problems and prospects of manufacturing industries...
TRANSCRIPT
Chapter-VI
PROBLEMS AND PROSPECTS OF MANUFACTURING INDUSTRIES IN HAVERI
DISTRICT 6.1 Introduction
Industries and their development is necessary for several
reasons. The manufacturing industrial and commercial development
in Haveri district appears to be fairly good, although regional
imbalance in development is existing in the district. Haveri and
Ranebennur talukas are more developed than other talukas of the
district. For their development, various programmes are under
implementation and new schemes have been introduced to overcome
the imbalance in the other talukas.
Despite the fact that, there is substantial growth in the
manufacturing sectors in the last two decades, some of the units are
under weak conditions, due to various reasons. These may include
non-availability of raw materials at a cheap price and availability of
good marketing for the products in the district, dispute among
partners, change in the demand patterns, change on taxation policy,
delays in granting and disbursement of loans and subsidies and delay
in clearance from state and central government, delay in payment by
the purchasing units, change of business by the owner, etc.
6.2 Problems of Manufacturing Industries
Industries generally face problems everywhere. The large,
medium and small scale industries in the study region also have one
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or the other problems, with varying and intensity of the problems. The
study reveals that, there are more problems with small scale
industries rather than large and medium scale industries in Haveri
district.
It is however a normal thing that waste products are formed
during the manufacturing process and while it is sometimes possible
to make use of these waste products (which are made to recycle of
products) it is quite often impossible to do this. The problem which
then faces the industry concerned is that of disposing of the waste
products efficiently yet as inexpensively as possible. Some of the
important problems faced by the manufacturing industries in Haveri
district are as mentioned below.
In view of the rising tempo of industrial activity, the storage or
right type of raw materials at standard prices has effected the entire
industrial sectors in the district. The irregular supply of certain raw
materials has already affected the production of materials of several
small and big industrial units.
Though the district is endowed with natural resources, it is not
sufficient for the industries. The raw materials required for the
industries are Iron and Steel, Alluminium, Rubber, Plastic products,
Non-ferrous metals, etc. are produced from outside the district or
state. Most of the units face not only shortage, but also the irregular
supply of raw materials, which are brought from outside the state.
This has led the units to be in low capacity utilization.
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At present power problems are minimized, but voltage
fluctuations, irregular supply, long hours of repairs breakdowns, etc.
still persists in the district, which all led to under utilization of
installed capacity and raise in the cost of production.
Due to lack of funds to purchase modern machineries to tools,
the entire premises are forced to use old and outdated machineries
which affects both the quantity and quality of their production.
Many units such as food products, cotton based, wood based
industries, etc. have low level of technology, due to which they suffer
from substandard quality or products.
The Government of Karnataka has developed industrial estates
areas to house the units here in, there are too many administrative
formalities, which entrepreneurs has to follow and they become
problems for Karnataka State Industrial Areas Development Board
(KSIADB) look after getting the shed or plot, and has to visit large
number of offices to have the connection of water, power, no objection
certificate, well connectivity of roads, etc.
In Indian context, industries are located beyond the industrial
complexes, are facing problems like transportation cost, quality of
roads not upto the mark and scarcity of power, all the problems
naturally affect production of industrial goods particularly small scale
industrial products.
Lack of skilled labours and industrial expertise persons are few
workers in the study region with industrial and managerial skills.
Most of the workers and managers in the most of the units are from
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outside the district. Another peculiar problem is labour absenteeism.
The absence of labours from work is a frequent problem. The absence
of labours is a frequent problem faced by large number of units. In
this regard, the most of the industrial units are facing such problems
in the district.
In the study area the availability of capital is a problem. It is
available only at very high rate of interest; particularly on working
capital though, there are incentives and capital subsidy, but all these
have remained much on the paper of their disbursement is made often
at considerable lapse of time. So the entrepreneurs do not get the
benefits of such facilities.
The small scale industries do not have sufficient funds of their
own for investment. They cannot but and store good quality of raw
materials or stock their finished products, preservation of their
products, it affects on the side transaction, due to the lack of capital
investment.
The successful industry needs a good market for their products,
the productions quality depends on the market demand in this
context in Haveri district, market demand is not very large for small
scale industries. They have to sell outside the district area, but in
medium and large scale industries, the market demand is satisfactory
in order to set maximum demand from outside the district and the
quality should be maintained.
Dispute among partners, change in business by the owner,
inadequate studies, lack of perspective plans and programmes, etc.
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are the other problems of industries particularly of small scale and
above all, growing of slum areas around the industry or zones is
another grave concern.
6.3 SWOT Analysis of Manufacturing Industries
SWOT analysis is a strategic planning method used to evaluate
the strength, weakness, opportunities and threats involved in a
project or in a business venture. It involves specifying the objective of
the business venture or project and identifying the internal and
external factors that are favourable and unfavourable to achieve that
objective. In 1960s and 1970s Albert Humphery is said to have
developed this strategic planning tool using data from 500 companies
in America at the time.
A SWOT analysis must first start with defining a desired end,
state or objective. A SWOT analysis may be incorporated into the
strategic planning model. Strategic planning has been subject of much
research.
Strengths: Characteristics of the business or team that give it an
advantage over others in the industry.
Weaknesses: are characteristics that place the firm at a
disadvantage relative to others.
Opportunities: external chances to make greater sales or profits in
the environment.
Threats: external elements in the environment that could cause
trouble for the business.
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The aim of any SWOT analysis is to identify the key interval and
external factors that are important to achieving the objective. These
come from within the industry’s unique value chain. SWOT analysis
groups key pieces of information into two main categories.
(a) Internal Factors – The strengths and weaknesses internal to the
organization.
(b) External Factors – The opportunities and threats presented by the
external environment to the organization.
The internal factors may be viewed as strengths or weaknesses
depending upon their impact on the organizations objectives. What
may represent strengths with respect to one objective may be
weaknesses for another objective. The factors may include all of the
4P’s as well as personal, financial, manufacturing capabilities and so
on. The external factors may include macro-economic matters,
technological change, legislation and socio-cultural changes, as well
as changes in the market place or competitive position. The results
are often presented in the form of a matrix.
SWOT analysis is just one method of categorization and has its
own weaknesses. For example, it may tend to persuade industries to
compile lists rather than think about what is actually important in
achieving objectives. It also presents the resulting lists uncritically
and without clear prioritization so that, for example, weak
opportunities may appear to balance strong threats.
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6.3.1 Strength Analysis of Manufacturing Industries
1) According to the range of the industries like big, medium and small
scale, the investment is also very high, high and low.
2) Adapting to change is crucial in industries and particularly small
scale industries, not being tied to any bureaucratic inertia, it is
typically easier to respond to the market place quickly.
3) Good customer relations of industries proprietors tend to be
intimate with their customers and clients which results in greater
accountability and maturity. They usually offer a more
personalized approach to interacting with clients. Customers who
are treated like family are more likely to return to that industry in
the future.
4) Independence is another advantage of owning an manufacturing
industry. A survey of manufacturing industries owners showed
that 38 percent (as per 2013 data) of those who left their jobs at
other industries said their main reason for leaving was that they
wanted to be their own bosses. Freedom to operate independently
is a reward for industries owners. In addition, many people desire
to make their own decisions, take their own risks, and reap the
rewards of their efforts.
5) Innovation and Creation: They are able to innovate and create new
products and services more rapidly and creatively than larger
companies that are mired in bureaucracy. Whether reaching to
changes in fashion, demographics or a competitor’s advertising, a
small firm usually can make decisions in days not months or years.
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6) Cater to Customer Needs: Small scale industries are the ability to
modify its products or services in response to unique customer
needs. The average entrepreneur or manager of small scale
industries known his customer base for better than one in a large
industry. If a modification in the products or services is offered – or
even the business’s hours of operation would better serve the
customers, it is possible for small scale industries to make changes
– customers can even have a role in product development.
7) The another strength is that the people involved in the
entrepreneur, any partners, advisors, employees or even family
members have a passionate, almost compulsive desire to succeed.
This makes them work harder and better.
8) Question Period: A small scale unit has less question period, which
means the period after which the returns on investment starts. It is
usually from 2 to 5 years.
Strength Analysis of Manufacturing Industries in Haveri District
a) Agriculture has been the major sector contributing to the economy
of the district. The productivity of crops like chilly, maize has been
substantially increased over the years. The productions of
Horticultural products like vegetables, tomato, mango, guava and
sapota have been on the rise.
b) The district has 79 kms of broad-gauge line and about 103 kms of
national highway and the district has a satisfactory communication
facility through telephone exchanges, post offices, mobile network
and even internet.
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c) About 300 engineers are completing their graduation in the district
every year, half of whom are from IT related branches. In addition
there are other qualified persons coming out every year from
general educational institutions, allopathic college.
d) Handicraft artisans are producing garlands, etc. which are very
famous throughout the state.
e) Flowers like Marigold and Kanakambari are cultivated in the
district.
f) Betel leaf trade in the district is encouraging.
6.3.2 Weakness Analysis of Manufacturing Industries
1) It can be difficult to reach enough potential customers to establish
a successful base of customers. Potential customers might be less
likely to do business with a small business that doe not offer a well
known brand of products or services. Some clients will give their
business top the bigger gut with the name they recognize.
2) One of the largest weakness for the industrial owners is to raise
finance. Many industrial owners invest their own money at the
start of the industry or if the industry fells upon hard times
because institutional lenders like banks and government financial
corporations are generally reluctant to advance money to the
industrial units.
3) The small scale industrial owners has to bear high cost of
production, which acts as one of the weakness for the small scale
industries.
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4) Another weakness is ‘Entrepreneurial Myth’ or E-Myth. The mythic
assumption is that an expert in a given technical field will also be
expert at running that kind of business. Additional business
management skills are needed to keep a business running
smoothly.
5) Absence of skilled personnel in most of the industries does not
have skilled personnel. due to which these industries lack in –
Identification of industrial projects for development.
Consultancy and counseling services.
Industrial training and skill formation.
6) As far as the small scale industries are concerned they do not use
information technology and its applications such as the designing
of prototype machines for product identified according to the
country resources and requirement.
7) Other weakness is to obtain the permission and licence of the
industrial development board, of the state, local bodies, etc. But
despite the policy of government, petty officials are often unhelpful.
A lot of time and energy is wasted in persuading these officials to
perform their duties.
8) Marketing is one of the weakness for the industries. They face
many problems in marketing like –
Lack of standardization
Poor designing
Poor quality
Lack of quality control
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Lack of precision
Poor finish
Poor bargaining power
Lack of service after sales
Scale of production
Brand preferences
Distribution contacts
Lack of knowledge of marketing
Competition
Ignorance of potential market.
Weaknesses Analysis of Manufacturing Industries in Haveri District
a) As the infrastructural facilities are not adequate and uniform in all
talukas of the district it is seen that growth and concentration of
the industries is likely to be limited to Ranebennur and Haveri.
b) Water shortage is a common phenomenon in the majority of the
locations in the district.
c) Lack of entrepreneurship.
d) Resources are mainly restricted to agricultural and horticulture.
e) Non-availability of adequate quality and quantity of power.
f) Absence of adequate cold storage and marketing facilities.
6.3.3 Opportunities Analysis of Manufacturing Industries
1) Government is providing many opportunities for industries.
Government has formed many policies and financial institutions for
helping industries like -
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Industrial policy resolution
Import export policy 1994-97
The pricing policy
The textile policy
Policy for development of handloom industry
Policy for khadi and village industry
Industrial estates programme
Promotion of ancillary industries.
2) An export committee (Abid Hussain) with eleven members and
handed by Abid Hussain was constituted on December 1995 by the
Government to study the status of small scale enterprises and to
suggest measures by which these units could grow and remain
competitive in the changing economic environment. Major
recommendations include -
Abolition of the policy of reservation for SSI’s
Transitional package of 2500 crores (by setting up of Corpus of
500 crores on annual basis) to provide confessional funding for
the SSI’s affected by the reservation.
Specialized commercial bank branches for SSI’s for easy credit
facilities.
Reduction of credit cost of SSI’s
Setting up of SSI clusters with modern infrastructure facilities.
Restoration of excise exemption on branded goods.
Excise incentives for grading tiny and small scale units.
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Credit rating for industries to enable them to avail funds at
lower cost.
3) Micro Small and Medium Enterprise Development Act 2006 was
implemented on 2nd October 2006.
4) There is de-reservation and reservation of products for small scale
industrial (SSI) units.
a) Food and Allied Industries
Pickles and chutney
Bread
Mustard oil
Groundnut oil
b) Wood and Wood Products
Wooden furniture and fixtures
Paper prospects
Exercise book and registers
c) Other Chemical Products
Wax candles
Fire works
Safety matches
Agarbatti
d) Glass and Ceramics
Glass bangles
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e) Mechanical Engineering and Excluding Transport Equipment
Steel furniture
Elmira
Chairs
Tables
f) Domestic Utensils
Stainless steel
Alluminium
5) Prime ministers task force of MSME’s was made who presented a
report on 20th January 2010. This task force was formed on 2nd
September 2009 under leadership of T.K.A. Nair who was secretary
to P.M. This task force focused on 6 areas, which are –
a) Credit
b) Marketing
c) Labour
d) Infrastructure
e) Rehabilitation and Exit Policy
f) Skill Development
g) Taxation
6) There are many Government and Non-Government financial
institutions who provide financial assistance to MSME’s like –
a) SIDBI – Small Industrial Development Bank of India
b) SIDO – Small Industries Development Organisation
c) SISI’s – Small Industries Service Institutes
d) NSIC – National Small Industries Corporation
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e) NIESBUD – The National Institute for Entrepreneurship and
Small Business Development
f) NABARD – National Bank for Agriculture and Rural Development
g) SFC’s State Financial Corporations
Opportunities Analysis of Manufacturing Industries in Haveri
District
a) Agriculture and Horticulture producers can be properly used for
conversion into value added products.
b) Livestock population of the district with better veterinary aid and
nutrition levels could bring about speedy economy and social
transformation among rural areas.
c) As there is great demand for milk products, there is good scope for
increasing of cattle.
d) The district has good access to the flower, trading places nearly
and hence there is scope for floriculture in the taluk.
e) Human Resource: The educated and skilled manpower is
abundantly available, which needs to be effectively utilized with the
available material resources in the industrial development.
6.3.4 Threat Analysis of Manufacturing Industries
1) Slow Payment – While large corporations and banks have been
fortified with ample low-cost cash to but small industries products
and services, they continue to pay slowly, bargain harder and
demand more concession from powerless small business who are
selling their souls ‘where the money is’.
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2) New costs, taxes and compliances – As social causes like
sustainability, diversity, healthcare and fair taxation are being
legislated by governments and lobbied into favourable terms for
corporations, industries are getting choked. The industries are
used to lament about proper work. Now, the new costs, taxes and
compliances rules are sapping the will of owners to believe that
they should risk, invest and remain confident in their business.
3) Approval vendor programmes force buying solely on price – to shift
responsibility and absolute outsource their liability, corporations
and governments are hiring third party sourcing companies whose
objective is to reduce industrial vendor power and commoditize
their products and services. And the more owners have to comply
with RFP’s and join “approved vendor programmes”, the less they
can add value through their creativity. ISO 9002 and ISO 14000,
along the countless ‘vendor-aggregators’ are following purchasing
agents to buy solely on price and penalizing industries who invest
in innovation and branding to differentiate their offers and earn
increased gross margins.
Threat Analysis of Manufacturing Industries in Haveri District
a) Digging for more bore wells may lead to decline in ground water
level year by year. Many of the bore wells have gone dry which is
also threat for industrialization.
b) Fast industrialization in the district may cause environmental
problems.
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c) Farmers are loosing interest in their occupation due to uncertainty
in rainfall, etc. This may lead to decrease in agricultural and
horticultural production.
d) Artisans who are preparing the traditional products need to
upgrade their skills so that their products are competitive and in
demand. In the long run, it is feared that their products may loose
their prominence in the market due to quality and competitiveness.
e) In many locations, the road conditions are not satisfactory and
hence there is likely to be increase in transportation costs and
delay in transportation of materials. This factor may create
problems to local industries in the competitive market.
f) The existing traditional industries are in problems due to
technology obsolescence.
g) Increased competition for all goods and services from Bangalore
and other places.
SWOT analysis helps in assessment of the internal and external
factors which is very important for all the organizations of all large,
medium and small scale industries. But as small scale industries are
facing many problems due to globalization and are suffering from
undue losses as compared to large scale units in this regard, SWOT
analysis has been done for all the small businesses at large, to make
them understand their weakness in a better way and to make they use
their strengths to stand in market and to make normal profits.
Today’s dynamic business environment is bringing many
opportunities for business enterprises but with that it has introduced
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business’s with greater threats, in the present work it has been tried
to give every aspect related to small scale industries, medium and
large scale industries about their strengths, weaknesses, opportunities
and threats so that they can use it with greater benefits and can know
their environment in better way.
6.4 Impact of Manufacturing Industries on General Economy
The small and medium enterprises today constitute a very
important segment of the Indian economy. The development of this
sector came about primarily due to the vision of our late prime
minister Jawaharlal Nehru who sought top develop core industry and
have a supporting sector in the form of small scale enterprises. The
small and medium scale units have emerged as a dynamic and vibrant
sector of the economy. The Indian economy is expected to grow by
over 8 percent per annum until 2020 and can become the second
largest in the world ahead of the United States by 2050, and the third
largest after China and the United States by 2032. The turn around in
manufacturing and other sectors, which has occurred in the face of
increased global competitions, is due to improved efficiency following
various policy reforms in recent years. The manufacturing industries
constitute 6 percent of GDP, 34 percent of national exports and
account for the employment of more than 30 million people.
The small and medium scale industries can be rightly called as
the backbone of the GDP of India. This sector in India is growing at an
exceptionally fast rate due to which it is providing to be beneficial to
the Indian economy.
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Following are the some of the current figures – related to small
and medium scale sectors in Haveri district.
The contribution of the small and medium scale sector to the entire
output of the country is 40 percent.
Currently, there are over 11 million small and medium scale units
in India that produces more than 8000 products.
90 percent of the Industrial Units in India belongs to the small and
medium scale sectors.
These small and medium scale units contribute 35 percent to the
Indian Industrial Export.
Following are some of the factors that have contributed to the
growth of small and medium scale sector in India.
These units in India are being funded by foreign and local fund
providers.
The advancement in technology has also contributed highly to this
sector. There are numerous business directories and trade portals
available online that contains a rich database of manufacturers,
sellers and buyers.
To start and maintain these units minimal investment is required.
These units are now being funded by many government and private
banks.
The small and medium sector is one of the greatest contributors of
domestic production as well as the export earnings. Many major
mergers have taken place recently.
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Though the small and medium scale industrial sector is
flourishing and expected to grow further in the near future, there are
however certain challenges that the small and medium scale
industrial sector will have to face.
The economy of Haveri district is predominantly agrarian. All
the segments of the economy, viz. agriculture, industry and services
have to improve their contribution to the economy. The growth of
manufacturing industries is a sine qua non for the growth of industry,
exports and other segments of the economy. Furthermore, promotion
of entrepreneurship is also vital for sustenance and upward movement
of the current growth trajectory of the economy. The manufacturing
sector acts as a catalytic in upholding and encouraging the creation of
the innovative spirit and entrepreneurship in the economy, thereby
helping in laying the foundation for rapid industrial development.
Moreover, the sector also serves the vital objectives of employment
generation and balanced regional development. Globalization and
liberalization of the district economy have also brought a host of
opportunities for the industrial sector, particularly the manufacturing
segment. While manufacturing industries have responded to
competition reasonably satisfactory, there is scope for increasing their
export potential, domestic market share and developing them as
serious players in the global value chain. It represents the largest
proportion of the manufacturing sector in every country.
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6.5 Prospects of Manufacturing Industries
There are number of factors that are to be considered for
identifying industries suitable for development in an area. Resources,
both men and material constitutes and important factor. Infrastructure
facilities like industrial accommodation, power, banking, railway,
roadway also play an important role in the development of industries,
realizing the importance of these factors in the promotion of
industries, an indepth factual analysis of data pertaining to the above
said aspects have been done. The details have been given in the
previous chapters.
Another important factor that had merited consideration in this
context has been the existing demand in the district for various goods
and services. Besides, the existing industrial structure of the district
is also been gone into in detail with a view to avoid duplication of
items suggested and to know the problems that confronted the local
entrepreneurs. Apart from these, certain other aspects like availability
of skilled labour, capital, locational advantages and aptitude of the
people in the study area have also been taken into consideration,
while identifying industrial opportunities. The criterions adopted for
identifying about industries are:
a) The availability of resources and the investable surplus of the
people.
b) The demand for the various products.
c) Availability of raw materials.
d) Adequate power supply.
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e) Incentives and concessions from the government.
f) Marketing support.
g) Transportation facilities.
h) Financial assistance.
i) Land availability.
j) Water resources.
k) Waste management.
However, for the survival of Haveri district and its mass, the
industrial sector will have to improve and provide resources top the
district and employment opportunity for the better living of its people.
The government and public have to adopt helpful and friendly
attitudes towards prospective industrial entrepreneurs.
There is a vast scope for industrial activities in Haveri district.
The need is right people, right movement in the right direction to
industrialize the district.