Academic journal article South Asian Journal of Management

Comparative Study on Strategies of Indian Small, Medium and Large Scale Organizations

Academic journal article South Asian Journal of Management

Comparative Study on Strategies of Indian Small, Medium and Large Scale Organizations

Article excerpt

Globalization of market and increasing expectations of customers have created a turbulent environment for Indian small, medium and large-scale organizations. In this paper, an attempt is made to study various issues such as nature of pressures and constraints, strategies adopted by these units for investments, competencies development, reducing cost and improving quality and their performance in comparison to national and international standards in the present scenario. It is observed that growth conducive environment and government support are the main constraints whereas cost, quality and delivery time are main pressures. Major weak areas of Indian organizations are research and development, application of information technology, identification of niches and training of employees. Performance of Indian organizations specifically in terms of manufacturing cost, level of inventory, employee turnover rate and throughput (Rs/hour) is found significantly below international standards. Therefore, Indian organizations should give more focus on these areas such as R&D, IT applications and training of employees while developing their strategies.

INTRODUCTION

Small and Medium Enterprises (SMEs) represent the largest proportion of the manufacturing sector in every country. In India, 95% of industrial units are in small-scale sector with 40% value addition in the manufacturing sector and 6.29% contribution to the Indian Gross Domestic Product (Singh et al, 2006). For a long time before economic reforms, Indian SMEs were concentrating on domestic market under government protection. The average growth rate of labor productivity in manufacturing during 1986-95 for India has been 4.95% in comparison to 7.31% for China, 9.45% for Singapore and 8.65% for Pakistan (APO, 1997). Share of manufacturing in India's Gross Domestic Product is about 17% in comparison to China's 35% and Korea's 31% (The Times of India, 2005). After 50 years of independence and over a decade of liberalization and economic policy reforms, India is yet to nudge its global export share beyond 0.5%. The technology gap in the Indian industry, in some cases, is up to 15-20 years equivalent due to low emphasis on research and development (R&D). A typical industry in India spends less than 0.6%, on average, of its turnover on R&D as against the world average of 2.5% (Garg et al., 2003).

Global Competition, technological change and demanding customers are creating a more knowledge intensive, turbulent, complex and uncertain environment. Various sub-constructs of environmental uncertainty are customer uncertainty, supplier uncertainty, competition uncertainty and technological uncertainty. These uncertainties due to globalization of the Indian market after the economic reforms have led to drastic changes in the approach of Indian SMEs and large organizations for formulating their strategies and priorities for investments and developing competencies. In such a dynamic environment, organizations that are able to continually build new strategic assets faster and cheaper than those of their competitors will create long-term competitive advantage. In this process, core competencies have a pivotal role to play. The number of such core competencies that a firm can develop is extremely limited, and the firm has to excel in them in order to be successful. Effective manufacturing firms are integrated firms, where manufacturing functions and performance are linked. Integration would enable the value creation and transfer processes right from the supplier to the end customer as a seamless chain along which information, knowledge, equipment and physical assets flow as water (Gunasekaran and Yusuf, 2002).

In the present scenario of economy when national boundaries have disappeared, a firm must also think and act as a global company and position itself in a favorable market. Competing and surviving in the markets of the developed countries force the firms continually improve and excel in every phase of their activities. …

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