Msme Challenges

8/11/2019 Msme Challenges

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Roll : ZR 46, Name : Saleh Ahmed, Batch : 20th

Email :[email protected],Phone: 01675123947

Group : A1, Industry : Plastic

Micro, small and medium sized enterprises (MSMEs) are playing increasingly

important role as engines of economic growth in many countries including

ours. MSMEs provide low cost employment opportunities and render

flexibility to the economy. Many of the MSMEs are engaged in export

activities suggesting that they are internationally competitive.

Considering the importance of MSME sector in the economy of Bangladesh,

we shall try to identify and explain the major challenges faced by these

enterprises using the nine dimensions of the Triple Triangle Framework (TTF)

model. :
mailto:[email protected]:[email protected]:[email protected]:[email protected]


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Figure : Triple Triangle Framework Model

Firm Level Factors

Capital:

Case: Plastic Industry of Islambagh

Source: Group A1

At present, there are 3000 plastic manufacturing units, 98% of which belong

to the Small

Medium Enterprises (SMEs). The plastic sector constitutes 1%of GDP and provides employment for half a million people.Even then the

commercial banks are reluctant to give out loans to small plastic enterprise

owners. As a result it becomes difficult for them procure capital. And that is

why only people with own capital and land are entering the business.

Moreover due to crisis of capital they buy below standard second hand

machinery which does not provide proper output. This lack of credit facilities

is a great barrier that is preventing such MSMEs from flourishing.

Capacity:


Source: Group A1

In Bangladesh cheap labor force is available unlike in other countries. This

should give us an upper hand in increasing output in our industries. But in

reality it does not happen because the workforce is not efficient enough to

compete with the foreign countries. The plastic enterprises of Islambagh are

doing quite a lot of business locally.But inspite of their immense potential,they are unable to standout to bigshots like RFL and Bengal, let alone

foreign companies.the reason behind this is inexperienced workers,

moldmakers and unskilled technicians. The products made by them are

usually inconsistent in quality and performance. As a result their market is

limited to low earning customers who cannot afford brands.


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Culture:


Source: Group A1

Although the suppliers and customers mostly give positive vibes about the

work culture in plastic industry, the employees are not usually happy there.

Suppliers, owners and customers have friendly relations since most belong

to same areas (Old Town). The owners do not pay much heed to employees

as they tend to switch jobs frequently. They leave as soon as they find a job

paying higher wage. The owners do not worry much about this as adequate

manpower is available. As a result the environment is not that friendly in the

work premises.

One more thing that is noticeable about the culture is credit sales. Ismail Mia

, owner of Ismail PVC, told us that a lot of fraud and bad debt occurs as

most sales are done on credit.

Industry Level Factors:

Customers:

Case: Bakorkhani Industry in Old Town

Source: Group A5

The main difficulty faced by most MSMEs is in retainting customers.

Customer loyalty is highly necessary for prosperity of MSMEs. Bakorkhani

industry of Old Town was once very well off due to great popularity of the

special bread bakorkhani. People of all ages had bakorkhani with tea during

breakfast. But nowadays the demand for bakorkhani is decling

tremendously. Most of the young generation either do not know about

bakorkhani or do not prefer to eat it. As a result the industry is in a dire

condition.


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Competitors:

Case: Dholaikhal Mini Motor Industry

Source: Group B2

Most stores have homogenous products and are closely clustered. As a resultthe competition is quite high. Infact it is quite unethical and unfair due to the

plummeting sales in the recent years. Some business men have termed

others as predatory towards customers. If one shop offers parts at BDT

1000, an adjacent shop will offer BDT 900 and lure the customer away. Also

the problems with these small enterprises are that they lack customer

service quality and sales people with good communication skills for which

they lag behind in repeat purchase.

Collaborators:

Case: Mirpur Benarasi Industry

Source: Group A3

The value chain actors in this sector are not valued adequately by the

entrepreneurs. Rather they are neglected. Their contribution is hardly

acknowledged and there is no significant collaboration between the suppliers

and entrepreneurs. The lack of concern for the suppliers has contributed to

creating an inefficient supply chain system for the Banarasi industry. Someshop owners clearly told us that all they care about is their own profit. Group

A3 found that this is a major reason behind the decrease of profit margin

from 15% to 10% in this industry.

Macro Level Factors:

Globalization and International Forces:

Case: Mirpur Benarasi Industry

Source: Group A3


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Due to globalization, the Benarasi palli is rather being hampered than being

improved. The invasion of foreign culture specially indian tv serials and

movies is slowly making our heritage obsolete. Women are now interested in

sarees that come from India (based on actress worn sarees). Many shops in

the area are now selling indian sarees as well in order to remain with thegoing trend. The shops which are still benarasi exclusive now tend to have

lesser profits than those which sell indian sarees as well.

Technology:


Source: Group A1

Most enterprises in the plastic industry are using outdated machinery formanufacturing the products. These machineries have lower processing

speeds and precision levels. As a result they cannot match up in competition

with bigger companies. The small-scale entrepreneurs prefer to buy old

second hand machineries from other local companies or import them from

abroad. These old machineries are of outdated technology and the plastic

manufacturers suffer from lower efficiency. The outdated technology

employed in the production process leads to higher defect rates. For the

plastic industry, the loss accumulated by defective products can become a

significant factor in reducing their profit margin.

State and policy:


Source: Group A1

At present the plastic industry do not have any effective policies, it needs a

comprehensive and consistent policy guideline from the government to keep

up and accelerate the existing rate of growth. The plastics industry needs a

proper government arrangement of an uninterrupted power supply, the


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single most important obstacle affecting industry growth. Furthermore, the

government should introduce favorable tax policy, establish of specialized

industrial zones and increase government purchase. These initiatives would

certainly give a huge boost to growth in this sector. The plastic industry does

not receive such benefits as tax concessions, better access to institutionalcredit and other preferential facilities awarded to the industries that are

included in the first list of prioritized export-oriented Thrust Sectors.

MSMEs will continue to be the major driving force for income and

employment generation in Bangladesh. The future for entrepreneurship

appears to be very bright. We are living in the age of the entrepreneur, with

entrepreneurship endorsed by government, business community,

educational institutions, society, and corporations. Development of MSMEs in

Bangladesh is the need of the hour to raise the standard of living of the

people of our country. And in order to develop the MSMEs the above

mentioned challenges must be overcome.

Documents

Msme Challenges