Classification of Enterprises - Micro, Small And Medium Enterprises | Entrepreneurship & Small Businesses - B Com PDF Download

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.

Micro, Small And Medium Enterprises Development Act , 2006 - Under this act, the central Government shall set up, for the purpose of the act, a Board known as the National Board For Micro, Small and Medium Enterprises

Classification of Enterprises

1. In Case of Manufacturing Enterprise:

(a) A micro enterprise is one in which the investment in plant and machinery does not exceed Rs.25 Lakhs.

(b) 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.

(c) A medium enterprise is one in which the investment in plant and machinery is more than Rs. 5 crores but does not exceed Rs. 10 crores.

2. In Case of Service Enterprise:

(a) A micro enterprise is one in which the investment in plant and machinery does not exceed Rs. 10 lakhs.

(b) 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.

(c) A medium enterprise is which the investment in plant and machinery is more than Rs. 2 crores but does not exceed Rs. 5 crores.

Ancillary Units

These units provide inputs to other industries. These are engaged in the manufacture of parts, components, light engineering products like cycles, sewing machines diesels engines, machine tools, electrical application. The investment in plant and machinery should not exceed Rs. 5 crores.

Export Oriented Unit
Export oriented units are those SSI units which export at least 30% of its annual production by the end of the 3^th year of commencement of production.

Characteristics Of MSMEs

The important characteristics of MSMEs are summarized as follows:

• They are generally organized and run by individual entrepreneurs.
• They require less capital.
• They are fundamentally labour- intensive units facilitating greater utilization of man power.
• They involve the use of simple technology, intensive utilization of individual skill leading to professional specialization.
• They cater the individual tastes and fashions and render personalized service to consumers.
• They are highly localized industries. Using local resources MSMEs are decentralized and dispersed to rural areas.
• They are eligible for govt. assistance and patronage and for concessional finance by banks, financial institutions etc.
• They are flexible to a large extent. They are more susceptible to change and highly reactive and receptive to socio-economic conditions.
• They are free from red- tapism and bureaucratic handicaps.
• Compared to large units, a MSME has a lesser gestation period. ie, the period after which the on investment starts.

Objectives Of MSMEs

The primary objectives of MSME are to play a complementary role in the socio- economic set up of a country. The other objectives are as follows:

1) To provide increased employment opportunities.
2) To provide production of large variety of goods especially consumer goods through labou rintensive 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 small entrepreneurs.
6) To ensure more equitable distribution of national income.
7) To ensure balanced regional development as regards industries.
8) To encourage the adoption of modern techniques in the unorganised traditional sector or the industry.

Advantage Of MSMEs

1) They are relatively more environmental friendly.
2) They are generally based on local resources.
3) They provide ample opportunities for creativity 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 necessary changes as and when required.
8) These help in reducing prices.
9) There is a close and direct personal contact with the customer and employees.
10) They create more employment opportunities. They are labour intensive. They offer ample scope for self employment.
11) They require only less capital. It is a boon to a country like India where capital is deficient.
12) MSME alone can satisfy individual tastes and offer personalized service to the customers.

Disadvantage Of MSMEs

• MSMEs suffer from lack of funds. They are financially weak.
• They suffer from lack of managerial and other skills. They cannot employ highly paid officials.
• MSMEs always face tough competition from large businesses.
• They are not well equipped to make advantage of the latest technology and modern methods.
• There is only a little scope for division of labour and specialization.
• MSMEs cannot afford to spend large sums of money on research and experiments
• They cannot survive in times of adversity.
• They cannot secure cheap credit.