Comparative Marketing Practices of Exporting and Non Exporting
SSI Units in Haryana

By

Shalu Rani
Research Scholar
Department of Commerce
Kurukshetra University
Kurukshetra
 

An Abstract

The first census of Small Scale Industries (SSIs) in the country was undertaken in 1972 and the second in 1987-88. The total number of Small Scale Industries working units in the country is estimated to be around 3 million. In terms of ownership, the vast majority of Small Scale Industrial (SSI) units are propriety concerns while others are partnership and private limited companies. The potential of Small Scale Industries (SSIs) to generate employment has remained the strongest argument in their favour. The sector now provides employment to 17 million persons and second largest employer of India's workforce after agriculture. The role of Small Scale Industries in the economy can be seen from the fact that it now accounts for 95% of all industrial unit in the country and 40% of total output. The industry groups which have recorded high growth rates and a large share in total production of Small Scale Industries are textile products, wood furniture, paper and printing and metal products etc.

Comparative Marketing Practices of Exporting and Non Exporting SSI Units in Haryana

The small scale industrial sector (SSI) is a vital constituent of India's industrial sector. It contributes significantly to India's Gross Domestic Product and exports earning besides meeting the social objectives including that of providing employment opportunities to million of people across the country. Change is the only constant Mantra in the present world. All economic activities including the Small Scale Industrial (SSI) sector in India have undergone a sea change in the past 50 years. The Small Scale Industries that we see today are not the same which existed 50 years ago and will not be the same after another 50 years. The process of change has been catalyzed in recent years due to macroeconomic transformation taking place both domestically and globally. In the present era of borderless and market oriented economy, 'the two big global economic forces which are competing for world attention are (a) the emergence of a 'new economy' underpinned by information and communication technologies and (b) growing instability and uncertainty linked to globalization. With the WTO coming into existence, a new trade environment has been emerging. With the removal of Quantitative Restriction on import of 715 items w.e.f. 1^st April, 2001 and those done earlier, a large number of items are now under Open General License (OGL). There has also been reduction in import duties in recent years. These have emerged as challenges before the SSI sector. This warrants that the SSI sector must be more competitive and efficient. There are changes in the type of products demanded, in the quality of products and changes in fashion and tastes. There have also been changes in the mode of production and technology. To cope up with these changes, the SSIs sector will have to undergo many internal and external transformations.

The SSI sector might witness changes in the following areas:

* Concept and Classification of SSI
* Role of Government as a Facilitator and Present Position of SSI
* Concept of Market and Marketing Challenges
* Changes in Technology in Use   
* Changes in the Regulatory Environment

Review of existing literature

To build the conceptual framework for marketing practices of small scale industries, we may draw on the following literature.

Goyal (1982) identified foreign tour to be most important constituent the promotion mix followed by trade fair and advertisement respectively. It is also observed that generally a low promotion budget (2% of total exports) is followed by exporters.

Khanna (1985) reported that fashion oriented items required a larger direct selling effort than standardized items. He further remarked that export promotion expenditure was positively associated with export performance.

Davar (1987) in his study on apparel export industry found that the promotion efforts are significantly associated with exports performance. The promotion mix of a large firms is rightly directed at long term development of market i.e. advertising for long term gains constitutes an important component of promotion mix. But, the small firms depend heavily on short term foreign tours with a view to generate immediate export orders.

Sahoo (1991) while analyzing the emerging trends in India's export markets impressed that only marketing orientation can help in boosting Indian exports. According to him, "Exporter must bear in mind that quality, cost, competitiveness and above all marketing techniques are the basic principle for competing the world market."

J. Stamely and Michael (1998) In International Marketing under the chapter "Exporting not just for small business show the problems for small exporter and found that

1 A relatively large domestic market and lack of exposure to other cultures, making the selection of markets and identification to customers abroad difficult.
2 The lack of management time and general resource.
3 Controlling the foreign operation, channel, policy and physical distribution.
4 Reaching the foreign markets.
5 Language problem.
6 Different safety and quality standard. We can show these problems diagrammatically in this way.

Rajesh Kumar (2005) in his study "Export marketing practices of selected pharmaceuticals companies in India" found that the global market place is forever dynamic because of changing paradigm, technological advances and shifting market preference.

Previous studies provide a conceptual framework of SSI units. The present study is step further to develop sufficient insight leading to formation of appropriate institutional arrangement to strength economic viability of small scale industrial units in Haryana and else where in country.

Research objectives and methodology

This study is an attempt to analyze the comparative marketing practices of exporting and non-exporting SSI Units in Haryana, where in a survey was undertaken to examine and to learn about marketing practices. Exporting SSI units serves both domestic and foreign market while non exporting units serves only domestic market.

The proposed study is primarily aimed at bringing out the marketing practices of small scale units. Specifically, the objectives are stated as under:-To examine the policies and practices relating to product, pricing, promotion, distribution and other matters related to marketing in SSIs, to find out the differences between marketing practices of exporting and non-exporting units regarding the marketing practices followed by them, to identify the gaps in those marketing practices which have failed to receive acceptance; and to specify the problems in the existing marketing practices of exporting and non exporting units. The Study makes an attempt to analyze the following hypothesis.

Ho₁ –  There is no difference in product practices of exporting and non-exporting SSI units. 
Ho₂ –  There is no difference in pricing practices of exporting and non-exporting SSI units. 
Ho₃ – There is no difference in promotion practices of exporting and non-exporting SSI units. 
Ho₄ – There is no difference in distribution practices of exporting and non-exporting SSI units. 

The data for the study "A comparative marketing practices of exporting and non-exporting SSI units in Haryana" has been obtained from both sources i.e. primary as well as secondary sources. Secondary data is collected from published and unpublished information provided by Directorate of Industries, Chandigarh, Development Commissioner, Delhi and District Industrial centre etc. Due to descriptive nature of study, major chunk of data was collected from primary sources. The primary data is collected through well designed questionnaire for measuring the marketing practices of small scale units. Under it, general information as well as information are collected about marketing mix of the concerns or it can be said that information about 4 Ps (product, pricing, promotion and physical distribution) are collected. Simple average method and standard deviation are being used intensively through out the analysis. For comparing the marketing practices of exporting and non-exporting small scale units, t- test is applied.

Concept and Classification of SSI

All over the world, the unorganized manufacturing sector is known as Small and Medium Enterprises (SMEs) while in India this is known as SSI defined in terms of investment in plant and machinery. During last 50 years, the limit of investment has changed from Rs. 5 lacs in the sixties to Rs. 100 lacs in 1999. Within the SSI sector, two sub segments have been created. : one for Tiny Units having investment in plant and machinery up to Rs. 25 lacs and the other for industry Related Service and Business Enterprise (SS and BE) sector defined as having investment in fixed assets excluding land and building not exceeding Rs. 10 lacs. The SP Gupta Study Group on Small Enterprises (1999), in its interim report, has recommended that the time is ripe to move from 'Industry' to 'Enterprise' and also to include Medium Enterprises within the SSI sector. This is essential in order to bring Indian SSI sector at par with the global SMEs sector.

Defining Small Scale Industries

The definition of Small Scale Industries varies from one country to another. In most of the countries of the world, the criterion for defining a small enterprise is related to the size of employment. For instance, in the USA, small business is one which has employment of less than 500 people. In the U.K., it is less than 20 skilled workers, in Sweden and Italy less than 50 and 500 people respectively. In some countries both employment and investment are taken into account. In Japan, the investment in industrial undertaking should not exceed 100 million Yen employing not more than 300 employees. In South Korea, investment limit is 2 lacs dollars and employment being 200 people.

The definition of SSI in India has changed from time to time. It is currently defined in terms of investment Ceilings on the original value of Installed plant and machinery is Rs. 1 crore at present. Table 1.1 below is showing the changes in investment limit in different years.

Table – 1.1

Evolution of Investment Limits for Small Scale Industries

Classification of Small Scale Industries in India

The SSIs in India are broadly classified into two types: Traditional industries and Modern industries. Both the types of SSIs are prevalent in India. Under traditional industries basically Khadi village industries, handlooms, Sericulture etc. are included while modern SSI industries include small scale, export oriented ancillaries and small scale service and business enterprise.

Concept of Market and Marketing Challenges

At present, three types of markets exist for the SSIs. These are (i) 'niche' market (ii) domestic/local market, and (iii) global/international market. With the introduction of non discriminatory trade laws under World Trade Organization (WTO) and with the removal of QRs and placement of the items under OGL, the SSI sector will have to produce only one type of product which is competitive in terms of cost and quality in all the three types of markets. In other words, by 2012 there may be only one market as there may be no distinction between global and domestic markets and the watchword for the same would be the quality to be attained by the use of state of the art technology. The small will continue to be beautiful even in changed market because it has the advantage of flexibility and innovativeness. The next ten years will see emergence of large number of market consortia and Indian SSI Association becoming part of global chain and information network.

Marketing occupies an important place in the management of small scale industries. It is key factor to determine the success of an industrial concern. It promotes trade and employment. But the small industry in India generally suffers from many ailments where marketing is concerned. Hence it requires support from Government and other agencies.

Why SSI sector needs marketing support

Of late marketing management has been given much importance, especially by the small scale sector. This could be attributed to the diverse marketing situation existing now. In a competitive environment small scale industries face many marketing problems. Some of the factors which could contribute to the marketing problem of the small scale industry could be identified as follows:

* Increasing competition from within the small scale sector as well as large industries with established brand names and marketing set up.
* Consumer awareness, even to rural and semi urban areas for quality goods.
* The need to set up distribution networks for reaching out widely dispersed markets.
* Inability of SSI units to exploit the export markets.

Considerable difficulty is being experienced by small scale industrial units in marketing their products. It requires marketing support from government and other agencies.

Marketing Practices

PRODUCT PRACTICES

While great devices are invented in the laboratory, great products are invented in the marketing departments.
                                                                                         William H. Davidow

Under product practices product development, standardization, branding, geographical coverage and packaging are considered and it is concluded that in small scale industrial sector, due to lack of knowledge, resources etc., they are not capable to take advantages of these types of practices to large extent. These SSI units are not using these techniques properly. It is observed that which units take into consideration product development practices, they only modify their product and develop their new product without marketing survey and consulting technical experts. As the same case in packaging, SSI units use packaging just as wrapper for goods. They have lack of knowledge that packaging can do multifarious activities or it can become effective promotion tool for them. So, it can be said on the basis of analysis that if SSI units adopt proper product practices only then they are capable to sustain and flourish in the national as well as international market. Table1.2 shows that both exporting and non exporting SSI units mostly deal in urban market because these units get much exposure in urban markets than rural market.

Table-1.2

Marketing Segmentation-A Geographical Coverage

But while comparative response is considered then it can be said that non-exporting units have higher average in dealing with rural markets and exporting units have higher average in dealing with urban markets. In other words, it can be said that exporting SSI units deals in urban market to flourish because they have to go in international market. But on the whole, on the basis of t-values, it can be said that there is no significant difference in practices of selecting market to enter for flourish.

PRICING PRACTICES

What price is to be charged for a product is the most critical decision to be taken by the firm producing it. Price is customarily defined as in the amount of money for which unit of any given good or service is exchanged. In fact, the pricing is the most important decisive area of marketing. It is the only element of marketing mix of a firm which produces revenue, while all other elements represent cost. It plays a distinctive role in determining the marketing success of a firm.

Factors Influencing Price Setting

The price at which a product is offered for sale in the market is affected by price setting. The relative importance of each of these factors is brought out by both external and internal factors. The relative importance of each of these factors is brought out in Table 1.3.

Table – 1.3

Factors Influencing Price Setting

Table 1.3 which gives the distribution of average responses of sample units of different exporting and non-exporting units. In case of exporting units, market condition is the major factors which determine the price. On the other hand in non-exporting SSI units, Product demand is primarily considered. After market condition, exporting units, then consider product demand and competitor price because both factors have larger impact on price. On the other hand, non-exporting units also kept in mind market condition and consumer paying capacity in determining the price. Ultimately, it can be said that there is no significant difference in factor consideration while determining price expect cost of production and consumer paying capacity both by exporting and non-exporting SSI units on the basis of t-values.

Discussion

Price is the only factor which generates revenue while other elements of marketing mix cause cost. It means price is reward for factor of production in form of wages, rent, interest and profit. Responses obtained in this regard show that exporting and non- exporting SSI units highly preferred to target return to investment. They are not much conscious about market share and target sales .So, this reason effect their sustainability of these units .On the other hand, under pricing policies, a mix of uniform and differential policy should be adopted to get success. In addition to this, proper practices should be adopted regarding factors influencing in determining price, types of discount offered etc. So, that they are capable to get effective market share as well as target returns of their efforts.

PROMOTION

Promotion always plays a vital role in the marketing efforts of a firm. Generally, there are four elements of promotion - personal selling, advertising, sales promotion and publicity. One objective of this chapter is to identify the approaches to determination of promotion budget. Another objective is to ascertain the size of promotion expenditure of small scale units.

Factors Influencing Promotional Budget

Promotion budget depends on various factors such as targeted sales, increasing sales of low selling items, for developing new markets and obtaining dealers etc. Table 1.4 indicates those factors which influence the promotion budget of SSIs.

Table – 1.4

Factors Influencing Promotional Budget

Sample response indicates that sales of low selling items are largely considerable factor to finalize the promotion budget both by exporting and non-exporting units. On the other hand, for developing a new market and for producing a new item, there is a need of promotional activities to push their sales. So, these are also widely considered for promotion budget. It is also brought out that a targeted sale is equally considered both by exporting and non-exporting units for promotion budget. On the whole, it can be said that there is no significant difference in practices of exporting and non-exporting units to finalize the promotion budget.

Advertising Media Used

Depending upon its form, benefits and coverage, a firm can engage itself in advertising by using varied media such as magazines and newspapers, radio and television, outdoor displays, direct mail and internet/websites etc. Each of these media differs in terms of the extent of its reach, frequency and impact on the target buyers. Before an advertising media is selected, it is necessary that media planner collects all possible information about each media and their characteristics in relation to type of products, type of customers, media cost etc.  Sample responses indicate in Table 1.5 that various factors affect media selection. It will be useful to know the media pattern used in small scale units.

Table – 1.5

Advertising Media Used

Table 1.5 classifies the responses received from the sample exporting and non-exporting units according to broad categories of media used. It shows that there is a significant difference in choosing advertisement media both by exporting and non-exporting units on the basis of t-values. Responses got from exporting and non-exporting SSI units indicate that they largely depend on wall writing/Direct Mail/Letter writing, posters/land bills, Radio/T.V. and other specific media for their product advertisement or it can be said that these media of advertisement are widely used by both exporting and non-exporting units. Comparatively, on the basis of responses, it can be said that except internet and websites, the other media of advertisement are mainly utilized by non-exporting units while in utilizing internet and website, exporting units have high average .In other words, it can be said that this media of advertisement is more preferably used by exporting units.

Discussion

In modern days, the consumer is the king of the society .Various efforts are done to attract them for purchasing the product. The tools which influence the choice of consumer are considered under promotion practices .Promotion practices include –advertising, publicity, personal selling and sales promotion activities.   Due to their size and resources, maximum SSI units prefer advertising and sales promotion activities. Under their promotion mix SSIs should launch a effective advertising campaign and timely sales promotion. Only then, they are capable to create and sustain the demand for their product.

DISTRIBUTION PRACTICES

"Any sequence of institutions from the producer to the consumer including one or any number of middlemen is called channels of distribution."

McCarthy

To know the relative use of these channels by small scale units, we may refer to Table 1.6 which gives the distribution of channel levels used by sample units.

Table – 1.6

Channel level Used

Table 1.6 shows that both exporting and non-exporting units largely used two level channels (manufacturer to wholesaler to retailer to consumer). The percentage of using this channel in exporting units is 43.3% and 56.3% in non exporting units. Exporting units then considered to zero level channel with 23.4% and one level channel (11%). On the other hand, non-exporting considered to one level channel (29.12%) at second place and then to three level channel. Exporting units manage zero level channel more frequently then non exporting units because these units have enough financial resources for direct selling to consumer.

Discussion

Under distribution practices, we generally include transportation and warehousing. Transportation means how a product will send to ultimate consumer. Under it, both middlemen (wholesaler, retailer and agent) and means of transport (rail, road and air) are included. Under distribution practices, responses are collected in regard of channel level, distribution intensity, factor effected selection of middlemen and incentive given to middlemen etc. A proper combination of these channels can bring the sustainability and success for these concerns .It is also necessary for small scale units to maintain adequate stock of raw material and finished products to avoid out of stock situation.

Conclusion

The study reveals the basic marketing problems related to exporting and non-exporting units. It is a well known fact that marketing mix is the combination of 4 P i.e. product, price, promotion and physical production. On basis of above variables it can be said that marketing activities start with origin of a product and continues after sale of product in shape of post sale services etc.

For the overall growth and development of the Indian economy, the contribution of SSI is undoubtly significant. The small scale sector acts as an instrument in absorbing excess labour existing mainly in the agricultural sector of our economy. We are passing through the age of competition and to compete with advanced economies, it is necessary to generate viable employment on one hand and to have a simultaneous check on unwanted increase in population on the other hand. Both of these objectives may be achieved to great extent by the growth and development of SSIs in all states of Indian Union.

Interpretation of  Problems faced by SSI units show that Finance problem is largely faced by non-exporting units while exporting units have to face the problems like executive inefficiency, technological lag, problems relating to export etc. In addition to this, terms of payment is also a major problem which is equally faced by both exporting and non-exporting units.

Since market performance of a product is determined to a large extent by the interest and involvement of the middlemen in pushing through the product, it is necessary that the middlemen engaged in the distribution are motivated. Among the various types of facilities and incentives which are extended by manufacturer to attract the right type of middlemen into the job- easy credit terms and replacement of defective items are the basic incentives which are similarly provided by exporting as well as non-exporting units. In addition to these motivations, both exporting and non-exporting units are largely preferred to special discount, cooperative advertising and free gifts to get success in competitive era.

References

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Table – 1.1
Evolution of Investment Limits for Small Scale Industries

Shalu Rani
Research Scholar
Department of Commerce
Kurukshetra University
Kurukshetra
 

Source: E-mail March 28, 2009

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