Problems of MSMEs / New Ventures

Problems of MSMEs / New Ventures

MSMEs / New small entrepreneurial ventures / Khadi Enterprises/ Rural or Village Enterprises constitute an important segment of the Indian economy ;
In terms of their contribution to country’s industrial production, employment, exports and creation of entrepreneurial base.
However,this sector is plagued with different problems such as:

1. Problem of Raw Materials:

 Availability of raw materials – of right quality – in right quantity – at right price – at favorable T & C .

 2. Problem of Finance:

a) it is due to scarcity of capital in the country as a whole because of low rate of capital formation

b) due to weak creditworthiness of MSMEs.

 3. Problem of Marketing:

  • Faces huge competition from large-scale industries.
  •  Small units do not have their own marketing agencies and departments.

4. Problem of under-utilization of capacity:

Small and new ventures hardly use 50% to 60% of their capacity.  It is caused by frequent power cuts and lack of facility to afford alternative power sources.

5. Problem of Technology:

Most small ventures use only obsolete and outdated technology and old machineries and equipment.
6. Problem of recovery:

Due to inability of marketing the products on their own- they are forced to sell their products to large industries on credit basis.

7. Deficient Managerial & Technical Skills:

Small industries do not afford appointing experts and competent professionals to manage their business.  Hence, most small new industries become technologically backward and managerially inefficient.

8. Labour Problem:

Inability to pay higher wages- leads to employment of inefficient, unqualified and incompetent HR.

 9. Less Competitiveness:

With less capital base- outdated technology- no marketing arrangements; they can’t face competition with large scale industries.

10. Other Problems:

  •  Lack of organized market channels
  • Imperfect knowledge of market conditions
  •  Unorganized nature of operations
  • Constraint of infrastructure
  • Poor accounting system
  • Ignorance of various laws (Labour Laws, Environment Protection, Consumer Protection Act, Sales Tax Act, Laws relating to exports etc.)

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