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MGT601 - SME Management - Lecture Handout 19

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Chapter deals with post and field this problems faced by a new concern.

  1. Acquisition of land;
  2. Construction of building and other aspect of civil works;
  3. Acquisition of machinery and its installation;
  4. Preliminary work about the sources of supply of raw materials , labor and managerial inputs;
  5. Prospecting about marketing;
  6. Preliminary work regarding sources of working capital;
  7. Coordination problem connected with the acquisition of different kinds of assets or completion of jobs;

Unless care is taken to ensure proper sequencing of different activities, the project would have cost over-run and/or time over run. Here in some kind of PERT analysis could be quite helpful.

Post Operative Problems of a New Enterprise

Several problems can create hurdle to start any enterprise-whether small or large. They need not always arise but an awareness regarding them could enable their timely avoidance or prevention. Below are given some of the post-operative problems.

  • Lack or absence of profits.
  • Experience factor:
    • Unfamiliarity or lack of experience in product or services line.
    • Lack of experience in management. There is a vast difference between being a machinist and being able to manage a machine shop.
    • Over-concentration of experience e.g. focusing only on the area of interest say, sales, finance, production etc and neglecting others.
    • Incompetence of management.
  • Sale Causes:
    • Weak competitive position;
    • Lack of proper inventory control
    • Low sales volume;
    • Poor location
    • Decline in demand due to recessionary trends in the particular industry;
    • Inappropriate marketing strategy;
    • High production costs and consequent high pricing;
  • Expense Causes
    • Fails to control operating expenses that reduce profits and pose a threat to survival of the firm. For instance, borrowing too heavily may force business to close if debts cannot be timely paid;
  • Neglect Causes
    • Common cases of neglect are: poor health, laziness, and family or marriage problems. Entrepreneurs need to establish priorities for themselves relative to their involvement in the firm. They must concentrate on the objectives of the firm.
  • Capital Causes
    • Low or over estimation of capital needs;
    • Fund management;
    • Cash losses;
    • Poor debt collection or unfavorable credit terms.
  • Customer Causes: i.e. extension of credit on liberal terms.
  • Personal Causes
    • High rate of absenteeism &/or labour turnover;
  • Unhealthy industrial relations;
  • Frequent strikes and lockouts;
  • Low productivity;
  • Militant trade unions.
  • Natural calamities such as burglaries, earthquakes, fire etc.
  • Government Regulations
    • Difficulty of compliance due to excessive cost burden;
    • Interference and dilatory tactics adopted by government authorities
  • Unmindful expansion so that sufficient business is not generated to sustain expanded capacity.
  • Environmental Causes:
    • Changes in government policy;
    • Changes in social or political conditions;
    • Inflationary pressures leading to increases in the input cost.
  • Production Causes
    • Technological obsolescence;
    • Low capacity utilization;
    • Inability of labour to correctly understand technology;
    • Non-availability of spares and replacements;
    • Poor machinery maintenance;

    Book recommended

    Entrepreneurship and Small business By C L Bansal

    Related Content: MGT601 - VU Lectures, Handouts, PPT Slides, Assignments, Quizzes, Papers & Books of SME Management