Small businesses are playing an important role in the industrial economy of the world. These are particularly important in the developing economies. Small business is predominant even in developed countries such as USA , Japan etc.
CLASSIFICATION OF ENTERPRISES (NEW DEFINITIONS)
Classification of Entreprises:
In Case of Manufacturing Enterprise:
1. Micro enterprise: A micro entreprise is one in which the investment in plant and machinery does not exceed Rs.25 Lakhs.
2. Small Entreprise: A small enterprise one in which the investment in plant and machinery is more than Rs.25 Lakhs but does not exceed Rs. 5 crores.
3. Medium Entrepise: A medium enterprise is one in which the than Rs. 5 crores but does not exceed Rs. 10 crores.
In Case of Service Enterprise:
1. Micro Entreprise: A micro enterprise is one in which the investment in plant and exceed Rs. 10 lakhs. machinery does not.
2. Small Entreprise: A small enterprise one in which the investment in plant and machinery is more than Rs. 10 lakhs but does not exceed Rs. 2 crores.
3. Medium Entreprise: A medium enterprise is which the investment in plant and machinery is more than Rs. 2 crores but does not exceed Rs. 5 crores.
Characteristics of MSMEs:
1. They are generallyorganizedand run by individual entrepreneurs.
2. They require less capital.
3. They arefundamentallylabour-intensive units facilitating greaterutilizationof manpower.
4. They involve the use of simple technology, intensive utilization of individual skillleading to professionalspecialization.
5. They cater the individual tastes and fashions and renderpersonalizedservice toconsumers.
6. They are highlylocalizedindustries. Using local resources MSMEs aredecentralizedand dispersed to rural areas.
7. They are eligible for govt. assistance andpatronageand for concessional finance bybanks, financial institutions etc.
8. They are flexible to a large extent. They aremore susceptible to change and highlyreactive and receptive to socio-economic conditions.
9. They are free from red-tapism and bureaucratic handicaps.
10. Compared to large units, a MSME has a lesser gestation period. ie, the period afterwhich the on investment starts.
Objectives of MSMEs:
1. To provide increasedemployment opportunities.
2. To provide production of large variety of goods especially consumer goods through labour-intensive methods.
3. To bring backward areas too in the mainstream of national development.
4. To improve the level of living of people in the country
5. To create a climate for the development of self-employed experts, professionals and smallentrepreneurs.
6. To ensure more equitable distribution of national income.
7. To ensure balanced regional development as regards industries.
9. To encouragethe adoption of modern techniques in the unorganised traditional sector or theindustry.
Advantages of MSMEs:
1. They are relatively mor e environmental friendly.
2. They are generally based on local resources.
3. They provide ample opportunities for crea tivity and experimentation.
4. They facilitate equitable distribution of income and wealth.
5. MSME enjoys the government support and patronage.
6. These helps in the balanced regional development.
7. It is possible to make nec These he essary c hanges as and when required. lp in reducing prices.
8. There is a close and direct personal contact with the cutomers and employees.
9. They create more employment opportunities.
10. They require only less capital.
Disadvantages of MSMEs:
1. MSMEs suffer from lack of funds. They are financially weak.
2. They suffer from lack of managerial and other skills.
3. They cannot employ highly paid officials.
4. MSMEs always face tough compet.They are not ition from large businesses.
5. There is only a little scope for division of labour and MSMEs cannot afford to spend large sums of mon specialization
6. They cannot survi ve in times of adversity.
7. They cannot secure cheap credit.
