BUSINESS ENVIRONMENT, INVESTMENT PRIORITIES AND COMPETITIVENESS: AN EMPIRICAL STUDY OF INDIAN SMALL SCALE INDUSTRIES (SSIS)
ABSTRACT
Small scale industries (SSIs) are considered engine for economic growth all over the world. In present scenario of markets globalization and age of information technology, SSIs are playing significant role in supply chains of larger organizations. To sustain their importance and performance, SSIs are feeling more pressures to improve their competitiveness as compared to past protective markets. In this paper, an attempt is made to examine various issues such as nature of pressures and constraints, priorities for making investment and developing competencies and their competitiveness. Different dimensions of performance and competitiveness have been identified.
For analyzing these issues questionnaire based survey methodology was used. Total 75 responses were received. For analyzing the data SPSS 10.0 software is used. On the basis of analysis of data, it is observed that cost reduction, quality improvement and delivery in time are major pressures on SSIs. Lack of growth conducive environment and inadequate government support are major constraints. For making investment, market research, welfare of employees and research and development are major areas of investment. Performance of Indian SSIs is not found very satisfactory in comparison to international standards. However their growth in terms of market share, sales turnover and profit is higher than moderate level. It may be due to enhancing opportunities for them after market globalization. This study implies that Indian SSIs have lot of potential for growth provided they can improve their competitiveness at global level.
Keywords: Globalization, Small scale industries, Performance, Competitiveness.
INTRODUCTION
Little scale ventures (SSIs) speak to the biggest extent of the assembling part in each nation. They have constantly assumed a key job in the economies of all major mechanical nations. In India, 95 percent of mechanical units are in little scale part with 40 percent esteem expansion in the assembling segment and 6.29 percent commitment to the Indian Gross Domestic Product (Times of India, 2002). In India, enterprises having interest in plant and apparatus not as much as Rupees (Rs) ten million are called little scale ventures (SSIs).
The real test for SSIs is to consistently give inventive and modified items utilizing the best accessible process advances. Enhancements in contenders’ abilities have abbreviated item life cycles, raised item multifaceted nature and extended availability to new specialized leaps forward (Gupta and Garret, 1996). As indicated by Ajitabh and Momaya (2004) in such sort of condition, association’s aggressiveness will rely upon its capacity to give products and ventures more proficiently than others engaged with the commercial center.
In recent years, many large organizations all over the world have been focusing on their core business, downsizing and outsourcing. This trend has given many opportunities for SSIs to work in partnership with them. As business success depends on the formulation and implementation of viable strategies (Pun et al., 2000), therefore to grab these opportunities, SSIs in all sectors need to develop effective strategies for providing higher added values to customers in terms of cost, quality and services at shortest possible time.
There have been not very many investigations went for methodology improvement by SSIs for intensity. Indeed, even in created nations, the greater part of the investigations have been committed to expansive scale ventures (LSI). Little firm with restricted assets will be required to see its business condition as being not quite the same as that of a substantial firm with maybe more assets and it is likewise liable to confront distinctive condition weights as to aggressiveness in advertise. (Gyampah et. al. 2001). The methodologies that a huge firm uses to benchmark its rivals and consult with providers are relied upon to be not quite the same as the methodologies utilized by little firm (Vickery et al. 1999). In this manner this investigation being an exact examination for SSIs has its own significance in improving the learning of procedure advancement. It will comprehend significant weights and limitations on SSIs, dynamic nature of technique improvement and additionally relationship of methodologies with execution.
RESEARCH OBJECTIVES AND METHODOLOGY
In maintaining their intensity, SSIs confront numerous weights and requirements because of their constrained assets, for example, absence of back, gifted labor and advance innovation. In this way, their system should coordinate the association’s assets to the changing condition and specifically its business sectors and clients in the quest for its objectives and goals (Porter, 1998).
The new rivalry is as far as decreased cost, enhanced quality, items with higher execution, a more extensive scope of items and better administration, and all conveyed at the same time (Dangayach and Deshmukh, 2001). For getting by in this new rivalry, SSIs should create reasonable methodologies for making new speculations and improvement of skills. Chaston et. al.(2001) have seen that the territories of fitness worried about new item advancement, human asset administration hones, hierarchical profitability, the administration of value and administration of data were amazingly pivotal as far as impacting little firm development rates. They have likewise seen that organizations which have received a more elevated amount learning introduction can be relied upon to show measurably noteworthy higher capabilities over the zones of estimating client desires, distinguishing quality difference, executing quality upgrades, utilizing data to advance data, make control frameworks, and recognize advertise changes and utilization of IT to get information.
MAJOR OBJECTIVES OF THE PRESENT PAPER ARE TO
• Analyse business environment for Indian SSIs.
Identify priorities for making new investments by them.
Identify major areas of competency development by them.
Analyse performance in comparison to national standards.
Analyse competitiveness at different levels.
For data collection from industries, a structured questionnaire was framed. This was also pilot tested and then administered to industry. Extensive visits were made to SSIs to collect first hand information. Research methodology followed for this study is shown in form of flow chart (Figure. 1). Identification of issues and development of preliminary framework for study was done after extensive review of literature and discussions with industry professionals. The framework developed for this study is shown in Figure 2. Ward et. al. (1995) have observed that link between environment and operations strategy determines firm performance. Therefore based on market environment, SSIs should decide their strategies for investments and development of competencies. Formulation of strategies and their effective implementation will decide their competitiveness.
Figure 1-Flow Chart for Research Methodology
Figure 2 Framework for study
RESULTS AND DISCUSSIONS
In this study, executives were asked to rate the intensity of each factor for their respective organization on a five point Likert scale (1-Lowest, 5-Highest). About 450 small scale organizations from all parts of India were contacted for collecting responses. These organizations were selected from various directories available at Confederation of Indian Industries (CII), Auto Component Manufacturers Association (ACMA) of India, Federation of Indian Chambers of Commerce and Industries (FICCI) and Department of industries (Government of India). In spite of continuous reminders, phone calls, e-mails only seventy five valid responses were obtained for this empirical study. This data was analysed in context of business environment, strategy development and performance. First of all reliability test was done for all the issues. It was observed that for all issues, it is more than minimum acceptable value 0.5 (Nunnaly, 1978).
BUSINESS ENVIRONMENT
In globalised market, growth conducive business environment plays significant role in improving competitiveness of organisations. For analyzing business environment, present study focus on business cost elements, pressures from market and major constraints of SSIs to become competitive in following sections.
Business Cost
The business cost dimension includes concerns pertaining to the rising cost of labour, material, energy, packaging, transportation, warehousing and distribution. Respondents were asked to indicate the degree to which the above elements are of concern for their company’s competitiveness from very unimportant to important in Likert scale of 1 to 5. Results of this analysis are given in Table 1 It is observed that rising material cost (Mean=2.92) is of highest concern for Indian SSIs competitiveness. After this transportation and distribution cost are considered as most important cost elements. Respondents were also asked to compare these components with respect to their global competitors on Likert Scale of 1 to 5 (1-Very low, 5-Very high). It is observed that for Indian SSIs, most of the cost components are very less in comparison to global competitors. It implies that Indian SSIs have cost advantage in comparison to their global competitors and they should take leverage of this asset for improving their competitiveness.
Table 1 Business Cost elements for SSIs
SN Elements of Cost Level of Concern to your company In Comparison to global Competitor
Mean SD T Mean SD T
Labor 2.35 0.78 -7.12# 1.64 .72 -14.44#
Material 2.92 0.70 -1.0 2.29 1.09 -4.93#
Energy 2.75 0.81 -2.59# 2.32 1.11 -4.56#
Packaging 2.61 0.78 -4.23# 2.14 .99 -6.41#
Transportation 2.81 0.72 -2.28# 2.34 1.14 -4.25#
Warehousing 2.60 0.87 -3.83# 2.18 1.05 -5.87#
Distribution 2.79 1.02 -1.76 2.04 1.00 -7.15#
# Significantly lower than moderate value at p
