Proceedings of the National Conference on

Trends and Advances in Mechanical Engineering,

YMCA Institute of Engineering, Faridabad, Haryaana.., Dec 9-10, 2006.

STRATEGIES FOR SMALL SCALE INDUSTRIES FOR GLOBAL

COMPETITIVENESS: TECHNOLOGY, QUALITY AND CUSTOMER
H.Pakkirappa1, B.Manjunath2, B.Vijay3, Dr. Madhu4
1
Department of Mechanical Engineering Assistant Professor, Acharya Institute of Technology, Soladevanahalli,
Bangalore-560 090
2
Department of Mechanical Engineering Lecturer, Acharya Institute of Technology, Soladevanahalli,
Bangalore-560 090
3
Department of Mechanical Engineering Lecturer, Sri Venkateswara College Of Engineering, Bangalore
4
Department of Mechanical Engineering, Professor and HOD, Acharya Institute of Technology,
Soladevanahalli, Bangalore-560 090
1
Email: [email protected]

Abstract
After globalization Indian manufacturing industry is facing tough competition with neighboring countries.
Introduction of World Trade Organisation (WTO) to globalise the several issues including technology,
manufacturing, quality, marketing and trade policies had its impact on developing countries including India. It
is inevitable for the countries to allow free trading and services for manufactured products. Globalisation has
opened an opportunity (as well as threat) to improve their economy and living standards of human being. Small
and medium scale industries are the backbone of Indian manufacturing, which have to compete by way of
technology upgradation, quality improvement and better customer relationship by adopting computerised
techniques and enhancing export ability in the local and international market. In this context, author emphasis
on the Technology, Quality, Customer (TQC) model to challenge the needs of the WTO for better manufacturing
environment and marketing.

Key Words: WTO, India, Technology, Quality, Customer, Small Scale Industry, Manufacturing

1.0 Introduction
After globalization Indian manufacturing industries are facing tough competition with other countries.
Introduction of General Agreement on Trade and tariffs (GATT) and World Trade Organizations (WTO) on
trade liberalization by the developed countries to globalize the several issues including technology,
manufacturing, quality, marketing and other related matters had its impact on developing countries like India,
China, Korea and Many countries across the globe.. It has fostered considerable liberalisation of trade in goods
as well as services, as the GATT had done for goods in the earlier period. Besides envisaging periodic
negotiations for further liberalisation of trade in future, the WTO provides a forum for considering the
enlargement of the scope of multilateral disciplines to cover other areas of economic policy related to trade(1). It
is inevitable for the countries to allow free trading and servicing for the manufactured goods. Globalization has
opened an opportunity (as well as threat) to improve their economy and standards of living.

India has long entrepreneurial tradition has more than 40 % of the gross turnover in manufacturing activities
through industries. The Small and medium scale (SMI) industries claims more than 30 lakhs units providing
employment over 17 million persons and producing goods worth over Rs. 470000 crores of which 39200 crores
is from SMI. The small and medium scale industries account for 90-95 % of the firms, 60-70 % of the total
employment and 50% of income and 35-40% exports. The development of SMI dependent on several factors
like technology, quality, R & D, training, infrastructure, power, road, communication, customer relationship
and management.

2.0 Present Scenario

Indian SMI has survived in protected environment by the Govt of India by means of product reservation,
quantitative restrictions, subsidies and concessions even though industries are quality conscious but they are not
grabing the global market due to several reasons like product reservation, less variety, poor technology, large
number of labour problems, delayed delivery schedules and higher cost. This problem is not overridden
completely till today because of several reasons like stringent Govt rules, Labour laws higher interest rates of
banks etc. Following table gives the number of registered and unregistered small scale industries in India

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 Number Of Registered And Unregistered SSI Units - All India(7)

No. of units (In lakhs Nos.)

Year
Regd. Un-Regd. Total
1990-91 13.78 5.70 19.48
1991-92 14.98 5.84 20.82 (6.88)
1992-93 16.48 5.98 22.46 (7.98)
1993-94 17.76 6.12 23.88 (6.14)
1994-95 19.44 6.27 25.71 (7.66)
1995-96 20.84 6.40 27.24 (5.95)
1996-97 22.07 6.50 28.57 (4.88)
1997-98 23.52 6.62 30.14 (5.5)
1998-99 24.47 (P) 6.74 (P) 31.21(P) (3.55)
1999-2000 25.39 (Pj) 6.86 (Pj) 32.25(Pj) (3.33)
P-Provisional
Pj-Projected (Note: Figures in brackets give percentage growth over previous year.)

3.0 Technology Transfer and Up Gradation

Technology is nothing but collection of techniques to produce desired quantities of outputs specifying or using
various inputs. It is also a production function related to economic issues. It increases the efficiency of labour,
capital or both, and even quality of products. Technology changes the method of manufacturing, standardization
of product, reduction in labour time and cost. . In low-tech industries, firms with high foreign stake are found to
be performing better. The R&D and efficiency of manpower are significant determinants of international
competitiveness in technology-based sectors.(6)

The technology has some characteristics for the growth of economy. It is dependent on labour, entrepreneur,
product, market, methods and customer. If the labour learning level is high in understanding the technology then
the skill problem is reduced. But situation in India is different that nearly 75% of Indians working age
population is educated below middle school level. Hence, use of technology concept requires proper training in
the use of relevant technology in the industries. The success of industries for expansion of exports of
manufactured product is mainly on the technology and its utilization in the standardized way or should keep eye
on exploring of technology transfer and up gradation for strengthening the economy.

The technology is not only borrowing and using of drawings of plant and machinery but it is a know how,
procedures and standardized way of implementation of knowledge of technology for the equality output of
industrial production to improve the economy. For mutual trade between the countries absolute technological
superiority in terms of know how and labour both required. As mentioned by Vrnon theory of product cycle, the
life of each product passed through three stages a) new product b) the maturing product and c) the standardized
product. The new product is just an introduction of technology where maturing product is various alternative &
obstacles overridden product. But the standardized product is the technologically standardized and which will be
accepted without any querry by the customer. The product designed and produced in one country is exported to
other as a part of technological gap trade to markets.

In the globalised scenario, any country can export and import product within the rules and network of WTO and
countries trade policy. To increase product demand, market location survey has to be conducted and analyzing
pros and cons of it implementation of the same has to be done in technology originated place or labour intensive
place.

For the benefit of Small scale industries seeking to know about the latest technologies available all over the
world Indian government has established twentyone Technology Resource Centres (TRCs) with effect from
October 2001. These TRCs will perform the following functions(7):
• TRCs will help SSI units who want to upgrade and modernize their technology. Generators of technology
may also avail this forum for dissemination of information about the technologies available with them
• TRC will provide information about product groups, covering details of technology (including state of art
technology, technology generally used and traditional technology) list of suppliers of machines and raw
material, quality standards, availability of consultant.

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 Proceedings of the National Conference on
Trends and Advances in Mechanical Engineering,
YMCA Institute of Engineering, Faridabad, Haryaana.., Dec 9-10, 2006.

• TRCs will have a highly computerized environment having a facility of networking with leading
Organisations involved in technology upgradation.
• TRCs will have a collection of technical books, catalogues, brochures etc. will be available in the institute’s
library in a newly formed TRC section.
• TRCs will provide latest and right technology for attaining global reach by SSI units.
• TRCs will also provide information on "How to Seek Technology, Technology Transfer Mode, Leading
Technology Transfer Agencies, International Exhibitions etc."
• TRCs will also help in preparation of project reports, conducting/organizing special technical training
programmes etc

4.0 Quality
The effective usable product by the customer with the standards is quality. If quality has to meet the customer,
then organization structure, procedure, process and methods, resources must be good. Quality product not only
satisfiable to local demand but also international standards. Therefore, it should be quality standard, so that it
will promote trade and profit.
To achieve quality standards for local demand various statistical tools are used. For globally acceptable product
it should be zero defects. To achieve this skilled labour, Constant Monitoring, Procedures and Methods have to
be used by implementing ISO 9000/14000 series which has stared in 1947 and effective in 1996 after
globalization. Quality of a product is achieved by implementing several tools like Total Quality Management
(TQM), Six Sigma Tools, Statistical process control tools Acceptance sampling, Zero defects methods etc are
used.

5.0 Total Quality Management (TQM)

TQM is a management approach for an organization, centered on quality, based on the participation of all its
members and aiming at long-term success through customer satisfaction, and benefits to all members of the
organization and to society."
In Japanese, TQM comprises four process steps, namely:
1. Kaizen - Focuses on Continuous Process Improvement, to make processes visible, repeatable and
measurable.
2. Atarimae Hinshitsu - Focuses on intangible effects on processes and ways to optimize and reduce their
effects.
3. Kansei - Examining the way the user applies the product leads to improvement in the product itself.
4. Miryokuteki Hinshitsu - Broadens management concern beyond the immediate product.

5.1 Main Components of TQM

For Six Sigma practitioners who may not be familiar with TQM, the program has three main components
Just in Time (JIT) - JIT exposes the cause of problems, and uses techniques similar to Lean
Total Quality Control (TQC) - TQC helps provide a solution to problems and TQC uses tools and
techniques similar to Six Sigma tools
Total Employee Involvement (TEI) - TEI helps elicits this involvement. Employees are satisfied by the
involvement.
TQM requires that the company maintain this quality standard in all aspects of its business. This requires
ensuring that things are done right the first time and that defects and waste are eliminated from operations.
Total Quality is a culture, attitude an organization of a company that aims and continues to provide, its
customers with products and services that satisfy their needs. The culture requires quality in all aspects with
things being done right first and with zero defects and waste.

Many companies have difficulties in implementing TQM. Surveys by consulting firms have found that only 20-
36% of companies that have undertaken TQM have achieved either significant or even tangible improvements in
quality, productivity, competitiveness or financial return. When you look at successful companies you find a
much higher percentage of successful in TQM implementation.

Some useful messages from results of TQM implementations are:

• If you want to be a first-rate company, look at the world-class companies that have adopted TQM
• The most effective way to introduction of TQM is by training top management people involved in new
product development, and people involved with customers
• It is much easier to introduce EDM/PDM in a company with a TQM culture than in one without TQM.

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Important aspects of TQM include customer-driven quality, top management leadership and commitment,
continuous improvement, fast response, actions based on facts, employee participation, and a TQM culture.
1. Customer-Oriented quality
2. TQM leadership from top management
3. Continuous improvement
4. Waste Reduction
5. Quick Response
6 Facts Based Action
7. Employee participation
8. TQM culture
9. Product development in a TQM environment

Awards for Quality achievement

The Deming Prize has been awarded annually since 1951 by the Japanese Union of Scientists and Engineers in
recognition of outstanding achievement in quality strategy, management and execution. Since 1988 a similar
award (the Malcolm Baldrige National Quality Award) has been awarded in the US. Early winners of the
Baldrige Award include AT&T (1992), IBM (1990), Milliken (1989), Motorola (1988), Texas Instruments
(1992) and Xerox (1989).
In India Best quality achiever award is given every year at state level and at national level. In India many
organization/ companies have achived this like Maruthi Udyog Limited, TVS Group Of Companies , Wipro,
Infosys etc.

5.0 ISO 9000 and Its Implications

To achieve desired quality implementation of ISO 9000 is must. It will satisfy both local and global market. But
it requires lot of documentation to get certification and also fees are high for SMI are concerned. Some ISO
9000 has yielded following benefits in many industries like
• Interpersonal communication between employee and employer
• Revolves political conflicts work procedures, formal and informal communication flow
• Trains Management and employees while documentation
• Creates documentation system and customer relationship
• Provides the basis for a networked communication system
• Foundation for information gathering from workers

But Indian government has several schemes to SSI sectors to avail benefit of ISO 9000 and In order to enhance
the competitive strength of the small scale sector, the Government introduced an incentive scheme for their
technological upgradation/quality improvement and environment management.(10) which are listed below:
1. Incentive Scheme for acquiring ISO-9000 Certification.
2. Awareness and Motivational Programmes on ISO-9000 Quality Systems.
3. ISO-9000 Reimbursement Scheme
4. Technology Development and Modernization Fund Scheme
5. Subsidy for obtaining ISO-9000 quality certification

6.0 Customer Relationship

Today’s market is dictated by customer as they are the buyer of industrial products. Before 1996 whatever the
product industry was dumping to the market was used by the customer. After the globalisation many MNC's
have entered Indian Industrial market and shown their verities of products. The cost of the product is
comparatively cheaper which is seen in many automobile sectors. This led SMI to revive their old technology,
Quality concepts etc, to keep their customer in their fist. With use of computer concept like CAD / CAM / CAE
and IT enabled concepts many industries widened their customer network.

Exports from the small scale sector over a period of time have acquired great significance in India's foreign
trade. The SSI Sector today constitutes a very important segment of India's economy and it accounts for nearly
40% of the gross value of output in the manufacturing sector and about 50% of the total exports from the
country. Direct exports from the SSI Sector accounts for 35% of the total exports More number of customer
network is essential to achieve this target for long run.(9). To respond for the change large scale industries
must help the SMI who are their under to meet their product quality. Any change occurs in the global scenario
must take place at SMI level, then only industry can survive.

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 Proceedings of the National Conference on
Trends and Advances in Mechanical Engineering,
YMCA Institute of Engineering, Faridabad, Haryaana.., Dec 9-10, 2006.

In today's world, marketing is much more than mere selling. Small enterprises can hardly match the advertising
support or distribution. In India, small units sell best in limited or neighborhood markets or when they are
meeting a low volume specialised demand which no large player can effectively cater to. Increasingly, now, the
endeavour is to build the marketing activity of small units around their competitive advantage i.e., products
which are labour intensive, items which cater to niche markets, low volume high margin products, sub assembly
tasks, outsourcing jobs and ancilliarisation. sub contracting exchanges are being established through
Government and Industry Associations to promote such a situation.. After sales service for imported products,
maintenance service contract on electronic equipments, reverse engineering are the other areas being
encouraged.

Activities such as brand building, extension of product portfolio, nationwide advertising, huge sales force,
competing with large scale imports are tasks left to the industrial players. Small enterprises in India are
realizing that the term "marketing" perhaps implies different things to different people. For new start up, head
on competition with established giants makes little sense. Marketing strategy is costomer oriented in these days
for which industry must response

7.0 Competitiveness of SMI

Competitiveness is participation of any sector whose output and inputs are efficient to meet the desired goal.
This is based on various factors like unit labour cost, exchange rates, natural resources, technology, quality etc.
Competitiveness of any industrial sector is based on export propensity, market shares, price protection etc In the
context of globalization, it is evident that competitiveness is a measure of international market share, quality,
technically and low cost.

A study by Accenture in 2002 says that competitiveness of Indian industries in the global scenario of
developing countries is far beyond neighboring countries like china Malaysia, Korea etc . For the global or local
market, it is necessary to have world class manufacturing by remaining various road blocks like infrastructure,
power, water, road, communication. non supportive trade policies, higher over heads, higher interest rates which
is more than neighbor countries industries.

Similarly, Indian labour handling is a great task. To get rid of bad worker lot of procedures have to be followed.
Because of stringent rules Hire and fire policy which is supportive to industry is lacking. Response for the up
gradation of knowledge to meet the international standards is less by our labour. Recently, Indian Govt has
introduced voluntary retirement scheme to its employees to cut down labour to enance productivity by job
enlargement and by saving lot of money. Hence right labour is engaged for right jobs to do it in right way.

Since SMI s are dependent on large scale industries as well as local service sector they have to be innovative.
Growth curve of the industry should be upward trended and linear at least. SMI donot have provision for
continuous improvement in product, information, efficiency, and quality that a large industry enjoys. Small
industries cannot compete efficiently with large industries and changes. Therefore factors for competitiveness
by limiting the exploitations of scale of economies, access to imported inputs, reduced competitive pressure
within domestic industries and encouraged excessive vertical integration and product diversification, firm level
factors like technology and management, domestic demand

Customer

Global
Competitativeness of

Quality Technology

Fig. 1.0 TQC Model

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Neighboring countries products are low priced, qualitative and competitive because of the high labour
productivity, low power tariff, low overheads, hire And fire policy of labour, simple Govt. rules and procedures
for product movement and speculated market demand, and opportunist attitude.

8.0 TQC Model

To meet the local and global standards of SMI every industry has to follow above three factors. As described
above, technology is the prime factor by which we can attract market maintaining required quality. Recent
quality tools like six sigma, p-chart, c-chart, SQC techniques, Kanban etc have to be used to manufacture the
products to meet the global standards. Technology up gradation is necessary to meet the challenges by Way
of sales –cum-study tour, Participating in trade fairs/exhibitions, Participating in Small Industry Cluster
Development Program, analyzing of case study problems, etc. similarly wide customer network is necessary for
any product survive in market. Customer service satisfaction is ultimatum to any industrial product for which
they should ask “what customer want? How they want?” Variety of products, their reliability and customer taste
has to be understood well in time.

In the above triangles quality, technology and customers have strong base so that they can have assured return
for any industry concerned. If the base of these three are stronger than competitiveness of SMI will be broader
which is depicted as inverted triangle. Participation network of SMI increases locally and globally irrespective
of the competitions in the market.

9.0 Conclusion
Indian SMI should be more active to response for the change taking place either in the local market or in the
global market. It has to do lot of surveys and research in the above area so that it can compete with other
industries. SMI has to spread its tentacles to use the opportunity of WTO and has increase its base and network
everywhere. It is right to remember Charles Darwin theory of survival that” strongest of the species that survive
nor the most intelligent but the ones responsive to change”. This is more relevant to our SMI sector. The
industry will remain in the scene if it responds to the change. Industries must understand changing global
scenario keeping their goals in mind.

References
1. World Trade Organisation- related issues, , ICRIER,2002
2. Trade Liberalization, Industrial Performance and Export Growth in India, Isher Judge Ahluwalia,
Basudeb Guha-Khasnobis and Shubham Chaudhuri, ICRIER,2002
3. Impact of Trade Liberalization on Indian Manufacturing in the Eighties and the Nineties Mihir
Pandey
4. Technology Policies and Technological Capabilities in Industry: A Comparative Analysis of India
and Korea, Aradhna Aggarwal
5. The Impact of Phasing Out Import Licensing on Small-Scale Industry , Sridhar Krishna
6. Liberalisation, Multinational Enterprises and Export Performance: Evidence from Indian Manufacturing
, Aradhna Aggarwal, 2002
7. Conversion of Small Industries Service Institutes (SISIs) into Technology Resource Centres (TRCs) :A
case study of SSI by SIDO,2000
8. Small and Medium enterprises in India - local strength to global reach ", OECd Case study, 2000
Background of Export Promotion, SME Trade policy, 2002
9. Quality Upgradation/Environment management for small scale sector through incentive for ISO 9000 /ISO
14001 Certifications,2002