Small Medium Business

Barriers for SME

2007-07-31T21:05:00.000-07:00

Hell lot of problems has to be faced by small medium businesses. There are lot of barriers that has to be overcome by SMEs. We’ve identified few barriers that are taken from various sources.

INTERNAL BARRIERS: Barriers internal to the enterprise associated with organisational
resources/capabilities and company approach to export business.

Informational Barriers: problems in identifying, selecting, and contacting international markets due to information inefficiencies.

Limited information to locate/analyse markets: difficulty in knowing what national and international sources of information is available or required to reduce the level of uncertainty of foreign markets.

Unreliable data about the international market: problems associated with the source, quality, and comparability of available information used to attempt to increase understanding of foreign markets (including access to data, ability to retrieve data quickly, and the cost of obtaining data).

Identifying foreign business opportunities: difficulty in strategically and/or proactively identifying and selecting opportunities in foreign markets (including customers, contacts, business partners and joint ventures).

Inability to contact overseas customers: difficulty in contacting customers in overseas markets due to geographical distance and time-zones, poor research by the firm in identifying customers, and limited exposure to sources listing potential customers such as databases.

Functional Barriers: inefficiencies of various functions internal to the enterprises such as human resources, production, and finance, with regard to exporting.

Lack of managerial time to deal with internationalization: inability for managers to
devote sufficient time, resources and energy towards selecting, entering and expanding into
foreign markets, designing export-marketing strategies, and conducting business with overseas customers.

Insufficient quantity of and/or untrained personnel for internationalization: problems associated with insufficient numbers of personnel to handle the excess work demanded by export operations, in addition to a lack of specialized knowledge and expertise within the company to deal with export-business tasks such as documentation handling, logistical arrangements, and communicating with foreign customers (including knowledge of foreign languages, cultures and hands-on export experience).

Lack of excess production capacity for exports: inexistence of or inability to generate excess production over and above what the domestic market requires in order to initiate or expand export business operations.

Shortage of working capital to finance exports: difficulty in allocating and/or justifying adequate expenditure towards researching overseas markets, visiting foreign customers, adapting export marketing strategies and/or inability to access export financing assistance from governmental agencies, banks and other investors.

Marketing Barriers: pressures imposed by external forces on adapting the elements of the company’s marketing strategy including barriers associated with the company’s product, pricing, distribution, logistics, and promotional activities overseas.

Developing new products for foreign markets: inability, difficulty or unwillingness to
develop entirely new products for specific foreign market needs and wants.

Adapting export product design/style: inability, difficulty or unwillingness to adapt the company’s product design or style to the idiosyncrasies of each foreign market (e.g. different conditions of use, variations in purchasing power, dissimilar consumer tastes, diverse sociocultural settings).

Meeting export product quality/standards/specifications: inability, difficulty, or
unwillingness to adapt products necessitated by both legal and non-legal differences in quality standards and preferences among overseas markets.

Meeting export packaging/labelling requirements: inability, difficulty or unwillingness to adapt: packaging for requirements such as safety during transportation, storage and handling; and/or labelling for requirements such as different languages, specific information required by the host country (such as expiry dates, types of ingredients and net weight), and symbols, pictures, and colours preferred by foreign markets.

Offering technical/after-sales service: problems associated with the provision of
technical and/or after-sales service including delays and increased costs associated with:
geographical distances between the company and its export market; setting up servicing
operations in strategic locations; maintaining large quantities of spare parts; adjusting the
approach to after-sales service for country variations in conditions of use, competitive practices, and physical landscape.

Offering satisfactory prices to customers: inability to offer foreign customers
satisfactory prices because of: higher unit costs due to small production runs; additional costs incurred in modifying product, packaging and/or service; higher administrative, operational and transportation expenses; extra taxes, tariffs, and fees imposed; and higher costs of marketing and distribution.

Difficulty in matching competitors’ prices: lack of price competitiveness due to factors that are controllable (e.g. strict adoption of a cost-plus pricing method) and/or uncontrollable (e.g. existence of unfavourable foreign exchange rates; differences among countries’ cost structure of production, distribution, and logistics; adoption of dumping practices by competitors; and government policy to subsidize local industry).

Granting credit facilities to foreign customers: problems due to a lack of funds to
sustain providing credit facilities to customers and/or a fear that debts may not be recovered from customers that might be far away, have no past experience with the company, and come from countries with unstable politico-economic environments.

Complexity of foreign distribution channels: problems associated with adjusting
distribution methods according to the variations and idiosyncrasies within each foreign market (e.g. range and quality of services offered, and number of layers of a distribution channel).

Accessing export distribution channels: problems associated with gaining access to
distribution channels in overseas markets (including channels that are occupied by the
competition; the costs of managing the length of the channel; or various levels of the system being controlled by a certain distributor).

Obtaining reliable foreign representation: difficulties in obtaining reliable
representation overseas who meet the: structural (territorial coverage, financial strength, physical facilities), operational (product assortment, logistical arrangements, warehouse facilities), and behavioural (market reputation, relationships with government, cooperative attitude) requirements of the exporter and is not already engaged by a competitor.

Maintaining control over foreign middlemen: problems associated with companies
having less control over foreign middlemen due to geographic and cultural distance, dependence on middlemen due to binding legal agreements, difficulties finding replacement middlemen; and/or the middleman carries other product lines that are more profitable than those of the exporter.

Difficulty in supplying inventory abroad: problems associated with re-supplying the
foreign market adequately including transportation delays, demand fluctuations, and unexpected events that create shortages of the company’s products overseas.

Unavailability of warehousing facilities abroad: problems associated with finding
adequate warehousing overseas including lack of proper installations to safeguard product
quality, prohibitive storage fees, outdated warehousing equipment technology, and the need for a multiple warehousing system for larger countries.

Excessive transportation/insurance costs: the exacerbation of transportation costs
because of large distances to and within foreign markets, poor infrastructural facilities, limited availability of transportation, and delays in product delivery; and/or insurance costs because of the higher risks associated with selling goods overseas.

Adjusting export promotional activities to the target market: problems associated with adjusting promotional activities due to country variations in buying motives, consumption patterns, and government regulations including: variations in the composition of the target audience, inappropriate content of the advertising message, unavailability or different use of advertising media, restrictions in the frequency/duration of advertising, and insufficient means to assess advertising effectiveness across countries.

EXTERNAL BARRIERS: Barriers stemming from the home and host environment within which the firm operates.

Procedural Barriers: barriers associated with the operating aspects of transactions with foreign customers.

Unfamiliar exporting procedures/paperwork: difficulty in understanding and/or
managing customs documentation, shipping arrangements, and other export procedures.

Difficulties communicating with overseas customers: insufficient and/or infrequent
communication with customers due to the large geographical and psychological distances
between buyers and sellers, and poor communications infrastructure.

Slow collection of payments from abroad: difficulty in achieving timely collection of
payments from overseas due to the lack of immediate contact with overseas markets, foreign buyers requesting more credit facilities, the use of intermediaries to enter a foreign market, and/or strict currency restrictions imposed by the central bank of the foreign market.

Difficulties in enforcing contracts and resolving disputes: problems associated with: enforcing contracts due to poor quality (e.g. non-verifiable information, ambiguity, lack of consideration or mutual acceptance, and/or unreasonable breadth of the contract); enforcing contracts because of unclear expectations, misinterpretation, ‘bad faith’ and/or unwillingness of contract partner(s) to uphold the contract; resolving disputes because of nonexistent or unsophisticated dispute resolution mechanisms, time and/or cost of accessing foreign legal systems, lack of knowledge of foreign laws, and conflicts of laws; and/or unwillingness of contract partner(s) to participate in dispute resolution mechanisms.

Governmental Barriers: Barriers associated with the actions or inaction by the home government in relation to its indigenous companies and exporters.

Lack of home government assistance/incentives: support and/or encouragement by
government agencies to SMEs for export and internationalizing activities is non-existent, scarce or unsophisticated.

Unfavorable home rules and regulations: local exporters are restricted by controls
imposed by the home government including restrictions on exports of either components or final products to certain hostile countries and/or restrictions on products with national security or foreign policy significance.

Unfavourable foreign rules and regulations: local exporters are restricted by controls imposed by the host government including restrictions on exports of either components or final products to certain hostile countries and/or restrictions on products with national security or foreign policy significance.

Customer and Competitor Barriers: Barriers associated with the firm’s customers and competitors in foreign markets, which can have an immediate effect on its export operations.

Different foreign customer habits/attitudes: difficulty in adjusting the company’s
strategy to accommodate variations in consumer habits and attitudes caused by different
topographic and climatic conditions, household size and structure, level of technical
understanding, income level and distribution, manners and customers, and education standards.

Keen competition in overseas markets: difficulty in maintaining competitive advantage in overseas markets due to more complicated and intensive competitive situations (e.g. competition arising from many sources, different cost competitive strategies and protections (including subsidies given to local competitors), different brand positioning and variable marketing strategies).

Business Environment Barriers: Barriers associated with the economic, political-legal and sociocultural environment of the foreign market(s) within which the company operates or is planning to operate.

Poor/deteriorating economic conditions abroad: unpredictable consumer behaviour
caused by economic effects such as large foreign debts, high inflation rates, and high
unemployment levels in foreign markets, which erode their citizens’ purchasing power and
impacts on their spending habits (e.g. seeking more economical products, purchasing goods less often, and carefully selecting what they buy).

Foreign currency exchange risks: risks to international business transactions arising from unstable exchange rates leading to fluctuating export prices overseas; revaluation of exporter’s currency resulting in less favourable prices to end-users; and unconvertible foreign currencies that impede the repatriation of sales/profits from overseas.

Unfamiliar foreign business practices: variations in business practices from country to country which may confuse or send distorted signals to companies that are unfamiliar with the formal and informal procedures performed in foreign markets.

Different socio-cultural traits: challenges associated with understanding and accommodating the affects that variations in religion, values, attitudes, manners, customs, education, and social organisation have on consumer behaviour, targeting approaches, and marketing programmes.

Verbal/non-verbal language differences: challenges associated with understanding the oral and written aspects of the foreign language and its nonverbal characteristics, such as body language and time perception, in order to communicate both verbally and non-verbally through marketing, advertising, branding and packaging.

Inadequacy of infrastructure for e-commerce: non-existent or unsophisticated structures (e.g. hardware, software, security, and broadband) are in place to support the distribution, sale, purchase, marketing, and servicing of products or services over electronic systems such as the Internet and other computer networks.

Political instability in foreign markets: difficulty in initiating or maintaining operations overseas due to economic (low household incomes, inflationary trends, large foreign debt), societal (religious fundamentalism, ethnic tension, high degree of corruption), and/or political (authoritarian regime, conflict with neighbours, military control) factors.

Tariff and Non-tariff Barriers: Barriers associated with restrictions on exporting and
internationalizing imposed by government policies and regulations in foreign markets.

High tariff barriers: the burden associated with excessive tax applied to imported goods to artificially inflate prices of imports and protect domestic industries from foreign competition.
Strict foreign rules and regulations: controls placed by foreign governments on
companies that sell goods in their markets including entry restrictions which delay or restrict the flow of the product in the market; price controls; special tax rates; and exchange controls.

Inadequate property rights protection: difficulties associated with an inadequate legal framework to protect the ownership, use, control, benefit, transferal or sale of both physical and intangible property especially intellectual property (e.g. copyrights, patents, trademarks and trade secrets).

Restrictive health, safety and technical standards: difficulties associated with meeting high, non-transparent, inconsistent and/or discriminatory country-specific standards for imported goods including: sanitary requirements; industrial and environmental protection standards; conformity assessment procedures (testing and re-testing, verification, inspection and certification to confirm products fulfill standards); and technical standards (e.g. preparation, adoption and application of different standards for specific characteristics of a product such as production, design, functions and performance).

Arbitrary tariff classification and reclassification: problems and costs associated with the practices by Customs administrations of classifying goods in a way which is not in
accordance with internationally accepted rules and principles of tariff classification (e.g.
increasing the level of duty payable for imported goods either for trade policy, trade protection and/or revenue raising reasons; imposing tariffs less favourable than those implied previously through reclassification of imported goods; inability to obtain firm rulings from overseas Customs authorities on duties for some products; and/or lack of technical knowledge by Customs’ administrations to enable them to provide correct tariff classifications to importers).

Unfavourable quotas and/or embargoes: unreasonable prohibition of commerce and
trade with a certain country or unreasonable restrictions on the quantity of specific goods being imported to certain countries.

High costs of Customs administration: costs associated with: divergent interpretations of customs valuation rules by different Customs administrations (including the use of arbitrary or fictitious customs values); delay in customs clearance procedures (e.g. excessive and/or irrelevant paperwork, congestion at points of entry, delay and cost of cargo clearance); lack of procedures for prompt review; and lack of transparency and/or irregular/illegal practices (e.g. unofficial customs procedures, unwritten rules and unpublished changes, unofficial fees to accelerate processing, and the absence of information on customs regulations and procedures in English).

Currency Conundrum: Is the Strong Rupee Good or Bad for India?

2007-07-30T23:30:00.000-07:00

History has been unkind to Canute. The 10th century king of England was so tired of his fawning courtiers that he took them to the shore and commanded the waves to roll back. It was to be a demonstration of the limitation of his powers. But Canute in popular perception is the man who tried to turn the tide and failed.

Today, India's finance minister P. Chidambaram and Y.V. Reddy, the governor of the Reserve Bank of India (RBI), India's central bank, face Canute's predicament. In the public mind, they seem to be trying to reverse an inexorable inflow of dollars and its consequence -- an appreciating currency. Once traded at 47 or 48, the rupee now hovers at 40 to the dollar. Observers call it the fastest appreciation of the Indian currency in three decades.
Is the rising rupee good or bad for India? What impact will it have on the global competitiveness of Indian firms? Should the RBI or the Finance ministry intervene? Responding to these questions and more, experts at Wharton and elsewhere say that the rupee's rise is the result of India's growing ability to attract global capital. While this creates problems for some companies that earn most of their revenues in dollars -- including IT giants such as Wipro, Infosys and TCS -- it also creates opportunities for Indian firms by making it less expensive for them to acquire overseas assets. In addition, a strong rupee is good for the Indian consumer. It would be unwise for the government to intervene to force down the rupee's value, they note.

What's Driving the Rise?

Dollars are pouring into India. Net investments by foreign institutional investors (FIIs) were $10.16 billion during January-June 2007. This is more than the $8 billion recorded in the whole of 2006. July has beaten all records with an inflow of $5.81 billion (so far). The FIIs are chasing Indian stocks and taking the markets to what many feel are levels of irrational exuberance. The bellwether Bombay Stock Exchange (BSE) Sensitive Index (Sensex) was 15,732 on July 23 against 12,455 on April 2. (Incidentally, that day's low -- the Sensex plunged 617 points during the day -- was caused by the RBI's attempts to control the rupee.)

The foreign direct investment (FDI) numbers are equally impressive. In 2006-07, FDI inflows touched $19.53 billion, a 153% increase over the previous year. (This figure includes private equity and also $3.5 billion in reinvested earnings.) The government is looking at a target of $30 billion in 2007-08. Foreign exchange reserves stood at $214.84 billion on July 6. This is a far cry from $5.8 billion in the dire days of March 1991, when India had to pledge its gold to stave off a default crisis.

External commercial borrowings of Corporate India were $12.1 billion in April-December 2006, an increase of 33%. Remittances from Indian workers abroad -- principally in the Gulf -- rose 15% to $19.6 billion in the same period. And non-resident Indian (NRI) deposits, attracted by better interest rates, were also up 35% in 2006-07 to touch $3.8 billion. These foreign exchange inflows have pushed the exchange rate to around Rs 40 to the dollar. The rupee has risen nearly 10% against the dollar this year. It has appreciated more than 14% from a low of 47.04 in July 2006.

Painful Squeeze

Wharton finance professor Jeremy Siegel notes (in his podcast) that a rising currency can cause distress. "This is painful. It's been the strongest appreciation of the rupee in over 30 years as I look back at some of the data," he says. CEOs of IT companies would agree with that assessment. Speaking at a press conference at Wipro's Bangalore headquarters on July 19, chairman Azim Premji complained about the "strong headwinds faced by us in the form of the appreciating rupee." Wipro reckons that its operating margins were lower by 2.4% in the first quarter because of the currency appreciation. Most IT companies -- the poster-boys of India's economic liberalization -- are in the same boat; they have been unable to meet their forecasted quarterly earnings. Their shares have been beaten down on the bourses, even as the markets are hitting new peaks.
Infosys chief mentor N.R. Narayana Murthy notes, "It (the rupee rise) is a macro-economic issue. I am not worried about factors which are out of my control." Others aren't taking it as easy. "A rising rupee can have a large impact on Indian exports and it could erode our competitiveness in the global market," IT firm Satyam founder and chairman B. Ramalinga Raju told The Economic Times recently. "Countries such as China are continuously suppressing the value of their currencies. So they may have an edge over us.... The government should intervene to bail out exporters who have been hit by the strengthening rupee." (The Indian government has announced a $3.5 billion package to provide relief to exporters in several sectors. But that has been deemed by many as insufficient.)

Jagmohan Singh Raju, a professor of marketing at Wharton, points out that smaller firms, including those "that rely on the U.S. market are clearly hurting. Companies such as Infosys and Wipro are feeling the impact, [but] smaller companies -- garment exporters and auto-part suppliers -- are hurting even more. Many of them banked on the dollar appreciating routinely after signing a contract. Now it is the other way around. I think these companies will be affected more than IT companies."

The Confederation of Indian Industry (CII) says that the worst hit are the textile and leather sectors. While individual exporters and companies have their woes, some complain of damage at a macro-level. A survey by the Federation of Indian Chambers of Commerce & Industry (FICCI) says sectors such as automobiles, consumer durables, food and food processing, gems and jewelry, textiles, handicrafts, and metal and metal products will be particularly impacted. "While the market should determine the exchange rate in the long run, sharp fluctuations in the short term create problems of adjustment for domestic industry," says FICCI president Y.K. Modi. The most affected, he says, is the small and medium enterprises (SME) sector.

Government's Role

When companies and industry organizations complain about such issues, the veiled -- and sometimes not-so-veiled -- argument is that the government should step in to provide support. Should it?
"My feeling is no, they should not intervene," says Siegel in his podcast. "My historical studies showed that a lot of the 1997 crisis was because currencies did not appreciate. That was during the era of fixed exchange rates in Thailand, Taiwan, Indonesia and the Philippines. And by not letting them appreciate, they actually attracted more capital. By letting it appreciate, people are a little bit more cautious because it looks a little more expensive now. And all of the capital that came in -- they couldn't deploy it favorably, and the result was over-consumption, deficits and then finally devaluation."

"I think it is best not to interfere," agrees Wharton's Raju. "Some correction should take place by the end of next year as U.S. expenditures outside decrease." Raju adds that in the short run, "A case can be made to support the very small exporters. But the right way is to allow the rupees to flow out. Let Indians invest in the U.S. -- not just companies, but also individuals. Some recent steps are in the right direction. More can be done."

Montek Singh Ahluwalia, deputy chairman of India's Planning Commission and one of the principal architects of the country's economic reforms, believes that the Reserve Bank and Finance ministry face a difficult set of choices. In an interview in his New Delhi office, he told India Knowledge@Wharton that, "This is a balancing act that the Reserve Bank and the Finance ministry have to play. It is a reflection mainly of the trilemma that economists face; you can only have two out of three things. If you want to have a stable currency, an independent monetary policy and capital account convertibility, you can't have all three. You have to give up one."

According to Ahluwalia, "The positive feeling about the Indian economy is bringing in a lot of capital. The only way you can absorb this capital is to let the exchange rate appreciate." He recognizes that "many people feel the appreciation has gone beyond what is reasonable. But this is a balancing act. What else can the Reserve Bank do? It can intervene to stabilize the nominal exchange rate, and that will generate some liquidity. It can stabilize the liquidity, but that will impact the exchange rate. Whatever it does, there will be some problem. What the Economic Advisory Council has said is that it can do these three things, and it should do a little bit of each."

In an effort to force down the rupee's value, under normal circumstances, the RBI would have bought dollars from the market. This releases rupees which the RBI then tries to mop up by issuing debt instruments. But the RBI has bought some 28.4 billion in dollars between January and May 2007 and it has to draw the line somewhere.

The sloshing liquidity leads to inflation, which is not politically palatable either. Indeed, the RBI sees controlling inflation as its prime mandate. As measured by the wholesale price index, inflation has come down to around 4.3% now, against 6.7% in January. But analysts warn that the trend may reverse soon.

The RBI has pulled out all the weapons in its armory. It has raised benchmark interest rates seven times since October 2005. It has sought to suck liquidity out of the system by increasing the cash reserve ratio (CRR), the amount banks have to keep with the central bank. Explains S.S. Tarapore, former deputy governor of the RBI and the man who has prepared two roadmaps for the full convertibility of the rupee: "While, until recently, the RBI has been intervening in the foreign exchange market buying dollars, the resultant release of domestic liquidity has required the authorities to issue bonds under the Market Stabilization Scheme (MSS), absorb liquidity under the Liquidity Adjustment Facility (LAF) through the reverse repo facility (surplus liquidity in the market is placed with the RBI at a rate of interest of 6%) and to increase the CRR. All this has costs. But these measures have increased interest rates in India and stimulated even larger capital flows."

Economists and India's money mangers are divided on the virtues of a strong rupee and what the RBI should be doing about it. "I have always argued that we should not intervene much on ups and downs of exchange rates. Let market forces determine that," Satish C. Jha, economist and member of the Prime Minister's economic advisory council, told The Economic Times recently. "We can't forget that the rupee has remained undervalued for quite some time. I feel it will get stronger and will hover around 38 in the next two years. We have seen a strong inflow of foreign capital into the market. How can we expect the rupee to depreciate?"

The rupee will stay strong, says analyst Jamal Mecklai. Speaking to exporters at a seminar on "How to deal with the new improved rupee," held in Mumbai recently, he said this was a period of churn. Big export houses, he added, had weathered the storm because of their professionalism. The small companies should similarly get their act together.
"It is obvious -- from the recent paroxysm in inflation followed by the trauma in the forex market -- that control processes have run their course and, appearances notwithstanding, the Indian economy is being run largely by the free flow of capital," wrote Mecklai in Business Standard. "The increasingly aggressive bleating we are hearing about the strength of the rupee is clearly coming from sources that don't recognize this."

How Should Companies Respond?

"Exports are about job creation, not dollar creation," says Ajit Ranade, chief economist of the Aditya Birla Group. "Unlike earlier, we are not starved of dollars." Ranade says you cannot compare the situation in India with that prevailing in, say, the U.S. The so-called free markets in India are not free and allowing market forces full play has atypical outcomes. "Look at our export-import basket," he says. "Our three principal imports are crude, gems and jewelry, and capital goods. Crude prices are still administered. And gems and jewelry and capital goods do not affect inflation. It would be different in the U.S. But, in the Indian context, a stronger rupee does not mean lower inflation.

"Now look at our exports. Leave IT and software aside for the moment. Some 65% of our exports come from the SME segment. There are 15 million workers in this sector. The SMEs have profit margins of barely 5-10%. If the rupee rises, as it has, their entire profit gets wiped out."

If inflation is unpalatable, the scale of job losses that could take place in the SME sector is even more so. "Total exports are about 20-21% of GDP," points out Ranade. "The entire agricultural sector is less than that."

Wharton professors have words of advice for companies that feel stretched by the rising rupee. Krishna Ramaswami, a professor of finance, points out that Indian companies may not be affected much "if their international competitors' currencies have also appreciated, though he admits that they "may lose some share of their sales in the U.S. market and have their margins squeezed if not." He recommends that these companies could "hedge their currency exposure if they do not already."

Raju of Wharton's marketing department agrees. His advice to Indian firms that are feeling pinched by the rupee: "Do not rely on the U.S. market too much. Get more business in Europe. The euro and the British pound are appreciating with regard to the Indian rupee." Raju believes that just as some companies are hurt by the strong rupee, others benefit from it. "Airlines benefit. It is now cheaper for Indians to travel to the U.S. This is also a great time for Indian companies to buy equipment and technology products from the U.S. Companies that buy components from the U.S. are in good shape. It is a lot cheaper for an Indian PC manufacturer to buy an Intel chip or a Motorola phone. Mobile phone operators benefit from the strong rupee."

Management professor Saikat Chaudhuri recommends that companies would do well to stop complaining and take advantage of the rupee's rise to drive through essential changes. "I don't understand the cribbing," he says. "As the Indian economy grows, the rupee will grow stronger. You can't get the benefits of globalization without feeling the other effects. My view is that there should be a renewed imperative for IT firms to go for high-end work across all industries." Chaudhuri adds that the stronger rupee should make it easier for IT firms to set up operations abroad. "That would be a good trend. Also, resource utilization will have to become better."

As for manufacturers, one thing could make things easier for them, Chaudhuri points out. "Right now, costs are high because of weak infrastructure. As India's infrastructure improves, those costs will come down. As freight corridors are built and airports are finished, that will help the manufacturers absorb the downside of the appreciating rupee." He also believes that the strong rupee could help companies drive through some strategic deals. "The strong rupee is good for Indian companies seeking to make acquisitions abroad. When your deals are worth billions, it makes a difference. We all like it when our money is worth more."

According to Siegel, "It is painful for the exporters, but look at the other side of the coin -- the consumers. A strong currency is good for a country; it's not bad for a country. They shouldn't just be beholden to the exporters. They should listen to the consumers, who are going to gain undoubtedly because of the strong currency."

Note: Taken from Knowledge@Wharton

US Bank turns greenback flows to Indian SMEs

2007-07-30T23:06:00.000-07:00

US banks have spotted a huge business opportunity in the small and medium enterprises (SME) here that contribute 9% of the country’s $1-trillion GDP. A wave of liberal offers for credit along with US government guarantee is set to make its way to the segment with the US seeking to boost its exports by providing trade finance to SME importers in emerging economies. More

S&P gives better rating for its India focus

2007-07-30T23:03:00.000-07:00

Two Years after its successful open offer for Crisil, Standard & Poor’s (S&P) has drawn up a plan to make India a strong regional base. S&P will also be applying for a licence to set up a credit information bureau in India through its local arm Crisil.

The international rating agency on Friday announced the elevation of R Ravimohan, MD, Crisil, as managing director and region head of S&P in South Asia. Mr Ravimohan’s place will be taken by Roopa Kudva, Crisil’s ED and chief rating officer. In addition, Subir Gokarn, currently chief economist of Crisil, will take on the additional role of chief economist in Asia-Pacific for Standard & Poor’s. He will be responsible for shaping S&P’s macro-economic views in Asia-Pacific and expanding its research and commentary on the region’s rapidly growing economies. More

UTI Bank is now Axis Bank

2007-07-30T23:00:00.000-07:00

UTI Bank has become Axis Bank from today. With this re-branding, the bank plans to diversify into other financial services and restructure its corporate banking. The bank would be adding 4,500 people at different levels during the current fiscal taking the staff strength to 14,500 by March 2008.

“The bank had used the UTI brand for 13 years, and has in recent years strongly contributed to the resurgence of the UTI brand,” said Dr P.J. Nayak, Chairman and CEO, Axis Bank.
“It was clear that the usage of the UTI brand by several shareholder-unrelated entities was becoming untenable,” he said.The re-branding becomes more important as the bank takes its initial steps in establishing a global footprint, he said. The bank has offices in Singapore, Hong Kong, Shanghai and Dubai. It seeks to expand further its international presence to become a multinational bank.
Axis refers to a line of reference and stability. Just like the twins (seen in the bank’s advertisements), everything in the bank remains same except the name, explains Mr Hemant Kaul, President-Retail Banking, Axis Bank.

RBI unlikely to slash interest rates

2007-07-30T22:53:00.000-07:00

Reserve Bank Governor Dr Yaga Venugopal Reddy is scheduled to unveil the first quarter credit policy review later in the day where the analysts expect that key interest rates may be left unchanged. This expectation does not signal the softening of interest rates leading to cheap credit for corporates and consumers that have been burdened in the last few months with expensive funds and high inflation. More

Forbes 200 Best Small Companies

2007-03-31T02:05:00.000-07:00

List of the 200 Best Small Companies ferrets out the most robust, fundamentally disciplined public outfits with sales between $5 million and $750 million. To qualify a company must have a share price of above $5 as of Sept. 29 on 3-month average volume of 10,000 shares. Candidates carry profit margins of greater than 5% with positive sales and profit growth, on average, over both the last five years and last twelve months. The result? Small, but growing, businesses designed to survive the ups and downs of market volatility. More...

Sort List By: Rank Company State ROE Sales Growth Profit Growth MarketValue

Corporate Profiles

Spy Planes: A Small Company Takes Off By Matthew Swibel After stumbling for years, United Industrial has found a sweet spot selling unmanned spy planes to the Army.

Bright, Very Bright By Kurt Badenhausen Tiny Daktronics has made it big in sports scoreboards. Now it's turning to outdoor advertising.

Best Of The Best The top of the heap for our annual list of America's 200 Best Small Companies.

Fastest Growing The fastest growers on our list.

Best Newcomers Outside of the top ten, the best of our 59 newcomers.

Safe Bets Companies with a high "board of directors score" and little debt should safely endure market fluctuations.

Betting On The Jockey Insider buying, double digit returns on shareholders' equity and a board score better than at least a third of its peers makes these standouts worth a look.

The List

Five Value Stocks to Own Now By Michael Maiello When you use a value approach to judge growth stocks, you get something like the buy list that Gerald Van Horn plucked out of the 200 Best Small Companies list.

Where Are They Now? By Megha Bahree Sometimes they graduate from the list with honors. Not always.

NOTE: This article has been presented only for info and not for commercial use

Credit Rating for SMEs

2007-03-25T01:09:00.000-07:00

How could a bank or partner or customer could find whether a SME is worth to outsource its services. Its quite tough to answer. But now its easy to find the solution.

CRISIL(Credit Rating Information Services of India Ltd) is now giving ratings for SMEs. SMEs could apply to crisil and could get benefit from their ratings. Their ratings could be passport for your success.

Log on to www.crisil.com. who knows, this could change your business.

SME is the buzzword at corporate corridors

2007-03-25T00:27:00.000-07:00

Wherever you go, you'd hear one word- SME. Small Medium Business has become heart and soul for various large enterprises across the world.

Almost all corporates across sectors seems to be coming up with various services and products to serve small medium business. Once upon a time SME seems to be nothing for all these giants. Now after so many success and new products SMEs seems to grab attention among them.

Banks are providing innovative loan facilities to small business. IT giants are coming with varous software solutions. Governments are taking various steps. So whatz happening.

We believe that time has come for SMEs to spread their wings and achieve successs at International arena.

Starting Small Business

2007-03-24T06:04:00.000-07:00

Overview

Starting and managing a business takes motivation, desire and talent. It also takes research and planning. Like a chess game, success in small business starts with decisive and correct opening moves. And, although initial mistakes are not fatal, it takes skill, discipline and hard work to regain the advantage.To increase your chance for success, take the time up front to explore and evaluate your business and personal goals. Then use this information to build a comprehensive and well-thought-out business plan that will help you reach these goals. The process of developing a business plan will help you think through some important issues that you may not have considered yet. Your plan will become a valuable tool as you set out to raise money for your business. It should also provide milestones to gauge your success.

Be honest with yourself. Know what you're getting into.

In business, there are no guarantees. There is simply no way to eliminate all the risks associated with starting a small business - but you can improve your chances of success with good planning, preparation, and insight. Also keep in mind that the business you start may not be the exact business you started. Start by evaluating your strengths and weaknesses as a potential owner and manager of a small business. Carefully consider each of the following questions:

Are you a self-starter? It will be entirely up to you to develop projects, organize your time, and follow through on details.

How well do you get along with different personalities? Business owners need to develop working relationships with a variety of people including customers, vendors, staff, bankers, and professionals such as lawyers, accountants or consultants. Can you deal with a demanding client, an unreliable vendor, or a cranky receptionist if your business interests demand it?

How good are you at making decisions? Small business owners are required to make decisions constantly - often quickly, independently, and under pressure.

Do you have the physical and emotional stamina to run a business? Business ownership can be exciting, but it's also a lot of work. Can you face six or seven 12-hour work days every week?
How well do you plan and organize? Research indicates that poor planning is responsible for most business failures. Good organization of financials, inventory, schedules, and production can help you avoid many pitfalls.

Is your drive strong enough? Running a business can wear you down emotionally. Some business owners burn out quickly from having to carry all the responsibility for the success of their business on their own shoulders. Strong motivation will help you survive slowdowns and periods of burnout.

How will the business affect your family? The first few years of business startup can be hard on family life. It's important for family members to know what to expect and for you to be able to trust that they will support you during this time. There also may be financial difficulties until the business becomes profitable, which could take months or years. You may have to adjust to a lower standard of living or put family assets at risk in the short-term.

Good attributes for entrepreneurs

Self confidence. You have a belief in yourself that you can do it.

Does not consider failure as an option. You recognize that failure is a necessary step to finding what does work.

Able to move from ambiguity to clarity. You recognize that confusion, chaos and lack of clarity are all pieces of the “playing full out” puzzle. You have a process that allows you to move through this phase into a state of power and momentum.

Has perseverance and discipline. You know that every day you must focus on what MUST be done, not what you feel like doing. You engage in consistent, supportive habits.

Has a plan yet is “flexible.” The key to massive results is setting your mind on a desired outcome while being willing to “go with the flow” so the idea can expand and grow with the changing environment.

Sets and attains realistic goals. In my work, the only difference between goal talkers and goal getters are how realistic you are about your time management and abilities.

Takes calculated risks. Risks are necessary – but they must be tempered against what is good for you and your business. Learn what your high payoff opportunities are (a great resource for this process can be found in the Unstoppable Goals Method system).

Equally skilled in sales, marketing and “craft.” It’s not enough to love what you do; you must become masterful at bringing in the business opportunities. Otherwise you will be the best kept secret in the world.

Has financial backing/funding sources. To truly achieve success, you must have access to financial leverage. As the saying goes, “It takes money to make money.”

Enormous passion and drive for the work. When the going gets tough (and it will) the one thing that will keep you going is your passion. You have to get up every day believing that what you do is so vital, so important and so necessary that you are willing to overcome any obstacles in your way.

Willingness to learn. You recognize that the minute you know it all, you are done. Bigger successes come from continuing to learn, grow and evolve your mind and your goals.
Surrounded by other successful entrepreneurs. You invest your time, money and energy in people who are playing a big game. Choosing an environment to tap into collaborative opportunities, brainstorming and big thinking is your way to leaping forward.

Has good health and unbounded energy. The one thing that is precious that can’t be bought once it is gone is your energy. You make a commitment to maintaining a good health regime as a priority, not a last resort.

Keys to success

According to the U.S. Small Business Administration, the following traits are found among successful entreprneurs:

persistence
desire for immediate feedback
inquisitiveness
strong drive to achieve
high energy level
goal oriented behavior
independent
demanding
self-confident
calculated risk taker
creative
innovative
vision
commitment
problem solving skills
tolerance for ambiguity
strong integrity
highly reliable
personal initiative
ability to consolidate resources
strong management and organizational skills
competitive
change agent
tolerance for failure
desire to work hard
luck
Source: SBA

Start with questions about yourself and the business you want to persue.

Your answers will help you create focused, well-researched business plan that should serve as a blueprint. It should detail how the business will be operated, managed and capitalized. Before starting out, list your reasons for wanting to go into business. Some of the most common reasons for starting a business are:

You want to be your own boss.
You want financial independence.
You want creative freedom.
You want to fully use your skills and knowledge.

Next you need to determine what business is "right for you." Ask yourself these questions:

What do I like to do with my time?
What technical skills have I learned or developed?
What do others say I am good at?
How much time do I have to run a successful business?
Do I have any hobbies or interests that are marketable?

Then you should identify the niche your business will fill. Conduct the necessary research to answer these questions

Is my idea practical and will it fill a need?
What is my competition?
What is my business advantage over existing firms?
Can I deliver a better quality service?
Can I create a demand for your business?

The final step before developing your plan is the pre-business checklist. You should answer these questions:

What business am I interested in starting?
What services or products will I sell? Where will I be located?
What skills and experience do I bring to the business?
What will be my legal structure? (see overview below)
What will I name my business?
What equipment or supplies will I need?
What insurance coverage will be needed?
What financing will I need?
What are my resources?
How will I compensate myself?

Develop a business plan

You will need to develop a business plan before starting or acquiring your business. A more detailed description and discussion of business plans can be found in the Business plan entry of Smallbusiness.com The following outline of a typical business plan can serve as a guide. You can adapt it to your specific business. Breaking down the plan into several components helps make drafting it a more manageable task.

Introduction

Give a detailed description of the business and its goals.
Discuss the ownership of the business and the legal structure.
List the skills and experience you bring to the business.
Discuss the advantages you and your business have over your competitors.
In-depth help on developing a sound business plan can be found on the SBA Web site in the Starting Area.

Marketing

Discuss the products/services offered.
Identify the customer demand for your product/service.
Identify your market, its size and locations.
Explain how your product/service will be advertised and marketed.
Explain the pricing strategy.

Financial Management

Explain your source and the amount of initial equity capital.
Develop a monthly operating budget for the first year.
Develop an expected return on investment and monthly cash flow for the first year.
Provide projected income statements and balance sheets for a two�year period.
Discuss your break-even point.
Explain your personal balance sheet and method of compensation.
Discuss who will maintain your accounting records and how they will be kept.
Provide "what if" statements that address alternative approaches to any problem that may develop.

Operations

Explain how the business will be managed on a day-to-day basis.
Discuss hiring and personnel procedures.
Discuss insurance, lease or rent agreements, and issues pertinent to your business.
Account for the equipment necessary to produce your products or services.
Account for production and delivery of products and services.

Concluding Statement

Summarize your business goals and objectives and express your commitment to the success of your business.
Once you have completed your business plan, review it with a friend or business associate or a Service Corps of Retired Executives (SCORE) or Small Business Development Center (SBDC) counselor. (See SCORE and SBDC listings in this guide).
When you feel comfortable with the content and structure make an appointment to review and discuss it with your lender. The business plan is flexible document that should change as your business grows.

Start Small, Think Big

2007-03-24T05:25:00.000-07:00

This blog is for small business owners who are in need of help to run their business in smart manner. This blog could provide more info on most of the aspects involved in their business. Read this to update about whatz happening in your sector.