A Study on Business Planning and Marketing Strategy in the Context of Globalization for Small and Medium Enterprises in the Select Automotive Clusters of India

Abstract

SMEs/SSBEs form the back bone of the economic development in every country across the world – be it developed, emerging or developing country. Besides industrial development in the country, they have unequivocally accounted to increased employment and exports. Their importance can be gauged from the fact that in the recent budget (Financial Year 2014-15) the Indian government had announced INR 100 billion fund for creating new businesses. The government further announced to reinforce substantively the manufacturing sector to revive economy and employment opportunities. Manufacturing has a cascading effect on the service sector as well besides ensuring industrial growth and employment. This is in addition to creation of a dedicated Ministry of Micro, Small and Medium Enterprises (MSME) way back in 2006. This emphasizes the resolve of the nation to ensure that SMEs grow and become profitable, thus contributing to the national economy. Attempts are also being made by government and other stake holders to rescue dying SMEs and revive those that are now dormant to unleash the locked resources though a variety of interventions and actions. Literature on what should be done to support the SMEs in their efforts are copious and freely available. However, there is sparse literature on what the Indian SMEs could do to help themselves survive and succeed. This study seeks to cull out factors and steps that SMEs and SSSBEs, particularly in the automotive and related light engineering sectors could take to withstand the kaleidoscopic changes happening in the business eco-system. A survey of literature was done to ascertain research gaps. Based on this and expert opinion a questionnaire was designed consisting of 57 items to test the three hypotheses formulated on the Likert scale of 5. There were also 9 items on nominal scale viz. Yes/No type in the questionnaire. A pilot test of this was done to test the rigor, relevance and the ease of administration on 51 respondents. The questionnaire was also checked for its reliability and validity. The questionnaire was then finalized and administered to 654 respondents of which 517 valid responses were obtained. Exploratory Factor Analysis (EFA) and Analytic Hierarchy Process (AHP) were conducted. EFA gave the success factors for the SMEs; and AHP, using pair-wise weights to all the items, gave the normalized weights based on expert opinion. Combining the results obtained through EFA x (using SPSS 20.0) and AHP gave the priority-wise steps/initiatives that the SMEs need to focus for being successful. Further SEM (Structural Equation Modeling) was used to further check the strength of relationships and what could be final take-away in form of top most priority steps by SME owners/managers. Hypotheses were tested using Minitab 16.1 and AMOS 20.0. What this study concluded was that there was a very strong case for business planning and it was important that SMEs engage in crafting their own marketing strategies to meld with the current and impending business scenarios. There were 18 factors needing their attention but that were far too many for resource starved SMEs to engage in all at once. Hence, a step-by-step recommendation was made:

1. Proactive innovation (0.529)

2. Technological Preferences (0.385)

3. Competitiveness (0.095)

4. Quality (0.057)

5. Product Innovation (0.055)

6. Negative attributes (0.049) i.e. Governmental support and required compliance

In other words, in order to be successful an SME would have to take the following steps:

1. Being small and resource-crunched, SMEs must constantly be innovating in all of its business processes to stay ahead of the competition.

2. Awareness of advances in technology and being prepared for the changing scenario, even when the resources are limited, means they must make right choice of technology they use.

3. At all times, they would need to be assertively competitive and sensitive to the actions in the market by other players such that they are able to leverage competition to their advantage.

4. Building quality in their entire endeavor means systematizing their business processes to give them a leg-up on their competitors besides coming with substitute offerings.

5. SMEs need to improve and innovate in their offerings especially product innovation.

6. Thorough understanding of support mechanism in terms of subsidies, loans, excise exemption schemes, industrial testing facilities, etc. available from the Government besides the mandatory compliances would help smoothen operations and free them to fully concentrate on the business of their business.