1

Micro, Small and Medium Enterprises

Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 which was notified on October 2,
2006, deals with the definition of MSMEs. The MSMED Act, 2006 defines the Micro, Small and Medium
Enterprises based on

1. the investment in plant and machinery for those engaged in manufacturing or production, processing
or preservation of goods and

2. the investment in equipment for enterprises engaged in providing or rendering of services.

The guidelines with regard to investment in plant and machinery or equipment as defined in the MSMED Act,
2006 are:

Investment in
Investment in plant and
equipment excluding
Nature of machinery excluding land
land and building for
activity of and building for enterprises
enterprises engaged in
the engaged in manufacturing
providing or rendering
Enterprise or production, processing
of services (loans up to
or preservation of goods
Rs 1 crore)

Micro Not exceeding Rs.25 lakh. Not exceeding Rs.10

lakh.

More than Rs.25 lakh but More than Rs.10 lakh

Small
does not exceed Rs.5 crore. but does not exceed
Rs.2 crore.

More than Rs.5 crore but More than Rs.2 crore

Medium
does not exceed Rs.10 crore. but does not exceed
Rs.5 crore.

Note: The investment in plant and machinery is the original cost excluding land and building and other items
specified by the Ministry of Small Scale Industries vide its notification no.

List of enterprises that are engaged in providing or rendering services

The illustrative lists of enterprises that are engaged in providing or rendering services are:
 Small road and water transport operators (original investment in vehicles up to Rs.200.00 lacs under Priority
sector)

 Retail trade (with credit limits not exceeding Rs.20.00 lakhs)

 Small business (whose original cost price of the equipment used for the purpose of business does not exceed
Rs.20.00 lakhs

 Professional and self-employed persons (whose borrowing limits do not exceed Rs.10.00 lakhs of which not
more than Rs.2.00 lakhs should be for working capital requirements except in case of professionally qualified
medical practitioners setting up of practice in semi-urban and rural areas, the borrowing limits should not
exceed Rs.15.00 lakhs with a sub-ceiling of Rs.3 lakhs for working capital requirements)
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Measures to remove difficulties faced by Small-Scale Industries

in India!
(1) Equitable Allocation of Raw Materials, Imported Components and Equipment:

The small scale industrial units should be given adequate degree of priority in the allocation pattern of
essential, but scarce, raw materials, imported components and equipment.
(2) Improvement in the Methods and Techniques of Production:
The small scale industrial units should be encouraged to replace their outmoded equipment with that
incorporating an up-to-date technology, and facilities and incentives should be provided wherever required.
Up-dating the methods and techniques of production of quality goods conforming to standards. The role of the
Government in this respect is quite significant. Standardisation of certain products should be ensured, the
quality of products should be guaranteed, and malpractices like adulteration, misrepresentation, etc., need to
be curbed drastically.
(3) Provision of Adequate Finance:
Promoter’s own capital in the small-scale industrial units is generally small and generation of internal
resources small and slow. They depend, therefore, on the external sources of finance in a substantial measure.
This factor requires, therefore, a system of integrated credit whereby the long-term as well as short-term
finance is made available in an adequate measure and at a rate of interest which these undertakings can bear.
(4) Marketing Assistance:
Marketing of their products at remunerative prices is the major problem of small-scale industrial units. There
is, therefore, a clear case for government intervention with a view to reducing the disadvantages arising out of
market imperfections. Market research, intelligence and information systems should be strengthened and the
results made available to those units.
(5) Industrial Education and Training:
With full advantages of changing technique of production, dispensation of technical knowledge, both to the
small-scale entrepreneurs as well as their workers, should form an essential element of the overall strategy.
Provision of adequate facilities for industrial education and training, therefore cannot be over-emphasised.
(6) Demarcation of Spheres of Large-Scale and Small-Scale Industrial Units:
Once the role of small-scale industries in the national economy is recognised, it becomes imperative that a
secured berth is provided to it. In this connection the guiding principle should be to clearly demarcate, as
possible, the spheres of production for these units. It may be pointed out that all the measures suggested above
should be viewed as a package and applied simultaneously.

Board For Industrial and Financial Reconstruction (BIFR)

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Process flow chart of BIFR’s working Enquiry

▼
Net worth positive through its own efforts
▼
It is in public interest to rehabilitate
▼
Preparation of techno-economic viability report
▼
Possibilities of merger or change of mgt.
▼
BIFR draws scheme of rehabilitation
▼
Consensus of parties called upon
▼
Fresh funds are released
▼
Advertisement inviting comments and objections
▼
Scheme is sanctioned by BIFR

Suggestions to make BIFR more effective:

1. One time settlement of existing dues
2. Substituting weak promoters by strong and resourceful promoters
3. Concessional interest rates where time resorted is less
4. Sale of units by BIFR instead of passing winding orders to be implemented by High Courts
5. Restriction over addition of new units unless the earlier ones are either closed after due scrutiny by
BIFR or Rehabilitated
6. Concurrence of majority of workers to be availed
7. Decentralizing the B IFR: It has found that the process followed by the BIFR was time consuming
and thus was proving costly for workers and trade unions. It has suggested decentralizing the BIRF
 4

with the creation of regional branches in the states, where the incidence of industrial sickness is quite
high.
8. Detect industrial sickness: Some critics observed that the coverage of SICA 1985 is not adequate and
some entrepreneurs are trying to turn their units. Thus government agencies should be careful in
detecting in genuine sick industrial units and to start revival process in right time.
9. Formation of the National Company Law Tribunal (NCLT): NCLT could be a good alternative to
BIFR. Once the tribunals are formed, they can replace the BIFR mechanism fully and, therefore,
provide a better avenue to deal with sick companies.
10. Possession of power: There is, therefore, a need to put the BIFR on a strong footing by increasing its
strength to the requisite level, giving it wide judicial powers and setting specific time limits for
expeditious disposal of cases.

Marketing Challenges of Small Business & Medium Enterprises

(SME)
In this article we will tackle three of the most difficult small business and medium enterprises marketing
challenges, namely:
 Finding new clients and customers

 Using engaging marketing messages that generate results

 Implementing business oriented marketing systems

1. Finding new clients and customers

The key to successfully using marketing to find new clients and customers is to recognise who your customers
are. Let us look at four points to be able to gain this insight into your customers:
1. Who are your best customers?

2. What are your target customers buying motivations?

3. What are their purchasing or buying criteria?

4. What are their purchasing or buying cycles?

A comprehensive and intimate understanding of the answers to these questions will allow you to develop your
ideal customer profiles. This knowledge allows your business to use appropriate marketing messages that are
relevant and powerful. Allowing you to focus your marketing spend on a clearly defined target market for
better marketing results.
As you progress your understanding of your potential clients and customers in your target markets, please do
not overlook your existing clients and customers. Yes, it is absolutely vital to grow your business
opportunities with new clients and customers. However your own client and customer database is a potential
gold mine when you properly segment and communicate with these existing customers. Increase your
business revenue from your own clients and customers by using the Recency-Frequency-Monetary
segmenting method and communicating with them using direct response marketing techniques.
2. Engaging marketing messages that generate results

If you and your business truly want to achieve immediate and quantifiable marketing results then use direct
response marketing offers. Do not engage in ‘feel good or hopeful’ marketing using purely branding and
image building advertising. Most small business and medium enterprises simple cannot afford the very long-
term and sustained expense in branding and image building advertising that only large corporations can truly
afford. Small business and medium enterprises must build their brands and market image with effectively and
consistent direct response marketing programs.
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Businesses achieve engaging marketing messages that drives marketing results when they are familiar with
the following factors:
 Timing of your marketing messages with the buyers purchasing cycle

 Using emotive language in your marketing messages

 Providing powerful, compelling and relevant offers

 Creating a sense of urgency in responding to your offers

 Encouraging interaction with your ‘call to action'

You will have noticed I used the term “emotive language” in your marketing messages. This is crucial
whether you are in a business to consumer (B2C) or in a business to business (B2B) situation as all your
marketing message recipients at least for the foreseeable future are human beings driven by their emotions! In
the consumer world their desires strongly influence their needs that drives their decisions to purchase your
products and/or services. In the business world your marketing messages must appeal to both their
‘professional and personal’ desires.
An extremely powerful communications method to use in the preparation of your marketing messages is to
apply the AIDA technique. It is an acronym for Attention, Interest, Desire, and Action that encourages the use
of emotive language with the appropriate marketing communication mediums.
3. Implementing business oriented marketing systems

As a business owner or manager you will be acutely aware that an efficient and effective business system
drives your profitability and allows your organisation to operate the process continually. It is getting your
marketing into such a position that is difficult for a variety of reasons. Some of these will be familiar to you:
 Inability to commit or allocate the time needed to perform

 Failure to provide adequate financial resources to achieve the effort

 Too many conflicting priorities and distractions

 Getting the business model right

 Developing the correct mix of sales and marketing strategies

 Recognising the need to test, measure, track and improve

 Implementing the required IT & communications infrastructure support

These reasons are used by many businesses as justifications for their inability to develop a workable
marketing plan and system. Unfortunately the consequence of this attitude is reflected in poor business
development results. Marketing is business development and is achievable for any business serious about
growing their business. Get that experienced and expert marketing advice to help implement your business
oriented marketing systems and secure better marketing results now and into the future for your business.

What is Idea Generation?

Idea generation is the creative process or procedure that a company uses in order to figure out solutions to
any number of difficult challenges. It involves coming up with many ideas in a group discussion, selecting the
best idea or ideas, working to create a plan to implement the idea, and then actually taking that idea and
putting it into practice. The idea can be tangible, something you can touch or see, or intangible, something
symbolic or cultural.
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How it Works

Tools and techniques for generating ideas

Idea challenge is a focused form of innovation where you raise a problem or opportunity with the hopes of
coming up with creative solutions. The point of idea challenge is to participate in ideation and generate ideas
around a pre-defined theme for a limited period of time.

The SCAMPER technique is created by Bob Eberle, and is a method used for problem-solving and creative
thinking. It’s a holistic way of applying critical thinking to modify ideas, concepts or processes that already
exist.

Opposite/reverse thinking is a technique that can help you question long-held assumptions related to your
business. It’s a useful tool to consider if you feel your team is stuck with the conventional mindset and coming
up with those “out-of-the-box ideas” seems to be difficult. With this type of thinking, you consider the exact
opposite of what’s normal. You can even think backwards to find unconventional solutions.

Brainstorm cards are a useful tool created by the Board of Innovation for coming up with dozens of new
ideas related to whatever challenge or problem you are currently working with. Brainstorm cards help you
consider external factors such as: societal trends, new technologies, and regulation in the context of your
business.

Analogy thinking is a technique for using information from one source to solve a problem in another context.
Often one solution to a problem or opportunity can be used to solve another problem.

Managing ideas: Although generating ideas is often the easy part of innovation, collecting and managing
them can be challenging without a proper tool. Because people often come up with new ideas then and there,
they should be able collect these ideas right when they arise.

What is Incentive?
The term “incentive’, generally means encouraging productivity. It is a motivational force, which
encourages an entrepreneur to take a right decision and act upon it. The objective of providing incentives is to
motivate an entrepreneur to set up a new venture in the larger interest of the nation and the society.
 7

Broadly, incentives include concessions, subsidies and bounties. Incentives may be financial or non-financial.
Non financial incentives push an entrepreneur towards decision and action. Entrepreneurs in India are offered
a number of incentives. These incentives normally aim at reducing some of the problems faced by small scale
industrialists.
Subsidy: Subsidy is a financial assistance or a sum of money provided by a government, to an industry for
public welfare or interest. It is any financial aid, grant, or contribution.
“Subsidy” means a single lump sum of money that is given by a Government to an entrepreneur to cover the
cost.

Bounty: The term “bounty” denotes a bonus or financial aid given to an industry to help it to compete with
other units established in country or in a foreign market.

Examples of Incentives
Industrial estates, industrial complexes, availability of power, concessional finance, capital investment
subsidy, transport subsidy, are few examples of incentives to solve constraints faced by entrepreneurs in small
scale sector.
Advantages of providing Incentives to Entrepreneurs

Following are the advantages of providing incentives to entrepreneurs.

1. Decentralization of economic power
Incentives encourages prospective entrepreneurs to take up industrial ventures and results in decentralization
of economic power in few hands.
2. Balanced regional development
Incentives are given to entrepreneurs establishing industries in backward areas. Hence, it results in the
dispersal of industries over India’s geographical area and contributes to regional balanced development.
3. Transformation of Technology
Incentives help in the transformation of traditional technology into modern technology. Traditional technology
is characterized by low skill; low productivity and low wages, whereas modern technology is subsequently
characterized by improved skills, high productivity, raising wages and a higher standard of living.
4. Overcomes Difficulties
The package of incentives and concessions are given to entrepreneurs for setting up units both in backward as
well as developed districts. But generally it is given for setting up units in backward area. It is provided to
offset the disadvantages prevailing in such places.
5. Generates Industrialization
Industrial policy uses incentives both to correct the market imperfections and to accelerate the process of
industrialization in the country. Regional balances can also lead to effective utilization of regional resources,
removal of disparities in income and levels of living and contribute to a more integrated society.

What is a Subsidy?
A subsidy is an incentive given by the government to individuals or businesses in the form of cash, grants, or
tax breaks that improve the supply of certain Goods and Services. With subsidies, consumers are able to
access cheaper products and commodities. Markets that have positive externalities, which are extra benefits to
society, tend to be favored in policy to provide a greater supply of that good and service.
Basically, subsidies are provided by the government to specific industries with the aim of keeping the prices
of products and services low for people to be able to afford them and also to encourage production and
consumption.
Advantages of Subsidies:
#1. Lowering prices and controlling inflation
They are especially applicable in the area of fuel prices, particularly when global crude oil prices are rising.
Many countries subsidize fuel costs in order to keep its prices from ballooning.
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#2. Preventing the long-term decline of industries

There are many industries that should be kept alive and functional such as fishing and farming. With many
new and fast-growing industries, they two might be compromised and suffer a major decline.

#3. A greater supply of goods

Governments want to increase the access of their population to Goods & Services such as Water, Food, and
Education. They, therefore, provide an incentive that could be in the form of a tax credit, or even straight up
cash. Markets that have positive externalities are usually the ones that receive such benefit.

What is Product Certification?

In the area of product certification, INAB accredits certification bodies who certify the quality of a product.
The word “product” is used in its widest sense, and includes processes and services. The certification of such
a product is a means of providing assurance that the product in question conforms to standards and/or other
normative documents.
Certification bodies providing product certification issue product certificates or licences to organisations,
which entitles them to display a mark of conformity on their product or to issue a certificate indicating the
product's conformity with specified requirements. In this way the consumer is assured that the product they
are purchasing has reached a set standard. One of the big growth areas for product certification has been in the
food area. Food quality assurance schemes such as those owned by Bord Bia and Bord Iascaigh Mhara are
now implemented by accredited certification bodies.
Product certification can offer the customer formal documentation that the product they have purchased has
been tested by qualified personnel to the applicable codes and/or standards. Those seeking certification for
their products must demonstrate that they have adequate quality control systems in place to maintain
conformity of their products with the standards.

Certification process

The process for certification of a product is generally summed up in four steps:

 Application (including testing of the product)

 Evaluation (does the test data indicate that the product meets qualification criteria)

 Decision (does a second review of the product application concur with the Evaluation)

 Surveillance (does the product in the marketplace continue to meet qualification criteria)

Certification marks and listings of certified products

An active certification listing must minimally include indication of[1] the following information:
 The specific product or type of product certified

 The qualification standard that the product is judged to meet

 The date of certification (and if applicable, its expiration)

Startup company
A startup or start up is a company initiated by individual founders or entrepreneurs to search for a repeatable
and scalable business model. More specifically, a startup is a newly emerged business venture that aims to
develop a viable business model to meet a marketplace need or problem. Founders design startups to
effectively develop and validate a scalable business model.[1][2] Hence, the concepts of startups and
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entrepreneurship are similar. However, entrepreneurship refers all new businesses, including self-employment
and businesses that never intend to grow big or become registered, while startups refer to new businesses that
intend to grow beyond the solo founder, have employees, and intend to grow large.[citation needed] Start ups face
high uncertainty[3] and do have high rates of failure, but the minority that go on to be successful companies
have the potential to become large and influential.[4] Some startups become unicorns, i.e. privately held startup
companies valued at over $1 billion.

Features of startup company:

1. A startup is… focused on growth.
One feature that most people seem to agree on for the definition of a startup is a focus on growth. Small
businesses may be happy staying small businesses forever, but a startup doesn’t want to stay small.
2. A startup is… solving a problem.
Sometimes the best way to figure out a simple definition of a big concept is to think about how you’d explain
it to a child. Jochem Wijnands, the Founder of a startup that was acquired by Apple in 2014 and TRVL.com
explains the definition of startup this way to his eight-year-old son:

“A startup is a modern version of an inventor. It experiences a problem and then tries to solve it with
ingenuity. A successful start up typically wants to solve a problem and make the world a better place.”

3. A startup is… a job you can’t live without.

A job is often just a job, when you’re working for someone else. But when you’re running a startup? It’s
much, much more. “In my experience, a startup is a job you cannot quit, that does not pay, and which you
cannot live without,”
4. A startup is… more questions than answers.
One of the hallmarks of a startup is the willingness to push boundaries and conduct lots of experiments. Xiao
Wang, the Co-Founder and CEO of Boundless, believes that those questions and experiments are essential if a
company is going to claim that startup definition.
“A startup is a company that has more questions about its business model and sustainability than answers,”
Xiao says.
5. A startup is… filling a gap in the market.
Nate Masterson, the Marketing Director of Maple Holistics, thinks the definition of a startup starts with the
goal of fill a gap in the market.
“Technically speaking, a startup is defined as any newly formed and fast-growing company or business that
aims to fulfill the needs or a gap in a relevant marketplace,” Nate says.

6. A startup is… starting from scratch.

Already making money from the get-go? Nailed your product-market fit? Then you’re not a startup, at least
according to Geoff Roberts, Co-Founder of Outseta.
“A startup is any business venture that’s starting from scratch and trying to build something of value — when
I say ‘scratch’ in a for-profit setting, I mean that the business has no revenue,” Geoff says.

Focus group
A focus group is a small, but demographically diverse group of people and whose reactions are studied
especially in market research or political analysis in guided or open discussions about a new product or
something else to determine the reactions that can be expected from a larger population.[1][2][3] It is a form of
qualitative research consisting of interviews in which a group of people are asked about their perceptions,
opinions, beliefs, and attitudes towards a product, service, concept, advertisement, idea, or packaging.
Questions are asked in an interactive group setting where participants are free to talk with other group
members. During this process, the researcher either takes notes or records the vital points he or she is getting
 10

from the group. Researchers should select members of the focus group carefully for effective and authoritative
responses.

Focus Group Format

During the focus group, the moderator takes participants through three different types of questions designed to
gather as much information from them as possible. They include:
1. Engagement questions. These are easy questions posed early on to introduce the participants to each other, to
make them more at ease, and to familiarize them with the topic to be discussed, whether it’s reacting to a new
ad campaign for coffee or thinking about self-driving cars.

2. Exploration questions. Once participants have begun to relax and open up in the group, the moderator begins
to ask deeper, probing questions about the topic and how the participants feel about it. These might include,
“What makes you say that?” “and “What would be a better solution?”

3. Exit questions. After the moderator is confident the group has shared all that it can, wrap-up questions are
posed to confirm that everything has been said. These might include, “Is there anything I haven’t asked that I
should have?”

Pros
Focus groups are one type of market research method that are popular because they:
1. Are generally lower cost than other methods

2. Can generate results very quickly

3. Are easy to conduct

4. Can supplement verbal responses with body language and other non-verbal cues

5. Information gathered is in respondents’ own words, which is more accurate

6. Technique is flexible and can be adjusted based on group behavior

Cons
Because a focus group involves multiple participants, the downsides of using this technique are generally
related to the interactions between participants:
1. Participants can be influenced by others in the group

2. Domineering participants can skew the results

3. Results from a small group can’t always be generalized to a larger population

Types of Focus Groups

Within the general category of focus groups are more specific types of groups that are designed for different
scenarios. Some of these include:
1. Mini focus groups. Fewer participants are used, bringing the number down from 6-12 to four or five
consumers.

2. Online focus groups. Consumers log into a website using video chat and participate remotely.

3. Two-way focus group. Focus groups are often conducted behind one-way glass, where researchers can take
note of what’s going on. In these types of groups, the whole group watches another and comments on what
they observe and hear.
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4. Dual moderator focus group. Instead of one moderator in the room, there are two – one to facilitate the
discussion and the other to take notes.

5. Client participant focus group. When a representative of the company or product being studied watches or
participates in the discussion.

Knowledge Management (KM):

KM may be defined as follows:
Knowledge management is a process of acquiring, generating, accumulating and using knowledge for the
benefit of the organisation to enable it to gain a competitive edge for survival, growth and prosperity in a
globalized competitive economy.

Point of comment:
According to some management experts, notably Peter F. Drucker, KM is a bad term; in as much as
knowledge cannot be managed.
Rather, KM requires conditions for the emergence of a learning organisation; which is necessary for
generation, sharing and use of knowledge residing in the minds of people.

Features of KM:

(i) KM is a systematic process; consisting of standardized procedures to collect, store, distribute and use
knowledge. The essence of KM is to get right knowledge to right people, at the right time.

(ii) Knowledge is of two types – explicit and implicit. Explicit knowledge is visible information available
in literature, reports, patents, technical specifications, communication with customers, suppliers,
competitors etc. It can be embedded in rules, systems, policies and procedures etc. of the organisation.

Tacit or implicit knowledge is personal knowledge residing in the minds of people as a result of their
personal beliefs, values, perspectives and experience. There is a need for a learning organisation for
enhancement, sharing and utilisation of tacit knowledge.

(iii) KM is a continuous process; as the world economy is dynamic and full of challenges. It requires
constant creation of new skills and capabilities and improvement of existing ones.

(iv) KM requires whole-hearted support of top management, to provide cultural and technical foundation
for the origination and implementation of KM practices.

(v) The objective of KM is improvement in organisational performance; to enable the organisation

acquire, sharpen and utilize its competitive edge for survival and growth in the global economy of today.

Significance of KM:
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(i) Building and Sharpening Competitive Edge:

KM enables a corporation to build and sharpen its competitive edge, for survival and growth in the
competitive globalized economy. In fact, KM aided by IT tools enables a corporation to design and implement
most appropriate corporate strategies.
(ii) Betterment of Human Relations:

KM is basically built on the knowledge generated, shared and utilized through a learning organisation. There
is no doubt that learning organisation provides the foundation on which the building of KM could be built. A
learning organisation through facilitating interaction among people of the organisation, leads to betterment of
human relations; which is a very big permanent asset an organisation can boast of to possess.
(iii) Improvement in Organisational Efficiency:
KM provides knowledge which can be embedded in organisational processes. It makes knowledge available
for decision-making purposes. Thus it helps to improve organisational efficiency, resulting in reduced costs
and increased profits, for the organisation.
(iv) Enhancement of Human Capital Capabilities:
KM-its concept and practices – motivate people to enhance their intellectual capabilities, resulting in new
skills, improvement of existing skills etc. Thus not only does KM enhance the intellectual elements of people;
but also indirectly prevents depreciation of human capital.
(v) Enhancement of Enterprise Goodwill:
Initiation and practices of KM help an enterprise enhance its goodwill in the global market; enabling it to
acquire more success and prosperity.

Production System
1. Meaning of production
Production can be explained as an act of either manufacturing or mining or growing of goods (commodities)
generally in bulk for trade.
Production is a method employed for making or providing essential goods and services for consumers. It is a
process that puts intangible inputs like ideas, creativity, research, knowledge, wisdom, etc. in use or action. It
is a way that transforms (convert) tangible inputs like raw-materials, semi-finished goods and unassembled
goods into finished goods or commodities.

2. Meaning of system
System is an arrangement or assembly of inter-dependent processes (activities) that are based on some logic
and function. It operates as a whole and is designed (build) with an intension to achieve (fulfill) some
objective or do some work. Huge systems are often a collection (assembly) of smaller sub-systems.

3. Definition of production system : Production system may be defined as,

"The methods, procedure or arrangement which includes all functions required to accumulate (gather) the inputs,
process or reprocess the inputs, and deliver the marketable output (goods)."
Production system utilizes materials, funds, infrastructure, and labour to produce the required output in form
of goods.

4. Meaning of production system

Production system consists of three main components viz., Inputs, Conversion Process and Output.
 13

1. Inputs include raw-materials, machines, man-hours, components or parts, drawing, instructions and other
paper works.

2. Conversion process includes operations (actual production process). Operations may be either manual or
mechanical or chemical. Operations convert inputs into output. Conversion process also includes supporting
activities, which help the process of conversion. The supporting activities include; production planning and
control, purchase of raw-materials, receipt, storage and issue of materials, inspection of parts and work-in-
progress, testing of products, quality control, warehousing of finished products, etc.

3. Output includes finished products, finished goods (parts), and services.

The three components of a production system are depicted in this diagram.

Hence, we can say that, production system is a union or combination of its three main components viz.,
Inputs, Conversion Process, and Output. In short, everything which is done to produce goods and services or
to achieve the production objective is called production system.
5. Examples
The examples of a production system are as follows:
1. Tangible goods : Consider an example of a manufacturing industry like a Sugar Industry. Here, sugarcane is first
used as an input, then the juice of sugarcane is processed through a conversion process, finally to get an
output known as a refined sugar (used for mass consumption).

2. Intangible goods : Consider an example from a service industry that of a software-development firm or
company. Here, initially, written program codes are used as an inputs. These codes are then integrated in some
database and are provided with a user-friendly interface through a conversion process. Finally, an output is
made available in form of an executable application program.

Features of Production System

Some of the main features of production system are:
1. Simplicity: The structure of each sentence in a production system is unique and uniform as they use “IF-THEN”
structure. This structure provides simpli city in knowledge representation. This feature of production system
improves the readability of production rules.

2. Modularity: This means production rule code the knowledge available in discrete pieces. Information can be
treated as a collection of independent facts which may be added or deleted from the system with essentially no
deletetious side effects.

3. Modifiability: This means the facility of modifying rules. It allows the development of production rules in a
skeletal form first and then it is accurate to suit a specific application.

4. Knowledge intensive: The knowledge base of production system stores pure knowledge. This part does not
contain any type of control or programming information. Each production rule is normally written as an English
sentence; the problem of semantics is solved by the very structure of the representation.
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Disadvantages of production system

1. Opacity: This problem is generated by the combination of production rules. The opacity is generated because of
less prioritization of rules. More priority to a rule has the less opacity.

2. Inefficiency: During execution of a program several rules may active. A well devised control strategy reduces this
problem. As the rules of the production system are large in number and they are hardly written in hierarchical
manner, it requires some forms of complex search through all the production rules for each cycle of control
program.
3. Absence of learning: Rule based production systems do not store the result of the problem for future use. Hence, it
does not exhibit any type of learning capabilities. So for each time for a particular problem, some new solutions
may come.

4. Conflict resolution: The rules in a production system should not have any type of conflict operations. When a new
rule is added to a database, it should ensure that it does not have any conflicts with the existing rules.

Turnaround Strategy
Definition: The Turnaround Strategy is a retrenchment strategy followed by an organization when it feels
that the decision made earlier is wrong and needs to be undone before it damages the profitability of the
company.
Simply, turnaround strategy is backing out or retreating from the decision wrongly made earlier and
transforming from a loss making company to a profit making company.
Now the question arises, when the firm should adopt the turnaround strategy? Following are certain indicators
which make it mandatory for a firm to adopt this strategy for its survival. These are:
 Continuous losses
 Poor management

 Wrong corporate strategies

 Persistent negative cash flows

 High employee attrition rate

 Poor quality of functional management

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 Declining market share

 Uncompetitive products and services

Also, the need for a turnaround strategy arises because of the changes in the external environment Viz, change
in the government policies, saturated demand for the product, a threat from the substitute products, changes in
the tastes and preferences of the customers, etc.

Definition of turnaround:
According to Dictionary of Marketing (edited by P. H. Collin), Turnaround means ‘making a company
profitable again’.
There are three phase in turnaround management:
1. Diagnosis of the problem faced by the company.
2. Choosing the appropriate turnaround strategy.
3. Implementation of the strategy.

Features of Turnaround:
1. Turnaround involves restructuring. It involves bringing back the sick industrial unit to its original position.
Turnaround is aimed at reversing the trend of declining performance of the business firm.
2. Turnaround is applicable to sick industrial units who are passing through economic and financial distress.
3. Turnaround is a long-term strategy. A sick unit cannot be revived over night. Proper planning and
implementation to convert a loss-making unit into a profitable one. It is a lengthy and a time consuming
process.
4. A sick unit is not in a position to make optimum utilisation of the resources. Turnaround involves
reorganizing of physical, financial and human resources by making optimum utilisation of the available
resources.
5. Turnaround require co-operation of all the sections of the society such as shareholders, financial
institutions, suppliers, employees, customers etc.
6. Capital is the lifeblood of every business. Turnaround requires money. Finance is required to implement the
plans of restructuring. Sufficient finance is required to undertake further production and remove deficiencies
of the business.
7. Turnaround is undertaken by both internal experts and outside consultants. A proper skill is required to
undertake turnaround strategy.