CHAPTER-4

PROBLEMS OF MICRO
ENTERPRISES
 In this chapter, an attempt is made to analyze the profile of the enterprise which

includes the inception period, occupational area, ownership and technology used and

proposed to assess various aspects of Production, Finance and Marketing Management

practiced in the sample of units of the study. The aspects covered are plant capacity

utilization and reasons for underutilization, sources of raw material and availability of raw

material for Micro Enterprises. Regarding financial management, investment in plant and

machinery and working capital ,sources of finance from organized and unorganized market

and average profit& loss have been examined and in marketing management various aspects

such as different segments of target customers, methods of fixing prices, promotion of

products, marketing channels and problems and measures have been presented below.

4.1 Enterprise’s Profile

Table 4.1 Profile of Micro Enterprise Respondents

Profile Manufacturing Services Both Total

Manufacturing

& Services

No. % No. % No. % No. %

A. Inception Period :

Upto 1990 09 11.7 15 7.5 01 2.2 25 7.8

Upto 2000 12 15.6 17 8.5 02 4.4 31 9.7

After 2000 56 72.7 167 83.9 42 93.3 265 82.5

B.Nature of Location:

Urban 25 32.5 168 84.4 20 44.4 213 66.4

Rural 52 67.5 31 15.6 25 55.6 108 33.6

73
C. Nature of Ownership

Proprietorship 60 77.9 196 98.5 44 97.8 300 93.5

Partnership 03 3.9 03 1.5 0 0 06 1.8

Joint family 14 18.2 0 0 01 2.2 15 4.7

D. Nature of Technology

Used:

Automatic 02 2.6 0 0 01 2.2 03 1.0

Semi-automatic 52 67.5 149 75.0 18 40.0 219 68.2

Manual 23 29.9 50 25.0 26 57.8 99 30.8

Source: Primary Data.

The above table reveals the profile of micro enterprise respondents such as their

inception period, nature of location, nature of ownership and nature of technology used.

As regards the inception period of the enterprise respondents, majority (82.6%) of

them initiated their business operation after the year 2000 followed by 9.7% upto the year

2000 and 7.8% upto the year 1990.

Industry wise analysis also reveals more or less the similar trends. In case of

manufacturing 72.7%, services 83.9% and both manufacturing and services 93.3% started

their business operation after the year 2000.Thus; it is known that most of the enterprises are

quite new business enterprises.

Regarding the nature of locational area of organizational respondents, 66.4% were

located in urban areas whereas only 33.6% were located in rural areas due to poor

communication, poor electricity and poor market coverage.

74
 Industry wise analysis also reveals that manufacturing enterprises were less (32.5%)

in urban area due to huge population and pollution whereas in rural it was 67.5%. But,

services were 84.4% in urban area whereas in rural areas it was only 15.6%.

It is learnt that most of the units are located in urban areas related to services sector.

But units related to manufacturing sector are basically located in rural areas where they get

huge area for establishing their units and also far from the huge population. Such as the

weavers from Sualkuchi are originally from the rural areas and they are never ready to

change their origin place and come to the urban areas. The brick making enterprises get huge

land to establish their business in open field in the rural areas which they will never get in the

urban areas. As a whole, most of them are located in urban areas which are related to service

sector and in rural areas which are related to manufacturing sector.

Relating to the nature of the ownership of the enterprise respondents, a greater

majority (93.5%) of them were having proprietorship business as it consist of less investment,

one man control, easy decision making, sole profit earner etc., whereas 4.7% were having

joint family business and only 1.9% were engaged in partnership business.

As regards nature of technology used by the enterprise respondents, 57.4% of the

enterprise respondents were using semi-automatic technology whereas 40.2% of them were

using labour intensive technology. Only 03 enterprise respondents (2.5%) were using

automatic technology.

Industry wise analysis reveals that in Manufacturing Sector, 67.5% of the enterprise

respondents were using semi-automatic technology, whereas 29.9% were using labour

intensive technology. Only 02 enterprise respondent (2.6%) were using automatic

technology. In Service Sector, 40% of the enterprise respondents were using semi-automatic

technology whereas only 57.8% were using labour intensive technology.

75
 Enterprises like Bricks, Printing, and Weaving were using labour intensive

technology; on the whole, many of the enterprise respondents were using semi-automatic

technology.

Figure 4.1

Inception Period

7.8%

9.7%

Upto 1990
Upto 2000
After 2000

82.5%

Figure 4.2

Nature of Location

33.6%

Urban
Rural

66.4%

76
 Figure 4.3

Figure 4.4

Nature of Technology Used

1%

30.8%

Automatic
Semi-Automatic
Manual

68.2%

77
 4.2 Production Management

Table 4.2 Plant Capacity Management of Enterprise Respondents

Details Manufacturing Services Both Total

Manufacturing
& Services

No. % No. % No. % No. %

Capacity Utilization

Upto 25% 09 11.7 109 54.8 18 40.0 136 42.4

25-50% 16 20.8 59 29.6 17 37.8 92 28.7

50-75% 52 67.5 30 15.1 10 22.2 92 28.6

75-100% 0 0 01 0.5 0 0 01 0.3

Reason for Plant

Capacity under
Utilization

Low Demand
04 5.2 75 37.7 16 35.6 95 29.6
Lack of Raw Materials
20 26.0 08 4.0 02 4.4 30 9.3
Finance
18 23.4 105 52.8 19 42.2 142 44.2
Power Failure
45 58.4 15 7.5 05 11.1 65 20.2
Lack of Skilled Worker
50 64.9 18 9.0 04 8.9 72 22.4
Any Other
01 1.3 01 0.5 0 0 02 0.6

Source: Primary Data

78
Note: Respondents have given multiple choices

Plant capacity management has been discussed in table 4.2.Regarding Plant Capacity

Utilization, mostly all the enterprise respondents has under-utilized their plant capacity below

75% except one respondent in the services sector. Nearly half of the respondents (42.4%)

were utilizing their plant capacity upto 25% followed by 28.7% of them using plant capacity

25-50% and 28.6% of the respondents were utilizing 50-75% of their plant capacity.

Industry wise the trend is different. In manufacturing sector, more than half (67.5%)

of the respondents have utilized their plant capacity from 50-75%,followed by 20.8% and

11.7% from 25-50% and upto 25% respectively. In services sector,54.8% of the respondents

have utilized their plant capacity upto 25%,followed by 29.6% from 25-50% and 15.1% have

utilized their plant capacity from 50-75%

The reasons that were responsible for capacity under-utilization was mainly Finance

(44.2%) as the financial institutions like banks fail to provide financial assistance as

committed earlier is delayed beyond the limit of time. Lack of demand (29.6%) as the full

production of a plant could not be utilized in its full capacity. 22.4% by lack of skill worker

as the plant fails to get proper skilled and technical personnel for a considerable time after

implementation of the plant and 20.2% by power failure as mostly in rural areas the power is

disconnected for longer period of time and only 9.3% by lack of raw materials as the plant

will remain idle for not being able to utilize its capacity.

79
 Figure 4.5

Figure 4.6

Reasons for Plant Capacity Under-Utilisation

Any Other 0.6

Lack of Skilled Worker 22.4

Power Failure 20.2

Finance 44.2

Lack of Raw Materials 9.3

Low Demand 29.6

0 5 10 15 20 25 30 35 40 45 50

In %

80
 Table 4.3 Sources and Availability of Raw Material

Details Manufacturing Services Both Total

manufacturing

& services

No. % No. % No. % No. %

A.Sources of Raw

Materials

Local 59 89.4 112 99.1 28 100.0 199 96.1

Other state 01 1.5 0 0 0 0 01 0.5

Abroad 01 1.5 0 0 0 0 01 0.5

1+2 04 6.1 01 0.9 0 0 05 2.4

2+3 01 1.5 0 0 0 0 01 0.5

B. Availability of

Raw Material

Highly adequate 0 0 01 3.1 0 0 01 1.2

Adequate 37 71.2 28 87.5 02 100.0 67 77.9

Inadequate 15 28.8 03 9.4 0 0 18 20.9

Source: Primary Data

Note: Respondents have given multiple choices

The above table discusses the sources and availability of raw materials used by the

enterprise respondents. In case of procurement of raw materials, majority (96.1%) of them are

acquiring from local sources ,followed by 2.4% local and other state,0.5% from abroad, other

state and importing from other state and abroad.

81
 Industry wise it reveals that manufacturing units procure raw materials 89.4% locally

,followed by local and other state 6.1% while other factors remaining the same. In case of

services sector, they procure raw materials 99.1% locally, followed by local and other state

0.9%.As a whole, it is noticed that raw materials are procured locally.

Regarding availability of raw materials, a greater number of respondents (77.9%)

expressed that the availability of raw materials as adequate. Whereas 20.9% stated

availability of raw materials as inadequate. Only 1.2% stated raw materials to be highly

adequately available.

Industry wise the trend remains the same. In manufacturing sector, 71.2% stated that

availability of raw materials as adequate followed by 28.8% as inadequate. In services sector

87.5% of the respondents stated that availability of raw materials as adequate, followed by

inadequate at 9.4% and only 3.1% mentioned that availability of raw materials as highly

adequate.

As a whole, availability of raw materials was not a serious problem.

Figure 4.7

82
 Table 4.4 Problems of Production Management

Details Manufacturing Services Both Total

Manufacturing

& Services

No. % No. % No. % No. %

Problems

1.No Professionalism 05 4.2 10 3.9 0 0 15 3.4

2.Poor Credit History 0 0 16 6.2 02 4.2 18 4.1

3.Inadequacy of Loan 01 1.0 01 0.4 0 0 02 0.5

4.Less Technologies 33 32.3 06 2.3 02 4.2 41 9.4

5.No Business Views 0 0 03 1.2 0 0 03 0.7

6.High Interest Rate 07 7.3 03 1.2 0 0 10 2.3

7.Raw Material 18 17.3 06 2.3 05 8.3 29 6.6

8.Market 38 33.3 166 63.0 24 41.7 228 52.2

9.Skilled Labour 55 56.3 26 7.8 10 16.7 91 20.8

10.Transport 46 45.8 07 2.7 02 4.2 55 12.6

11.Lack of Clear Plan 01 1.0 02 0.8 01 2.1 04 0.9

12.Roads 49 49.0 04 1.6 04 6.3 57 13.0

13.Power 45 44.8 15 4.3 02 4.2 62 14.2

14.High Wage Rate 55 55.2 19 4.7 01 2.1 75 17.2

Source: Primary Data

83
Note: Respondents have given multiple choices

Table 4.4 reveals the problems associated with manufacturing of goods and rendering

of services. Majority (52.2%) of the respondents advocated that market was the main problem

in running their business. Specific market was not available for their finished products or it

was too far from their home place. Lack of skilled workers (20.8%) was another of their

problem as they failed to get proper skilled and technical personnel for a considerable time

after starting their business. This was followed by high wage rate (17.2%) as the labourers

charge very high rate of wage, power (14.2%) as in the rural areas power is discontinued for a

very longer period of time. Another problem advocated by them was roads (13.0%) and

transport (12.6%) as the medium through which goods are carried are not always of the good

condition and lack in updation. Less technology (9.4%) as technology didn’t reach the rural

areas easily .Other lesser known reasons were raw materials (6.6%),poor credit history

(4.1%),no professionalism (3.4%),high interest rate (2.3%),lack of clear plan (0.9%),no

knowledge of business (0.7%) and inadequacy of loan (0.5%).

Industry wise in manufacturing sector, lack of skilled labor (56.3%) was the main

reason followed by high wage rate (55.2%), roads (49%), transport (45.8%) and power

(44.8%) were said to be the secondary problems of production management. While, in service

sector the main problem was advocated to be market (63%).

On the whole, majority of the enterprise respondents were facing many problems in

production management.

84
 Figure 4.8

Problems of Production Management

14.High Wage Rate 17.2
13.Power 14.2
12.Roads 13
11.Lack of Clear Plan 0.9
10.Transport 12.6
9.Skilled Labour 20.8
8.Market 52.2
7.Raw Material 6.6
6.High Interest Rate 2.3
5.No Business Views 0.7
4.Less Technologies 9.4
3.Inadequacy of Loan 0.5
2.Poor Credit History 4.1
1.No Professionalism 3.4

0 10 20 30 40 50 60

In %

85
 4.3 Financial Management

Table 4.5 Amount of Capital Investment by Enterprise Respondents

Details Manufacturing Services Both Total

Manufacturing

& Services

No. % No. % No. % No. %

Investment in

P/M

Upto Rs.50000 15 19.5 39 19.6 26 57.8 80 24.9

Rs.50000-Rs.100000 17 22.1 37 18.6 09 20.0 63 19.6

Rs.100000-Rs.500000 34 44.2 115 57.8 09 20.0 158 49.2

Rs.500000-Rs.1000000 09 11.7 08 4.0 01 2.2 18 5.6

Above Rs.1000000 02 2.6 0 0 0 0 02 0.6

Total 77 100.0 199 100.0 45 100.0 321 100.0

Investment in Working

Capital

Upto Rs.50000 01 1.3 15 7.5 07 15.6 23 7.2

Rs.50000-Rs.100000 02 2.6 19 9.5 20 44.4 41 12.8

Rs.100000-Rs.500000 33 42.9 130 65.3 14 31.1 177 55.1

Rs.500000-Rs.1000000 18 23.4 28 14.1 02 4.4 48 15.0

Above Rs.1000000 23 29.9 07 3.5 02 4.4 32 10.0

Total 77 100.0 199 100.0 45 100.0 321 100.0

Source: Primary Data

86
Note: P/M-Plant & Machinery

Table 4.5 explains the amount of capital that was invested in Plant & Machinery and

Working Capital by the enterprise respondents.

As regards Investment in Plant & Machinery,49.2% of the enterprise respondents

have invested from Rs.1,00,000-Rs.5,00,000,24.9% upto Rs.50,000,19.6% from Rs.50,000-

Rs.1,00,000,5.6% from Rs.5,00,000-Rs.10,00,000 and only 0.6% above Rs.10,00,000.

Industry wise followed the same trend.

Majority invested from Rs.1, 00,000-Rs.5, 00,000.

It was found that enterprises like battery charging, carpentry, tea stall, cycle repairing,

sound system, Dye-cleaning, plumbing, tours & travels, tailoring invested less in their plant

& machinery. Whereas, enterprises like furniture, brick industry, fabrication, iron & steel

products invested more capital in their plant & machinery.

As regards Investment in Working Capital,55.1% of the enterprise respondents have

invested from Rs.1,00,000-Rs.5,00,000,15.0% from Rs.5,00,000-Rs.10,00,000,12.8% from

Rs.50,000-Rs.1,00,000,10.0% above Rs.10,00,000 and only 7.2% upto Rs.50,000.

Industry wise followed the same trend.

Majority invested from Rs.1, 00,000 –Rs.5, 00,000.

It was found that working capital ,which is needed to run a business day to day and

includes cash needed to maintain stock and pay expenses, in enterprises like printing press,

tailoring, tea stall demanded more than brick industry, rice mall and other bigger industries.

87
 Figure 4.9

Figure 4.10

88
 Table 4.6 Financial Assistance Received & Sources of Finance

Details Manufacturing Services Both Total

Manufacturing

& Services

No. % No. % No. % No. %

Yes 63 81.8 124 62.3 21 46.7 208 64.8

No 14 18.2 75 37.7 24 53.3 113 35.2

Sources of Finance

Bank 18 28.6 39 31.5 03 14.3 60 28.8

Personal 60 95.2 86 69.4 19 90.5 165 79.3

Friends & Relatives 27 42.9 15 12.1 04 19.0 46 22.1

Other Sources 04 6.3 11 8.9 0 0 15 7.2

Levels of Sourcing

Single source 24 38.1 98 79.0 17 81.0 139 66.8

Double source 32 50.8 26 21.0 03 14.3 61 29.4

Triple source 07 11.1 0 0 01 4.8 08 3.8

Total 63 100.0 124 100.0 21 100.0 208 100.0

Source: Primary Data

Note: Respondents have given multiple choices

The above table explains whether or not Financial Assistance has been received by

the enterprise respondents and Sources of Finance. 64.8% of the respondents have revealed

that they have received finance from various sources of finance. Most of them (79.3%) were

Self-financed, followed by Bank 28.8%, Friends& Relatives 22.1% and Other Sources 7.2%.

89
 Industry wise in Manufacturing Sector 95.2% are Self-financed, Friends& Relatives

42.9%, Bank 28.6% and Other Sources 6.3%.In Services Sector,69.4% are Self-financed,

followed by Bank 34.5%,Friends & Relatives 12.1%.

In regards to Levels of Sourcing, 66.8% of the enterprise respondents have revealed

that they have received finance from a Single Source, 29.3% from Double Source and only

3.8% from Triple Source of finance.

As a whole, majority of the respondents have utilized their own fund to start up their

enterprise as Micro Enterprise doesn’t require such huge sum of fund.

Figure 4.11

Souces of Finance

Other Sources 7.2

Friends & Relatives 22.1

Personal 79.3

Bank 28.8

0 10 20 30 40 50 60 70 80 90
In %

90
 Table 4.7 Loans and Incentives taken from Banks

Details Manufacturing Services Both Total

Manufacturing

& Services

No. % No. % No. % No. %

Amount of Loan

Below Rs.1,00,000 03 16.7 13 33.3 02 66.7 18 30.0

1,00,000-1,50,000 06 33.3 15 38.5 0 0 21 35.0

1,50,000-5,00,000 07 38.9 10 25.6 0 0 17 28.3

Above 5,00,000 02 11.1 01 2.6 01 33.3 04 6.7

Total 18 100.0 39 100.0 03 100.0 60 100.0

Repayment of

Loan 14 77.8 38 97.4 03 100.0 55 91.7

Regular 04 22.2 01 2.6 0 0 05 8.3

Irregular

Reasons for

Irregularity 03 75.0 01 100.0 0 0 04 80.0

Loss 01 25.0 0 0 0 0 01 20.0

Inadequate Income

Source: Primary Data

The above table explains the amount of Loan and Incentives taken from Bank, their

Repayment and Reasons for Irregularity in repayment of their loan to the banks. Majority

(35.0%) of the enterprise respondents have taken loan between Rs 1,00,000-

91
Rs.1,50,000.Another 30.0% of the enterprise respondent below Rs.1,00,000,28.3% of the

enterprise respondents from Rs.1,00,000-Rs.1,50,000 and Only 6.7% of the enterprise

respondent have taken loan above Rs.5,00,000.

Industry wise, in Manufacturing Sector, majority (38.9%) of the enterprise respondent

have taken loan from bank which ranges between Rs.1,50,000-Rs.5,00,000.Another 33.3% of

the enterprise respondent between Rs.100,000-Rs 1,50,000,whereas,16.7% of the enterprise

respondent have taken loan below Rs.1,00,000.Only 11.1% of the enterprise respondent have

taken loan above Rs.500,000,i.e., only two units from the brick industry have taken this huge

amount from the bank. In Services Sector, majority (38.5%) of the enterprise respondent have

taken loan from bank which ranges between Rs.1, 00,000-Rs.1, 50,000, followed by 33.3%

below Rs.1, 00,000 and 25.6% between Rs.1, 50,000-Rs.5, 00,000.Only 2.5% of the enterprise

respondents have taken loan above Rs.500000, i.e., only one unit from the tours & travels

industry have taken this huge amount from the bank.

As a whole, the enterprise respondents have taken various amounts of loan from the

banks ranging from below Rs.100000, Rs.100000-Rs.500000 and above Rs.500000.

In regards to repayment of loan, majority (91.7%) of the enterprise respondents have

been regular in repaying their loan to the banks .But 8.3% of the enterprise respondents couldn’t

repay their loan to the banks.

Industry wise follows the same trend. In Manufacturing Sector, 77.8 % of the

enterprise respondents have been regular in repaying their loans whereas 22.2% couldn’t repay

their loans to the banks. In Services Sector, 97.4% of the enterprise respondents have been

regular in repaying their loans whereas 2.6% couldn’t repay their loans to the banks.

92
 In regards to reasons for irregularity in repaying their loans to the banks, majority

(80.0%) of the enterprise respondents revealed that Loss has been the main the reason and only

20.0% revealed that Inadequate Income as the main reason for not being able to repay their loans

to their concerned banks.

Figure 4.12

Amount of Loan
6.7%

30.0%
Below Rs.1,00,000
28.3%
Rs.1,00,000-Rs.1,50,000
Rs.1,50,000-Rs.5,00,000
Above Rs.5,00,000

35.0%

93
 Table 4.8 Average Profit & Loss during 2008-2013(Amount in Rs.)

Details Manufacturing Services Both Total

Manufacturing &

Services

Mean Valid N Mean Valid N Mean Valid N Mean Valid N

Profits

2008-09 134394 69 100033 151 73375 32 106056 252

2009-10 130725 69 108431 176 81263 38 110218 283

2010-11 145603 73 121490 196 97476 42 123907 311

2011-12 154292 77 129090 199 116356 45 133350 321

2012-13 188394 77 157302 199 126511 45 160443 321

Losses

2008-09 13571 07 18706 17 28750 04 18857 28

2009-10 9571 07 12188 16 15000 04 11926 27

2010-11 5000 03 7500 02 36667 03 17500 08

2011-12 -- 0 -- 0 -- 0 -- 0

2012-13 -- 0 -- 0 -- 0 -- 0

Source: Primary Data

Table 4.8 explains the average profits and losses incurred by the enterprises from

2008-09 to 2012-13. In 2008-09, the average profits made by 252 units were Rs.1, 06,056.

Remaining 41 units were newly established. In manufacturing sector, 69 units made an

average profit of Rs.1, 34,394 and in services sector, 151 units made an average profit of

Rs.1, 00,033. In 2008-09, the average losses incurred by 28 units were Rs.18, 857. In

94
 manufacturing sector, 07 units incurred losses of Rs.13, 571 and in services sector, 17 units

incurred losses of Rs.18, 706.

In 2009-10, the average profits made by 283 units were Rs.1, 10,218. Remaining 11

units were newly established. In manufacturing sector, 69 units made an average profit of Rs.1,

30,725 and in services sector, 176 units made an average profit of Rs.1, 08,431. In 2009-10, the

average losses incurred by 27 units were Rs.11, 926. In manufacturing sector, 07 units incurred

losses of Rs.9, 571 and in services sector, 16 units incurred losses of Rs.12, 188.

In 2010-11, the average profits made by 311 units were Rs.1, 23,907. Remaining 02

units were newly established. In manufacturing sector, 73 units made an average profit of Rs.1,

45,603 and in services sector, 196 units made an average profit of Rs.1, 21,490. In 2010-11, the

average losses incurred by 08 units were Rs.17, 500. In manufacturing sector, 03 units incurred

losses of Rs.5, 000 and in services sector, 02 units incurred losses of Rs.7, 500.

In 2011-12, the average profits made by 321 units were Rs.1, 33,350. In

manufacturing sector, 77 units made an average profit of Rs.1, 54,292 and in services sector,

199 units made an average profit of Rs.1, 29,090. In 2011-12, the average losses incurred was

nil.

In 2012-13, the average profits made by 321 units were Rs.1, 60,443. In

manufacturing sector, 77 units made an average profit of Rs.1, 88,394 and in services sector,

199 units made an average profit of Rs.1, 57,302. In 2012-13, the average losses incurred was

nil.

95
 Figure 4.13

Yearwise Profit Making in %

2012-13 25.3

2011-12 21.1

2010-11 19.5

2009-10 17.4

2008-09 16.7

0 5 10 15 20 25 30
In %

96
 Table 4.9 Problems and Measures of Financial Management

Details Manufacturing Services Both Total

Manufacturing
& Services

No. % No. % No. % No. %

Problems in getting
Loan & Incentives
Delay 17 94.4 34 87.2 03 100.0 54 90.0
Documentation 17 94.4 32 82.1 03 100.0 52 86.7
Bribe 0 0 03 7.7 0 0 03 5.0
Security 06 33.3 21 53.8 03 100.0 30 50.0
Margin Money 0 0 01 2.6 0 0 01 1.7
High Interest Rate 17 94.4 32 82.1 03 100.0 52 86.7
Short Repayment 06 33.3 10 25.6 01 33.3 17 28.3
Problems for
Managing Financial
Resources 47 61.0 44 22.1 02 4.4 93 29.0
Lack of Knowledge 13 16.9 20 10.1 05 11.1 38 11.8
No Proper Accounting 01 1.3 01 0.5 0 0 02 0.6
Diverting Fund

Steps for Managing

Problems 19 35.8 31 48.4 04 57.1 54 43.5
Proper Training 08 15.1 11 17.2 02 28.6 21 16.9
New Machines 21 39.6 17 26.6 01 14.3 39 31.5
Reduce Costs 05 9.4 05 7.8 0 0 10 8.1
Increase Sales
Source: Primary Data

97
Note: Respondents have given multiple choices

The above table explains the Problems and Measures of Financial Management. As

regards problems in getting loans and incentives, majority (90.0%) of the enterprise

respondents have revealed that delay was the main problem in getting loan from the financial

institutions followed by high interest rate and documentation (86.7%).Most of them (50.0%)

advocated that security was the problem in procuring loan and incentives while for some

(28.3%) short repayment was said to be the problem in procuring loan and incentives from

financial institutions.

Industry wise followed the same trend.

As a whole, delay, documentation and high interest rates in getting a loan was

advocated to be the main problem as said by most of the enterprise respondents. Financial

institutions like banks fail to provide financial assistance as committed earlier is delayed

beyond the limit of time that may cause hampering in running of the business.

As regards the problems of managing financial resources, respondents indicated as

lack of knowledge on financial management (29.0%), lack of proper accounting (11.8%) and

diverting fund (0.6%). Industry wise followed the same trend with some significant

differences.

As regards steps for managing Financial Resources, the respondents advocated for

Proper Training (43.5%), Reduce Costs (31.5%), New Machines (18.9%) and Increase Sales

(8.1%)

Industry wise followed the same trend with some minimum variations.

98
 As a whole, most of the enterprise respondents were facing problems in managing

financial resources and trying to overcome their problems by taking some effective measures

which would help them in the near future.

Figure 4.14

Figure 4.15

99
Figure 4.16

100
 As regards Marketing Management, different segments such as Market Place, Target

Customers, Methods used for Fixing Prices, Annual Sales, Methods Used for Promoting

Products and Services, Investment in Promotion of Products, and Marketing Channels are

discussed below.

4.4 Marketing Management:

Table 4.10 Market Place and Target Customers

Details Manufacturing Services Both Total

Manufacturing
& Services
No. % No. % No. % No. %

Market Place:

Within state 47 70.1 139 98.6 29 100.0 215 90.7

Outside state 06 9.0 01 0.7 0 0 07 3.0

Abroad 01 1.5 01 0.7 0 0 02 0.8

Within and Outside

State 01 1.5 0 0 0 0 01 0.4

Outside State and

Abroad 12 17.9 0 0 0 0 12 5.1

Target Customers:

Children 13 16.9 36 18.1 03 6.7 52 16.2

Adult 57 74.0 57 28.6 05 11.1 119 37.1

Aged 22 28.6 40 20.1 03 6.7 65 20.2

Male 36 46.8 47 23.6 05 11.1 88 27.4

Female 42 54.5 38 19.1 05 11.1 85 26.5

Source: Primary Data

101
Note: Respondents have given multiple choices

The above table explains the profile of the market place and targeted customers.

Majority (90.7%) of the respondents were concentrating their marketing place Within State

followed by Outside State (3.0%) and Abroad only 0.8%.

One unit from Manufacturing like weaving and one unit from Service like tours and

travels were rendering their services to foreign countries.

As a whole majority of the respondents were marketing within state.

As regards targeted customers, majority (37.1%) of the respondents were targeting

adults followed by children only 16.2%.

Industry wise follows the same trend. Both manufacturing and services sector targets

the adults 74% and 28.6% respectively.

As a whole, the enterprise respondents were targeting adults rather than children and

aged.

As regards customers according to their sex, marketing for male (27.4%) was greater

than marketing for females (26.5%).

102
 Figure 4.17

Target Customers
Female 26.5

Male 27.4

Aged 20.2

Adult 37.1

Children 16.2

0 5 10 15 20 25 30 35 40
In %

Table 4.11 Methods used for Fixing Prices and Promotion of Products

Manufacturing Services Both Total

Manufacturing

& Services

No. % No. % No. % No. %

Methods used for

Fixing Prices

Cost Plus 45 86.5 15 100.0 02 100.0 62 89.9

Skimming 07 13.5 0 0 0 0 07 10.1

Means used for

Promoting Products

Advertisements 16 20.8 01 0.5 01 2.2 18 5.6

Sales Promotion 19 24.7 01 0.5 01 2.2 21 6.5

103
Publicity 21 27.3 13 6.5 0 0 34 10.6

Personal Selling 33 42.9 44 22.1 01 2.2 78 24.3

Marketing Channels

Direct 61 93.8 137 98.6 27 100.0 225 97.4

Indirect 02 3.1 0 0 0 0 02 0.9

Both 02 3.1 02 1.4 0 0 04 1.7

Source: Primary Data

Note: Respondents have given multiple choices

The above table explains the methods used for fixing prices and promotion of

products. Majority (89.9%) of the enterprise respondents revealed that they use Cost Plus

Method of fixing their product prices where added together the direct material cost, direct

labor cost, overhead cost for a product and added to it a markup percentage in order to derive

the price of the product. Only 10.1% of the enterprise uses Skimming Method of product

price fixation where a high price is set for a new product to skim maximum revenues layer by

layer from those segments willing to pay the high price.

Industry wise follows the same trend.in manufacturing sector, 86.5% of the

respondent units use Cost Plus Method and only 13.5% uses Skimming Method of product

price fixation. Likewise, in services sector, 100% of the respondents use Cost Plus Method of

product price fixation.

As a whole, Cost Plus Method is preferred as it is quite easy to derive a product price

using this method and it is justifiable on the grounds that the supplier can point to an increase

in its costs as the reason for the increase.

104
 As regards Means used for Promoting Products, majority (24.3%) of the respondent

unit uses Personal Selling, a process in which an individual salesman works one-to-one with

a customer to try to match a product to his/her needs, as their medium for product promotion

like Weaving Industries, followed by Publicity at 10.6%.Only 6.5% uses Sales Promotion as

their medium and 5.6% of the respondents uses Advertisements as their medium of product

promotion.

Industry wise follows the same trend. In both Manufacturing and Service sector,

Personal selling tops the list by 42.9% and 22.1% respectively as it is the easiest and cheapest

means of promoting products.

In case of Channels of Marketing, a majority (97.4%) uses Direct Channel of

marketing to customers like Weaving and Tailoring industries. It involves selling directly to

the end buyer from the manufacturer without any middlemen involved .Only 0.9% uses

Indirect Channel through distributors and wholesalers and then retail stores and only 1.7% of

the enterprise respondents use both Direct and Indirect method of Marketing Channels.

Industry wise also Direct Channel of Marketing is preferred in both manufacturing

(93.8%) and service (98.6%) sector as it enables promoting products or services that might

not have a strong brand which is very important for products of micro enterprises.

As whole, Direct Channel of marketing is preferred than any other channels of

marketing.

105
 Figure 4.18

Table 4.12 Annual Sales during 2008-09 to 2012-13 (Amount in Rs.)

Years Manufacturing Services Both Total

Manufacturing

and Service

Mean No. Mean No. Mean No. Mean No.

2008-09 117789 76 229562 153 193903 31 192638 260

2009-10 88599 76 231343 172 176500 36 186192 284

2010-11 139338 77 269745 188 206100 40 228475 305

2011-12 144039 77 284711 192 173140 43 234617 312

2012-13 177221 77 320135 192 448791 43 302596 312

Source: Primary Data

106
The above table explains the annual sales during 2008-09 to 2012-13.

In 2008-09, the Average Annual Sales were Rs.1, 92,638 by 260units. In Manufacturing

Sector, the Average Annual Sales were Rs.1, 17,789 by 76units. In Service Sector, the

Average Annual Sales were Rs.2, 29,562by 153 units.

In 2009-10, the Average Annual Sales were Rs.1, 86,192 by 284 units. In Manufacturing

Sector, the Average Annual Sales were Rs.88, 599 by 76 units. In Service Sector, the

Average Annual Sales were Rs.2, 31,343 by 172 units.

In 2010-11, the Average Annual Sales were Rs.2, 28,475 by 305 units. In Manufacturing

Sector, the Average Annual Sales were Rs.1, 39,338 by 77 units. In Service Sector, the

Average Annual Sales were Rs.2, 69,745 by 188 units.

In 2011-12, the Average Annual Sales were Rs.2, 34,617 by 312 units. In Manufacturing

Sector, the Average Annual Sales were Rs.1, 44,039 by 77 units. In Service Sector, the

Average Annual Sales were Rs.2, 84,711by 192 units.

In 2012-13, the Average Annual Sales were Rs.3, 02,596 by 312 units. In Manufacturing

Sector, the Average Annual Sales were Rs.1, 77,221 by 77 units. In Service Sector, the

Average Annual Sales were Rs.3, 20,135 by 192 units.

107
 Figure 4.19

As a whole, the average annual sales have been increasing year after year which is a

good signal for any business enterprise and the increased rate is 9.6% from 2008-09 to 2012-

13. If any enterprise is already profitable, then growth in annual sales should translate to

more working capital, which is a benchmark of any enterprise’s ability to meet its short term

obligations. But if each revenue of sales is getting dominated by expenses then the increase

might not improve working capital, if at all.

Increase in Annual Sales also affects the committed fixed costs like long term lease

payments and insurance premium. A Micro Entrepreneur may cut down marketing costs but

cannot ignore these fixed costs during economic downturn. Fixed costs tend to fall when

volume rises because the costs are spread over more units.

108
 Table 4.13 Use of Advertisement by the Entrepreneur Respondents

Details Manufacturing Services Both Total

Manufacturing &

Services

No. % No. % No. % No. %

No 21 27.3 102 51.3 34 75.6 157 48.9

Yes 56 72.7 97 48.7 11 24.4 164 51.1

Total 77 100.0 199 100.0 45 100.0 321 100.0

Source: Primary Data

The above table 4.13 shows the use of advertisement by the entrepreneur respondents.

Majority (51.1%) have revealed that they have used advertisement to promote their products

among the public. Remaining 48.9% have not used advertisement as the means of promoting

their products.

Industry wise, in manufacturing sector, 72.7% of the respondents have used

advertisement as the mode of promoting their products, whereas remaining 27.3% have not

used advertisement in their business. In services sector, 51.3% have not advertisement to

promote their products whereas 48.7% have used advertisement to promote their products.

As a whole, advertisement has been used by the enterprises mainly by the

manufacturing sector in order to promote their products.

109
 Table 4.14 Investment on Promotion of Products (Amount in Rs.)

Both

Manufacturing

Manufacturing Services and Service Total

Years Mean No. Mean No. Mean No. Mean No.

2008-09 20848 33 156667 06 52500 04 42744 43

2009-10 15094 32 151429 07 61250 04 41581 43

2010-11 77542 24 217200 05 69500 04 97727 33

2011-12 14100 20 272500 04 10900 04 50557 28

2012-13 10059 17 280750 04 101667 03 66625 24

Source: Primary Data

The above table 4.14 explains the average investment on promotion of products.

In 2008-09, the average investments on promotion of products by 43 units were Rs.42, 744.In

Manufacturing Sector, the average investments by 33 units were Rs.20, 848 and in Services

Sector, the average investments by 06 units were Rs.1, 56,667.

In 2009-10, the average investments on promotion of products by 43 units were Rs.41, 581.In

Manufacturing Sector, the average investments by 32 units were Rs.15, 094 and in Services

Sector, the average investments by 07 units were Rs.1, 51,429.

110
 In 2010-11, the average investments on promotion of products by 33 units were

Rs.97, 727.In Manufacturing Sector, the average investments by 24 units were Rs.77, 542

and in Services Sector, the average investments by 05 units were Rs.2, 17,200.

In 2011-12, the average investments on promotion of products by 28 units were

Rs.50, 557.In Manufacturing Sector, the average investments by 20 units were Rs.14, 100and

in Services Sector, the average investments by 04 units were Rs.2, 72,500.

In 2012-13, the average investments on promotion of products by 24 units were

Rs.66, 625.In Manufacturing Sector, the average investments by 17 units were Rs.10, 059

and in Services Sector, the average investments by 04 units were Rs.2, 80,750.

Figure 4.20

111
The following analysis has been done to fulfill the Second Research Query-- “What are the

problems faced by the micro enterprises?”

Table 4.15 Overall Problems of Micro Enterprises taken for Analysis

Details No. %

Problems

1.No Professionalism 15 3.4

2.Poor Credit History 18 4.1

3.Inadequacy of Loan 02 0.5

4.Less Technologies 41 9.4

5.No Business Views 03 0.7

6.High Interest Rate 10 2.3

7.Raw Material 29 6.6

8.Market 228 52.2

9.Skilled Labour 91 20.8

10.Transport 55 12.6

11.Lack of Clear Plan 04 0.9

12.Roads 57 13.0

13.Power 62 14.2

14.High Wage Rate 75 17.2

The above table explains the problems of micro enterprises. Majority (52.2%) of the

respondents advocated that market was the main problem in running their business. Specific

market was not available for their finished products or it was too far from their home place.

Lack of skilled workers (20.8%) was another of their problem as they failed to get proper

skilled and technical personnel for a considerable time after starting their business. This was

followed by high wage rate (17.2%) as the laborers charge very high rate of wage, power
112
(14.2%) as in the rural areas power is discontinued for a very longer period of time. Another

problem advocated by them was roads (13.0%) and transport (12.6%) as the medium through

which goods are carried are not always of the good condition and lack in updation.Less

technology (9.4%) as technology didn’t reach the rural areas easily .Other lesser known

reasons were raw materials (6.6%),poor credit history (4.1%),no professionalism (3.4%),high

interest rate (2.3%),lack of clear plan (0.9%),no knowledge of business (0.7%) and

inadequacy of loan (0.5%).

Table 4.16 Regression

R R Square Adjusted R Std. Error of

Square the Estimate

0.756 0.571 0.542 1.387

Dependent Variable: Problems of Micro Enterprises

Independent Variable: Investment in Plant & Machinery, Working Capital, Capacity

Utilization, Sources of Raw Materials and Availability of Raw Materials.

The above table shows the R value which indicates the relationship between the dependent

and independent variables which is found 0.756 (75%) is strongly correlated.

Table 4.17 ANOVA

Sum of df Mean F Sig.

squares square

Regression 192.063 5 38.413 19.971 0.000

Residual 144.258 75 1.923

Total 336.321 80

113
 Dependent Variable: Problems of Micro Enterprises

Independent Variable: Investment in Plant & Machinery, Working Capital, Capacity

Utilization, Sources of Raw Materials and Availability of Raw Materials.

The above table shows the significant differences of dependency of independent variables on

dependent variable (F=19.971, p=0.000).

It depicts that the difference of significance is at 1% level, which concludes that coefficient

has to be calculated to fulfill the purpose.

Table 4.18 Coefficients

Unstandardized Standardized

Coefficients coefficients

B Std.Error Beta t Sig.

Total Problems -1.953 1.061 -1.840 0.070

Availability of Raw

Materials 0.630 0.440 0.127 1.431 0.157

Capacity Utilization 1.459 0.278 0.436 5.250 0.000

Working Capital 1.29 0.000 0.480 4.358 0.000

Sources of Raw

Materials -0.065 0.047 -0.112 -1.361 0.178

Investment in Plant &

Machinery 1.77 0.000 0.028 0.259 0.797

114
 The above table shows the impact of independent factors which creates the problems

in running the business of micro enterprises. From the table, we can obtain the t-values of

capacity utilization and working capital is 5.250 and 4.358 respectively. The P-value

indicated the level of significance for capacity utilization is P=0.000 which is significant at

1% level and working capital is P=0.000 which is also significant at 1% level. Other factors

have no significant impact to create the problems in running business of micro enterprises in

the study.

Capacity utilization is the level upto which a plant is used to produce products

efficiently. Therefore, a plant must be used to the optimum extent. But due to some problems

emerging in the enterprise or entrepreneur, the plant is not utilized properly to its fullest

extent. Problems like lack of demand of the product, lack of raw materials, finance, power

failure, lack of skilled workers etc. may be the main causes for plant capacity

underutilization. This is the main reason for the existing problems of micro enterprises in the

study.

Working capital is the cash which is required to maintain stock and pay expenses and

which is needed to run a business day to day. It has to be maintained at a fixed level in an

enterprise. Investment in working capital also creates the main problems of the micro

enterprises.

115