1. On the one hand they open up opportunities. For example, SMEs which can grow quickly, which are niche exporters, or which are able to tie in with global supply chains are all able to take advantage of opportunities created by globalization.
2. On the other hand, globalization poses an increased threat for SMEs which are unable or unwilling to compete. Given that labour is still less “globalised” than other factors, this poses political and social challenges for governments.

1. To understand the status of Indian Small and Medium Enterprises in the international business
2. To evaluate the challenges of Small and Medium Enterprises of India in today’s business environment
3. To study the strategies adopted in small and Medium Enterprises to discover the international business career by taking sugar industry as an example.

1. Manufacturing Enterprises-the enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the first schedule to the industries (Development and Regulation Act, 1951) or employing plant and machinery in the process of value addition to the final product having a distinct name or character or use. The Manufacturing Enterprise is defined in terms of investment in Plant &Machinery.
2. Service Enterprises: -The enterprises engaged in providing or rendering of services and are defined in terms of investment in equipment.

1. a)      Political Factors: The Indian sugar industry works under high political intervention. Farmers usually deal through co-operative society, where the local political parties have a strong influence on the finance disbursement and preferences. Even though to protect the sugar farmers, the government introduced Fair and Remunerative Pricing (FRP), the situation has not changed much.
2. b)     Economic Factors: The sugarcane production in the country constitute almost 2.2-2.7 percent of India’s total cropped area. Even though there is annual volatility, the contribution of this crop to the total GDP stands almost 0.7 percent (2018-19). In addition, the sugar industry pays almost Rs. 1700 crores to various state government in the form of excise duties and purchase tax (now GST) on sugar cane.
3. c)      Social Factors: The employment generation of this industry is a remarkable one. Almost 7.5 percent of the rural population in the country depends on sugarcane farming. The direct employment of the industry is approx. 2 million and there is also significant indirect employment generation through various ancillary services.

f)      Legal Factors: Legal aspects of the sugar cane affect the industry and producers. But government is trying to support the sugarcane producers with the enactment of various acts which will provide both financial support and protect from international competition.

To determine industry attractiveness and long-run industry profitability of the Indian Sugar Industry, we chose to apply the Porter’s five forces in our analysis (Figure 6). Porter’s five forces are:

1. Barriers to Entry and exit: The Indian Sugar Industry is characterized with modest entry and exit barriers. Integrated business model and increasing capital requirement in the industry restrict new entrants. The Government earlier used to give incentives to set up new plants by granting higher free sales quota for the first five to eight years of operations that had led to mushrooming of small units. This incentive has been withdrawn and the new sugar units are required to comply with the levy quota regulation from first year of operations. The GOI has also put restriction on setting up of two sugar factories within the radius of 15Kms.
2. Threat of substitutes: Being an essential commodity the demand for sugar is not elastic. Alternate sweeteners to refined sugar in India are gur and khandsari. But with increased per capita income and easy availability of sugar at competitive rates, use of gur and khandsari is seeing a downward trend and is mostly confined to rural areas. Hence, threat of substitute is low in the industry.
3. Buyer bargaining power: Indian sugar market is highly regulated by the Govt. influencing distribution, purchase price of levy sugar and the free sale quota releases for sugar. Hence, buyer’s power is highly restricted in this sector.
4. Supplier bargaining power: Allocation of the area from where the sugarcane can be procured is allocated by the government. The Sugar mills have no choice but to purchase all the Cane sold to them, even if it exceeds their requirement. Sugar producers are not allowed to own cane fields in India. Though recent sugar de-control is likely to give higher pricing power to the mills, the government still can influence the prices with its PDS system.
5. Industry Competition: Competitiveness among the Indian sugar players is high. With around 500 units engaged in production of sugar, the industry is highly fragmented. Private Individual players do not have big market share. Cooperatives are relatively high as they account for more than 50% of the industry’s production.

FACILITATING SMES ACCESS TO INTERNATIONAL MARKETS

During the past decade there have been steady technological and structural changes which have made it easier for SMEs to participate in the international economy. Advances in ICTs, and in particular, the Internet, have been a major factor in facilitating information flows and expanding the market potential of smaller firms. Governments have been making efforts to reduce barriers to international business activity, at the global and especially at the regional level.

However, SMEs are still relatively under-represented in the global economy. SMEs only contribute between one quarter and one third of manufactured exports and account for a very small share, usually less than 10%, of foreign direct investment (FDI) in India (Schreyer, 1996; Hall, 2002; Sakai, 2002). In most national economies SMEs make up more than 95% of market participants, and contribute around 50% of direct value added or production. The reasons for such small contribution by Indian firms are manifold. Globalization has exposed SMEs to a more complex and risky business environment. Compared to larger firms, SMEs are relatively unprepared and less well-resourced. Some of these risks and complexities can be addressed by governments as they relate to the differing regulatory, administrative and policy environments.

For many enterprises gaining access to international markets and internationalization requires much strategic support. Many firms have high fixed and sunk costs which need to be recouped as quickly as possible. Access to global markets can also offer a host of business opportunities, such as new niche markets; possibilities to exploit economies of scale, scope, volume and technological advantages; the upgrading of technological capability; lowering and sharing costs, including R&D costs; and in many cases, affording improved access to finance. Recent research findings link high-growth firms and exports, and find that exporting is not the end of a strong growth process but rather appears as a starting point to accompany the growth process (OECD, 2002).

CONCLUSION

With the large benefits, globalization comes with numbers of costs. The main costs are likely to be felt by small and micro businesses that are unable to cope with the increased competition. These small firms are usually operating only at a local level, but are nonetheless affected by the broader international environment. In addition, there will always be gains accruing to some regions or countries which have a more attractive entrepreneurial business environment. This attractiveness is relative to that prevailing in other locations and countries, and relative to the different types of entrepreneur.

A main factor impeding factor of development could be governments themselves. These impediments are difficult to monitor at present, because they are relative, not absolute, and because most are non-border impediments. There need to be better ways of identifying what government regulations and practices are impeding the startup, growth and internationalization of fast growth firms. Because many of these firms are small, and they are “pushing the envelope” in new industries and new technologies they do not show up as significant “blips” on trade negotiation. Governments need to collaborate to set up monitoring systems to identify these impediments, understand their longer-term impact, and establish mechanisms for addressing them, at bilateral and multilateral levels. The success and growth of international SMEs will be enhanced by a more internationalized infrastructure geared to the smooth growth of firms across borders. This applies to the infrastructure for financial markets, advisory services, information access, telecommunications, intellectual property rights markets and regulation, dispute resolution processes, etc. all of which need to be internationalized. All of this requires active collaboration between governments, international agencies and the private sector to address these issues with the view to create a simpler, more business friendly, and more integrated economy at international levels for Indian SMEs.

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