Sem Management For Small Businesses – The term ‘business’ includes in its scope industrial and commercial activities. The official definition exists only for ‘small scale industry’ and not for ‘small commercial enterprise’. A small business, however, he explained in terms of characteristics, also applies to small scale industry.
Professors H.N. Broom and Justice G. Longinker provided an outline of the qualitative characteristics developed by the Economic Affairs Committee to describe America’s small business. The authors of this book believe that these characteristics can be used to describe small businesses in any country. Below are the characteristics of a small business:
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The definition used by the Government of India to describe small scale industries depends on investment in plant and machinery. The move seeks to take into account India’s socio-economic environment where capital is scarce and employment is plentiful. Another important point to note is that the definition applies only to micro and small units but not to large and medium units. Medium and large companies are not defined. Anything that does not fall under the definition of small can be large or medium. Small business units in India fall into the following categories on the basis of investment:
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(i) Small Scale Industry: A small scale industrial enterprise is defined as an investment in fixed assets of plant and machinery not exceeding one million rupees. However, to focus on export growth and modernization to meet the needs of small scale industries, the investment limit in plant and machinery is Rs.5 crore.
(ii) Affiliated Small-scale Industrial Unit: A small-scale industry can acquire the status of a sub-small-scale industry if it supplies not less than 50 per cent of its production to another industry designated as a parent unit. A subsidiary small industry may produce parts, components, sub-assemblies, tools or intermediate products for the main unit. Apart from meeting the needs of the main unit, it can also run its own business. Sub-units have the benefit of guaranteed demand from parent units. Generally, the parent unit assists the subsidiary unit by providing technical guidance and financial support.
(iii) Export units: A small scale industry can attain the status of export unit if it exports more than 50 per cent of its production. It can take advantage of export subsidies and other concessions such as incentives provided by the government to export units.
(iv) Small Scale Industries Owned and Managed by Women Entrepreneurs: An enterprise run by a woman entrepreneur is a small scale industrial unit in which he/she individually or jointly holds less than 51 percent share. has capital. Such units can get special concessions from the government, lower interest rates on loans, etc.
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(v) Small Industrial Units: Investment in plant and machinery Rs. A small unit is defined as an industrial or commercial establishment not exceeding 25 million
(vi) Small Scale Service and Business (Industrial Related) Enterprises: Investment in fixed assets other than land and buildings in plant and machinery of small scale service and business enterprises not exceeding. 10 lakhs.
(vii) Micro Enterprises: In the small and micro business sector, those whose investment in plant and machinery does not exceed one lakh rupees are called micro enterprises.
(viii) Rural Industry: Rural industry is an industry situated in a rural area which manufactures any kind of goods, renders services with or without electricity and has more than a fixed capital per head or worker or laborer. not be 50,000 or such other amount as may be fixed by the Central Government from time to time.
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(ix) Cottage Industries: These are also known as rural industries or traditional industries. They are not defined by investment criteria as is the case with other small scale industries. However, cottage industries are characterized by the following characteristics:
Large business firms are considered competitors of small business firms. But small scale industries have the following relationship with large scale industries:
A) Partners: The 1990s saw a general increase in business partnerships between small and large firms. Alliances between large companies are still widespread and many large companies prefer to pass on smaller companies. Big business companies join hands with small business companies for their particular company.
B) Product Distributor: Many small scale manufacturers in India depend on large scale organizations (regional, national or international) to sell their products.
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C) Customers: Most of the world’s small businesses pursue large business organizations in retail, wholesale, manufacturing or services as their main or primary customers.
D) Competition: Small-scale industries can compete with large-scale industries only under certain conditions and in specified products.
E) Innovation: Small units can also innovate to produce a particular product that can absorb the higher profits of larger units.
F) Servicing: Small scale industries also set up service and repair shops for larger units of products. Many smaller companies are tasked with repairing and maintaining products manufactured by larger units.
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G) Recruitment: In some cases, large companies supply materials and components to small units. Small units process these materials and components into complete parts or subassemblies.
(iv) They are located in urban centers and are in the public sector or run by large industrialists, eg, cotton textiles, jute textiles.
(iv) They are distributed in rural and urban areas and are in the private sector, eg, bicycle, television, radio.
Small scale industries in India occupy a unique position in view of their contribution to the socio-economic development of the country. The following points highlight their contributions.
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(i) 95 percent of the industrial units in the country are small scale industries in India. It accounts for about 40 percent of gross industrial value addition and 45 percent of total exports (direct and indirect exports) from India.
(ii) Small scale industries are the second largest employers of human resources after agriculture. Large industries create more jobs per unit of investment than non-major industries. Therefore, they are considered more workers and less investors. This is a boon for a labor surplus country like India.
(iii) Small-scale industries in our country provide a wide range of products such as heavy consumer goods, ready-made garments, knitted garments, stationery items, soaps and detergents, household goods, leather, plastic and rubber goods, processed foods. And vegetables, wood, etc. Steel furniture, paints, varnishes, safety matches, etc. Advanced manufacturing includes electrical and electronic items such as televisions, calculators, electronic medical equipment, overhead projectors, air conditioning equipment, electronic teaching aids such as drugs and medicine. equipment and many other engineering products. Handicrafts, handicrafts and other rural industries should be given special mention considering their export value.
(iv) The contribution of small industries in the balanced regional development of our country is significant. Small-scale industries that produce simple products using simple technology and rely on locally available resources for both materials and labor can be established anywhere in the country. As they spread widely without any spatial limitations, the benefits of industrialization can be reaped by any region. Thus, they contribute a lot in the balanced development of the country.
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(v) Small scale industries provide ample opportunities for entrepreneurship. Individuals’ hidden skills and talents can be turned into business ideas that can be turned into reality with little capital investment and almost no formalities to start a small business.
(vi) Small scale industries also benefit from lower cost of production. Locally available resources are less expensive. The establishment and operating costs of small scale industries are low due to low overhead costs. In fact, the low cost of production enjoyed by small scale industries is their competitive strength.
(vii) Due to the small size of the organizations, quick and timely decisions can be taken without consulting many people as is the case in large organizations. New business opportunities will be available in due course.
(viii) Small scale industries are better suited for traditional production. This means designing a product, say a tailored shirt or trousers, according to the individual customer’s taste/preferences/needs. The latest trend in the market is to move towards custom manufacturing of even non-custom products like computers and other products. As they use simple and flexible production methods they can produce according to customer requirements.
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(ix) Last but not the least, small scale industries have adaptability and personal touch and hence good personal relations with customers and employees. There is no need for the government to interfere in the work of small units. Due to the small size of the organization, decisions can be made quickly and in a timely manner without consulting many people, as in large-sized organizations. New business opportunities can be seized at the right time, thus providing healthy competition to big businesses that benefits the economy.
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