in the international arena in the fields of technology and research and development and engage themselves in international trade. International trade fairs are an important source of market intelligence, technological advancements and innovations. Internet plays an important role in reaching out to the prospective customers irrespective of the remoteness and boundaries, and showcasing the products and services in the virtual world. Most of the MSME business enterprises face marketing problems, but the small and medium scale enterprises face greater difficulty in the marketing and distribution of their products. Some of the MSME do not correctly understand as to what a kind of product are actually needed by the market, how big or small is the market, when the products are needed and how to deliver such products. All these problems lead in to the isolated from the market trends and conditions and, thus, tend to restrict the operations. Some of these are as given below:

  • Micro, Small and Medium Entrepreneurs tend to face tough competition from the products and sales or marketing strategies of large scale enterprises. They face the difficulty in terms of cost, quality, standards, popularity, meeting ever-changing demands/ preferences of consumers, etc.
  • Lack of own marketing distribution network depends on external agencies for distributing the outputs which ultimately increases the cost of their products and services.
  • Small Entrepreneurs are unaware of the modern marketing and business strategies. As a result, which are unable to cope quickly with changing market scenarios though the products has huge market potential but unable to opt for efficient marketing techniques.
  • Lack of effective sales promotion because of the lack of funding and resources which cannot afford to spend much on advertising, sales promotion, market research, etc.
  • Difficulty to sell the output at a profit because of higher cost of production and non-standardized quality of products.
  • Selling the products at a loss because cannot bargain with the big buyers and requirement for the urgent need of working capital.
  • Small business often find it difficult to tap foreign markets for their products, either due to lack of awareness on the potential markets or due to inadequate information on various regulations, guidelines and procedures for exporting to the foreign markets.

MARKETING TOOLS FOR MSMEs

There are many innovative marketing tools and techniques, which can be considered by the managers for their enterprises. The most popular and usable tools for the SMEs for their industrial product marketing are given below:

  • Customer Relationship Management (CRM)

The MSMEs should provide special training to their sales team to bring in enthusiasm and commitment for the work with new ideas and innovation. CRM is the process of understanding and influencing customer behavior through meaningful communication in order to improve customer acquisition, customer retention, customer loyalty, and customer profitability. Implementation of CRM by businesses provides for better allegiance with customers and ensures a rewarding relationship that provides for opportunities to the business, to deliver customer service with better efficiency.

  • Internet as a Promotional Tool

Last two decades the Indian business has shown that, an impact of internet can make the business effectively. Generating own website and promoting products and services on globe is now cost effective as the company’s website are regularly updating were as the website have user friendly futures and full of information.

  • Digital Advertising

Digital advertising has a large number of ways of on the internet and is expected to grow exponentially. The companies activates can be video recorded and uploaded in the internet, which intern will help the potential industrial buyers to understand the functioning of the MSMEs.

  • Mobile Applications

Mobile applications can be used as the service tool, where the regular payments, receipts, and other business related information will update and help the customers in meeting their commitments without overlooking at them.

CONCLUSION

MSMEs not only play crucial role in providing large employment opportunities at comparatively lower capital cost than large industries but also help in industrialization of rural & backward areas, thereby, reducing regional imbalances, assuring more equitable distribution of national income and wealth. MSMEs are complementary to large industries as ancillary units and this sector contributes enormously to the socio-economic development of the country. Although, Indian MSMEs are finding it difficult to sell their products in the domestic and international markets because of increasing competition to make their products globally competitive, Indian MSMEs need to up-grade their technology and put more emphasis on innovation. The tools help MSMEs to improve their performance and gain real time insight about the business. MSMEs can vastly improve the effectiveness and accuracy of business planning without implementing a large and expensive system and also would help to improve their sales, optimize inventory, understand customer and product behavior patterns, etc with a view to build up more efficient, robust, progressive & profitable business.

References

Journals and Research Papers:

  • Navneeta Singh, “Industrial sickness: Causes & Remedies”, Annuals of Management Research, Vol- 1(2), December 2011.
  • G. Sajeevan, “Present Status of MSME Statistics”, Report- Ministry of Micro Small and Medium Enterprise, Journal of Industrial Statistics (2012).
  • Shamika Ravi, “Entrepreneurship Development in the Micro Small and Medium Enterprise Sector in India”, Indian School of Business, July 2009.
  • Vishal Bhatnagar, “Various Risks Involved in SME Units and Measures to Fight Them: A Case Study on SME Units with Special Reference to Moradabad, India”, International Journal of Application or Innovation in Engineering & Management (IJAIEM), Volume 2, Issue 11, November 2013.
  • Venkatesh, J., “Role of Marketing Strategies in the Context of Msme Sector”, International Journal Of Research In Finance And Marketing, Volume 5, Issue 8 August, 2015.
  • “NSIC Evaluation Study/Survey of Marketing Assistance Scheme With Respect to Micro, Small and Medium Enterprises”, Report by Kaarak Enterprise Development Services New Delhi, 2012.

Reports:

  • India Micro, Small, and Medium Enterprise Report 2014 (www.msme.gov.in).
  • Annual report 2013-2014(www.msme.gov.in).

Websites:

  • www.msme.gov.in
  • www.wikipedia.com
  • www.ibef.org
  • www.rbi.org.in

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