The Management of Small and Medium Enterprises

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The small scale industries play very heavy role in fuelling the overall economic growth. The small scale industries set up by entrepreneurs have contributed to the increased shares in the overall production, exports and capacity utilization of SME's. The significance of SME's in giving large-scale employment is of a supreme importance. In generally the whole of articles the overall performance of the SME's has been examined in intensity on the basis of the different parameters.

Most of the economies do not enjoy place advantage in terms of raw materials and reach to nearby markets because of most of its industries and on top of that it is true tough because of SME's. The industries which have developed are mostly dependent on money from other countries for satisfying the demand. As far as the arrangement of the products manufactured by these true industries is concerned, reliance on outside markets is quite considerable. Products in what one the region has come to specialize include textiles, sports, electrical and electronic products, agricultural products, machinery, etc.

According to my understanding, in order to grasp better conduct of any business, a substantial thing is to select the right form of organization since the amount of capital, risk and control; etc the whole of depends on the form of the business organization.

There are lots of issues that the SME's face in order to survive. They are -

Sources of Funds

The main source of funds was from personal and family sources. The entrepreneurs in developing countries depend mostly on family funds while those in developed economies try to tap some nearby sources like allies. However in developed economies the resources come from the government as well as banks.

External Motivating Factors

There are a number of factors, which motivate a person to enter into any industry. Some factors are internal whereas others are external. Among the external factors are incentives to start up the new ventures encouraged by low barriers to entry into entrepreneurial activities. Heavy demand for the product, high profit margin and other external factors are other reasons for the SME's to open the business into new territories.

Managerial Performance of Small Scale Units

An effort has been made to scrutinize a variety of managerial problems like production, marketing, finance, organization behavior and the institutional support of the SME's. Since the large number of SME's become sick due to various managerial factors, hence, in order to capture the trend, a preliminary survey has to be carried out and in-depth analysis of various managerial problems should be undertaken. Similarly, various behavioral and socio economic factors of industrial entrepreneurs like age, group, belief, education, leadership qualities and motivational factors also play an important role in the working of the SME's units.

Government Policy/Incentives

Government Policy and the incentives provided for the promotion of SME's have had a positive effect on the performance of SME's. Since the problems faced by SME's are quite different and unusual, hence the respective governments are making necessary changes in the policies from time to time by introducing the provision of subsidy, incentives and infrastructural facilities to encourage the output of the SME's.

Labor Management Problems

Since majority of the SME's are labor intensive, they often face of the labor unrest and issues with the trade unions, hence it is quite suitable to find a reason for unrest/labor problems which respective governments have failed to do so and is creating unnecessary problems and a barrier for the SME's to improve their performance.


Planning related problems

Technical Feasibility :

insufficient technical know-how

Location disadvantage

obsolete production process

Economic viability :

High cost of inputs

Break-even point too high

unprofitable size of project

Choice of idea

weak structure

Faculty planning

Poor Project implementation

Lack of strategies

Lack of vision

insufficient connections

Lack of Motivation

Under estimation of financial requirements

Unduly large investment in fixed assets

Over estimation of demand


Cost increases resulting from delays in getting licenses and sanctions, etc. and insufficient liquidity in the market.

General Problems

Production management:

unsuitable product mix

pitiable quality control

pitiable capacity utilization

High cost of production

pitiable inventory management

Inadequate maintenance and replacement

Lack of timely and adequate modernization etc.

High wastage

Poor production

Labor Management :

Very high wage structure

Inefficient handling of labor problems

Excessive manpower

Poor labor productivity

Poor labor relations

Marketing management :

Dependence on a single customer of a limited number of products

Poor sales realization

Defective pricing policy

Booking of large orders at fixed prices in an inflationary market

Weak market organization

Lack of market feedback and market research

Lack of knowledge of marketing techniques

immoral sales/ purchase practices

Financial Management

Poor financial planning

inaccurate costing

factual dividend policy

General financial indiscipline and application of funds for unauthorized purposes

shortage of funds

Over trading

Unfavorable gearing or keeping adverse debt-equity ratio

Administrative Management :

Lack of professionalism

Lack of feedback to management

Lack of control

Lack of timely diversification

unnecessary expenditure on Research and Development

External Problems

Infrastructural :





Non-availability or irregular supply of critical raw materials or other inputs

Transport bottlenecks

Financial :


Working capital

Long-term funds




Raw material

Industrial and financial regulations



Government policy

Administrative Hurdles

Rampant corruption

Lack of direction

Competitive and volatile Environment

Innovation and SME's

Innovation worthy of the name is a test, and so it is easy to predict that organizations will always have difficulty in doing it efficiently. A lot of opinion leaders have debated that innovation activity is something that must necessarily be cut off from the rest of the organization.

Amount of prudence that may occupy can or cannot be adjusted to revolutionary technologies or not? Can the organization sustain with its current base of familiar customers or not?, changing a strategic paradigm will bring a change or not?, breaking out of prevailing patterns of decision making, adjusting the product architecture, and learning from experience will bring change in the motivation levels and will it take the organization forward or not?, being any and all of these, it is understandable that managers always seek to bring in innovation through the business processes.

The four activities that stemmed out of the articles about innovation

Market-technology Linkage

It seeks to link purchaser needs with the organization's technical capabilities such that the product has integrity', i.e.- its design reflects the firm's technological, manufacturing, and marketing capabilities, customer's needs, and market structure. Techniques because of the performance of this linkage include exposure to lead users and close interaction with (potential) customers through, for example, team visits of customer premises to determine in what manner the product might best meld with the customer's processes or own product offering. Market-technology linking attempts to bridge 'inside' and 'outside'. The development of one organization identity in terms of the value it provides to customers may be a passage of bridging inside and outside and breaking the strong inward pull of day-to-day operations from one side allowing the different functions- most notably, perhaps, marketing and manufacturing-to invoke common context for their interactions.

Organizing for Creative Problem-Solving

This describes the coordination of interdependent activities: understanding the constraints people in various functions face, anticipating their needs, and pulling scattered information together from one side constant interaction. The tension here is between aged and new: the new product may require new suppliers, new procedures, novel parts and it must compete in the resource-allocation process through products profoundly embedded in the organization through existing ways of working. However, a capacity to see the organization as process is also vital if the complexity of innovation is to be managed. It is crucial for everyone to view the organization as a process; individuals can see how their work flows into the work of others and how products involve.

Monitoring and Evaluation

These two constitute the third put of activities underlying innovation, and describe the need to lay upon n-going cost/benefit analysis to the innovation effort. Given inherent ambiguity, innovators be obliged o rely on others to assess progress, which involves, for example, accepting the judgment of others and integrating diverse views without compromising the project. Phase and budget reviews are two techniques that provide assistance, yet this particular activity is also problematic. One may rely on abstracted processes of formal control to coordinate a broad variety of activities.

Commitment to the Innovation Process

This aspect comprises the final put of activities; a commitment that is greater degree of depending than regular act because of the ambiguity inherent in innovation. Teamwork may provide the satisfaction of both accountability and confidence and so help generate commitment; career paths, broad interpretation of work roles, and operational autonomy all contribute to broadening it. The tensions between independence and responsibility are embodied in the issue of commitment, and this is single of the most challenging tradeoffs in theory in the manner that spring as in practice. And because, over time, individuals will announce to different supervisors, be on distinct teams, and form new act relationships, generating such a sense of commitment is an organization-wide issues and cannot be assigned to the project level. But in emphasizing control within organizations single also emphasizes individual accountability, through systems of measurement and exact job definition, to an extent that encourages individuals to limit their personal responsibility.

Innovation and Society

In method to grasp any debating of capacities because of innovation it is therefore, necessary to receive into record the social context and we also have to consider the institution that form them. Diverse institutional arrangements have lack of vision encourage different forms of organizational activity. A theory of innovation in the context of developing countries like Cyprus and even Austria allows us to see more clearly in what manner broad characteristics of an alliance to act to defeat economic disadvantages through their influences on organizational-level behavior.

Innovation in Developing Countries

In the context of developing economies, technology has been the traditional point of concentration of researches while conduct with the egress of the describing of capacities because of innovation. Innovations are generally believed to be centered on transfer of technology, appropriate condition intervention and provision of incentives because of innovation. Consequently, innovation in developing countries had primarily get a move of economists who analyze like issues at either the country or industry level; at most good studies have considered only the very large environment that environs organizations. It is even that market forces are considered to be responsible because of all change that occurs in society and the sustainable competitive advantages are the chief way to formulate a corporate strategy geared towards innovation.

Any observed act on innovation in developing countries is at the level of organizations is noticeably poor. Thus change in the context of development has typically been treated in conditions of efficiency and a principle of adopting most good practices. The only assurance of change in a developing society that is considered heavy enough is technological and the single passage in what one capacities because of innovation be able to be developed is from one side adopting 'best practices'. Successful product-innovation adds value because of the customer, and is achieved from one side the unfolding of underlying capacities which can be related to action. However, just in the manner that single organization cannot confide to successfully exist out of re-engineering its processes and in the manner that a proceed capacity, the extent to what the capacities themselves are attainable is really influenced from one side the sort of organization that draws its members. Such a framework should be of especial use to entrepreneurs doing ownership in developing countries. It provides an instrument for evaluating the likely usefulness of Western managerial practices, and for intellect what necessarily to change because of innovation is to become a part of any firm's on-going activities.

Conclusion - Providing as it does multidisciplinary perspectives on entrepreneurship (SME's) and innovation in the context of economic and social development, the 20 articles can be essential read for even management experts, managerial trainers, designers of entrepreneurship development programmes and even policy makers.