The supply chain refers to full range of value-added activities which are required to bring a product from its conception, design, sourcing raw materials, production, marketing, distribution and support to final consumer. Supply chain management is the collaborative effort of multiple channel members to design, implement, and manage seamless value-added processes to meet the real needs of the end customer (Burt et al., 2004).

Supply chains become global, when their component activities are geographically dispersed across borders to multiple country locations. Global supply chains have emerged as one of the most important factors shaping international trade today. The global economy is increasingly structured around global supply chains that account for a rising share of international trade, global GDP and employment. It link firms, workers and consumers around the world and often provides a stepping stone for firms and workers in developing countries to integrate into the global economy. Indian economy too is passing through the transitional period .i.e. from an isolated and protective environment to integrating itself into the global economy. In India, this acceleration of global supply chain process has made global companies to increasingly outsource non-core activities to MSMEs. This acceleration has put these MSMEs under pressure to improve their competitiveness. Low cost firms have entered Indian market which in turn has intensified competition for MSMEs. For this reason, MSMEs can no longer afford to remain isolated or allow redundancies in management, technology and marketing techniques. Soni and Kodali (2011) explored in their study that MSMEs in manufacturing industry are not able to fully participate in global supply chain due to presence of many hurdles like use of traditional practices, lack of finance etc. Sahay and Gupta (2002) also confirmed the growing importance of supply chain management for Indian MSMEs (Sahay et al., 2001).SMEs in global supply chain are required to meet many stringent standards, certifications and conformity requirements (ESCAP, 2007). SMEs faces problems like higher transaction costs and lack of research and development expenditure which makes them unable to compete against large enterprises (Harvie and Charoenrat, 2013). Small and medium enterprises in developing countries of Asia have not well utilised business and trade opportunities generated by the emerging global supply chains under the accelerated trade and investment liberalization (Masato Abe, 2015). Therefore, a need is felt to explore potential causes, which restrict MSMEs’ participation in global supply chains. Also, even though India has a high density of MSMEs, who have been consistently contributing to the growth of the Indian economy, there is a need to give extra impetus to Indian MSMEs to effectively integrate them with global companies and thus contribute towards economic growth in India. The present research investigates the challenges in the process of MSMEs integration in global supply chains and accordingly the policy initiatives which could be taken to create more market opportunities for them. This paper has been divided into 9 sections. Section 2 reviews the important studies relevant to the present research. Section 3 and 4 respectively define the scope and objectives of the study. Section 5 describes the methodology used to carry out the present study. Section 6 deals with the results and discussion part of the research. Sections 7, 8 and 9 respectively discuss the conclusion, managerial implications, and limitations of the study.

2. LITERATURE REVIEW:

For better understanding and to draw useful inferences, the important studies reviewed have been presented under the following heads:

Micro, Small and Medium Enterprises (MSMEs)

Worldwide, the micro, small and medium enterprises (MSMEs) have played a leading role in promoting equitable regional development and economic growth. Globally, MSMEs are the largest employment generators. In all industrialised countries, small and medium enterprises (SMEs) contribute substantially to the total industrial output.MSMEs employ at least 45 percent of the workforce in half of the high income economies (FICCI, 2013). Similar results have been observed in India, where MSMEs have contributed beyond doubt to the Indian economy by generating employment opportunities, promoting exports and innovations, and by developing entrepreneurial skills. In the present business scenario, the MSMEs have been accepted as the engine of industrial growth as they provide employment to around 805 lakh people and contribute 37.33 percent towards total manufacturing output of the country (MSME Annual Report, 2016). With a contribution of 40 percent to the country's industrial output and 35 percent to direct exports, the MSME sector has achieved substantial landmarks for the industrial development of India (FICCI, 2013).This sector has emerged as a highly vibrant and dynamic sector of the Indian economy and enabled our country to achieve industrial growth and development (Vasu, 2014). MSMEs helped in industrialisation of rural and backward areas. They also played a crucial role in providing large employment opportunities, reducing regional imbalances, assuring more equitable distribution of national income and wealth. Since MSMEs contribute enormously to the socio-economic development of the country thus they can be boon and a hope for Indian economy in near future (Ali, 2014). In accordance with the MSME Act, 2006 they are classified into manufacturing and service segments. The present study relates to firms operating in manufacturing sector. In manufacturing sector a micro enterprise is an enterprise where the investment in equipment and machinery does not exceed Rs. 25 lakh; a small enterprise is an enterprise where the investment in equipment and machinery is more than Rs.25 lakh but does not exceed Rs. 5 crore; and a medium enterprise is an enterprise where this investment is more than Rs. 5 crore but does not exceed Rs. 10 crore.

Internationalisation of MSMEs

Today, international expansion has become vital for MSMEs because it is not individual enterprises that compete against each other, but global supply chains that are mostly competing at a global level. There is a direct link between internationalisation of MSMEs and their performance. The process of internationalisation has presented new market opportunities for enterprises, in particular to MSMEs and provided impetus for the expansion of value chains (OECD, 1997). The process of globalisation has made MNCs to increasingly outsource non-core activities to MSMEs around the world which present huge opportunities to MSMEs. Participation in Global supply chains can give MSMEs the opportunity to increase productivity, expand their markets, and attain financial stability. International activities enhance competitiveness, reinforce growth, and support the long term sustainability of MSMEs (FICCI, 2013). Regional economic integration and globalisation have influenced the development of MSMEs (Harvie and Charoenrat, 2013).

Global Supply Chains

Global supply chains are a major driving force towards globalisation. The importance of foreign inputs and fragmentation of production across global chains is not new. For decades, parts of machinery and equipments have been imported by developing countries from countries with more advanced technology. However, these imports were generally for the assembly of locally sold goods. The rate of technology transfer and flows of know-how were less intense because the goods produced were not part of a global network. There were very few opportunities to buy and sell in global markets. However, now the firms in developing countries have become full-fledged participants in international production due to the development of global supply chains. Firms in developing countries no longer are just importing parts for local sales; now they are absorbing valuable foreign technology and know-how and exporting goods, components, and services which are used worldwide (Taglioniand Winkler, 2016). Global supply chain can be defined as a chain of interrelated production activities divided among many firms situated at different geographical locations to bring out a product or a service from conception to production and then delivery to final consumers (UNCTAD, 2006). Supply chain management are the functions within and outside a company that enable the value chain to make products and provide services to the customer (Cox et al., 1995). Scholars have discussed about four types of global supply chains (Gereffi, Humphrey, and Sturgeon, 2005; ESCAP, 2007) viz. international supply markets, where based on arm’s length relationships transactions are made between buyers and sellers across borders; producer-driven networks, where the lead firm such as an automobile plays a central role in exercising control over the international network of suppliers, subsidiaries, and affiliates; buyer-driven networks, where large brand manufacturers, retailers, and marketers source from the decentralised network of suppliers across borders; and integrated firms, which produce all major goods and products in-house, characterised by vertical integration and strong managerial control. The activities along global supply chains may involve concept, design, production, R & D, marketing, retailing and distribution. Countries that understand the opportunities that global supply chains offer and adopt the appropriate policies to mitigate the risks associated with them are able to boost employment and productivity in their agriculture, manufacturing, and services production. Developing countries can now industrialise by joining global supply chains without the need to build their own value chain from scratch. Firms in developing countries can focus on specific tasks in the value chain rather than producing the entire product, thereby lowering the costs for industrial development.

Performance of MSMEs in pre and post reform period

It has been observed that MSME sector was hard hit by the Government’s recourse to liberalisation policy in 1991. The MSME sector was vulnerable because it had neither the size nor the advantage of technology. Small scale industries observed deterioration in their performance after 1991. Table 1, shows the deterioration in the performance of small scale industries after 1991.

Table 1: Performance of small scale sector

	Employment (CAGR)	No. of Units (CAGR)	Gross Output (CAGR)
1977-1992	5.45	10	91.06
1992-2002	5.33	8.97	16.81
2002-03	5.85	4.06	8.67
2003-04	4.40	4.07	9.64
2004-05	4.44	4.07	10.87
2005-06	4.27	4.07	12.32

Source: 1 and 2 census reports of SSI and Economic survey reports

The number of units in the SSI sector over the year is the criteria to decide the growth of SSI in the economy. Though the number of units were increasing in absolute figures, the compound annual growth rate has decreased (Table 1) from 10 % in 1977-1922 .i.e. pre-reform periods to 8.97 % after 1991 .i.e. post-reform periods from 1992-2002. This has further decreased during 2002-2006 period (Table 1). Employment growth: employment generation has always been one of the main objectives of the policies aimed at economic development and growth of the nation. The compound annual growth rate has decreased (Table 1) from 5.45 per cent in pre-reform period to 5.33 per cent in post reforms period, which is quite disheartening. Gross Output: the compound annual growth rate has decreased from 91.06 per cent in pre-reform period to 16.81 per cent in post reforms period (Table 1). This further has slowed down during the period 2002-06 (Table 1).Thus in the post reform period SSI sector has faced numerous challenges and its performance deteriorated over time.

MSMEs and supply chains

Increasingly, SMEs play key role in supply chain management as they participate in value creating activities. They supply raw materials, produce products, and distribute finished goods to customers. Through their efforts, SMEs have significant impact on supply chain processes (Huin et al., 2002). To face global competition successfully, SMEs has to break isolation of their suppliers and other entities in the supply chain. The strategic supply chain continues to be adopted by organisations as the medium for creating and sustaining a competitive advantage (Ireland and Webb, 2007). There are various benefits of integrating into global supply chain for MSMEs like increased inventory turnover, increased revenue, cost reduction across the chain, decreased order cycle times, and greater product availability (Attaran, 2004; Daugherty et al., 2005;Stank et al., 1999)

Auto-components industry

In 1953, the Indian Government with the principal aim of import substitution decided to develop its own manufacturing base which led to the development of auto-component industry. However, it was in 1980s when Maruti Udyog Ltd. entered the auto-component industry which led to a paradigm shift in this industry. The auto-component industry experienced climbing of exports after this venture. This growth in auto-component industry was enhanced by the introduction of industrial policy of 1991, which focused on promotion of exports, abolishment of licensing requirements, and liberalisation of the economy. This spurred the entry of new players into the auto-component industry. Now the auto-component industry has become one of the sectors of high economic importance. The Indian auto component industry is one of the fastest growing industries in the country and produces a comprehensive range of components demanded by the auto-mobile segment, which include drive transmission and steering parts, engine parts, suspension and braking parts, electrical parts, equipment and other parts, etc. The industry caters to some of the big names in the global automobile industry and has a distinct global competitive advantage in terms of cost and quality.

Auto-component clusters

The auto-components industry of India is present in three major regions. First, western region which include Mumbai, Pune, Nashik, and Aurangabad, second, southern region which include Chennai, Bangalore, and Hosur, and third, northern region which include Delhi, and Gurgaon. In addition to this, the eastern region which include Jamshedpur and Kolkata also consist of many firms involved in auto-components manufacturing. Due to the presence of large number of micro, small, and medium enterprises and unorganised units, the auto components industry in India is present in the form of clusters. The clusters have few large firms which act as centres of growth while the small firms which act as suppliers have formed their bases around these large firms. Major auto component clusters of India are Chennai Auto Components, Pune Auto Components, Gurgaon Auto Components, Jamshedpur Auto Components and Meerut Auto Components (Cluster Observatory of India, 2016). Table 2 describes these major auto-components clusters.

Table 2: Major auto-components clusters in India

Name	State	No. Of firms	No. Of workers
Chennai Auto Components Cluster	Tamil Nadu	3000	NA
Pune Auto ComponentsCluster	Maharashtra	6000	47000
Gurgaon Auto ComponentsCluster	Haryana	5000	260000
Jamshedpur Auto Components cluster	Jharkhand	506	25000

Source: Cluster Observatory of India

3. NEED AND SCOPE OF THE STUDY:

Majority of micro, small and medium enterprises are in the nascent stage of entering into global supply chainprocess and face many challenges that need to be catered to. Equally important is the participation of the government to formulate initiatives to encourage this integration process. This paper examines these two issues in the auto-component cluster.

The auto-component industry occupies a prominent place in India’s industrial development which is mainly due to its deep forward and backward linkages with many key segments of the economy. It is capable of being the driver of economic growth. It is one of the largest in the world with an annual production of 21.48 million vehicles in 2013–14 (IBEF, 2015).The automobile industry accounts for 22 percent of the country's manufacturing gross domestic product (IBEF, 2015). The automobile industry has been developed in a cluster form and Gurgaon auto-components cluster of Haryana is one of them (Mittal, Aggarwal, and Rawat, 2015). The Gurgaon auto-components cluster has been chosen as testing ground and the firms operating in this cluster as sampling frame for the proposed framework. This cluster around the National Capital Region (NCR) of Delhi originated with Maruti establishing its base in Gurgaon. The reasons for selecting this specific cluster stemmed from the fact that the automobile industry is the biggest industry in the state of Haryana, which ranks first in India in the production of passenger cars, motorcycles and tractors. Several market leaders like Hero Honda, Maruti Suzuki, Yamaha, Escorts and some leading suppliers like Sona Koyo, Asahi Glass, Krishna Maruti, Jai Bharat Maruti (JBM), Omaxe and Bharat Seats are present in the state (Mittal, Aggarwal, and Rawat, 2015).

4. RESEARCH OBJECTIVES:

The present study has two objectives:

i. To identify the critical challenges which micro, small and medium enterprises faces while integrating into the global supply chain network.

ii. Recommend steps to strengthen the involvement of MSMEs in the global supply chain process.

5. METHODOLOGY:

The present study utilises a descriptive research design through the use of a self-administered questionnaire. A survey-based methodology has been used to collect the information from organisations after gathering the information on the challenges faced by MSMEs from the literature. The Gurgaon auto-component cluster has been selected for the study. Extensive visits were made to MSMEs in Gurgaon auto component cluster to collect first hand information. The final questionnaire has been framed on the basis of information gathered by interaction with experts from academic institutions. The questionnaire contained two sections. Section A, deals with the challenges faced by MSMEs while integrating into Global supply chain and section B focuses on the strategies that policy makers should adopt to promote MSMEs participation in global supply chain process. In this study, professionals who are directly and indirectly related with MSMEs were asked to rate the challenges and strategy related questions on a five-point Likert scale (1–strongly disagree, 5 – Strongly agree). The professionals chosen were engineers, managers and owners of MSMEs and those who have worked in this cluster. Finally the responses obtained from 50 professionals have been retained for the purpose of analysis for this study. Statistical techniques like ANOVA and Post Hoc Tukey HSD have been used to find out significant difference which exist between the ratings of each challenge among MSMEs.

6. RESULTS AND DISCUSSION:

A) Reliability and validity analysis

In this study, 27 questions have been generated from the literature. These 27 questions were subjected to pre-test involving experts. During pre-test experts expressed their opinion with regard to appropriateness of the questions and suggested changes to improve the wording of the questionnaire. The feedback received from the experts was used to refine the questionnaire.

Reliability: The reliability refers to consistency of score at different time periods or accuracy of the measurement/ scale. The Cronbach’s alpha value is 0.657, suggesting that questionnaire has good reliability.

Content validity: If there is general agreement among researchers that the instrument has measurement items that cover all aspects of variables being measured then that measure has content validity. It is not evaluated numerically rather it is subjectively judged. In this study, the selection of variables is based on both an exhaustive review of literature and the pre-test, which indicated that the content of each factor is well represented by the variables.

B) Challenges faced by micro, small and medium enterprises

Global supply chain has changed the competitive environment for the MSMEs in auto component sector drastically. To be successful, these enterprises have to compete not only against domestic competitors but also against the best companies in the world. For the purpose of determining the ranking of challenges faced by MSMEs mean values of challenges rated by respondents on a five-point Likert scale (1 – strongly disagree, 5 – Strongly agree) has been carried out. Table 3 shows the ranking of challenges faced by MSMEs.

Statistical tools of ANOVA and post hoc Tukey HSD have been used to observe if significant difference exist between the ratings of the major challenges discussed above which are faced by MSMEs. Table 4 gives the summary of all the ANOVA tables and Post Hoc Tukey HSD tables for all major challenges of MSMEs in Gurgaon auto component cluster. This table suggests that there is a difference between the major problems faced by micro, small and medium enterprises. This has further been explained in Table 5.

Table 4: Summary of results of ANOVA and Post Hoc Tukey HSD tests

Major challenges faced	Difference in rating between MSMEs (ANOVA table)	Difference in rating between micro and small enterprises (Tukey HSD)	Difference in rating between micro and medium enterprises (Tukey HSD)	Difference in rating between small and medium enterprises (Tukey HSD)
High imports	Yes	Insignificant	Significant	Significant
Lack of trust when associating with MNC	Yes	Insignificant	Significant	Significant
Low scale of operations	Yes	Significant	Significant	Significant
Weak management and less training	Yes	Significant	Significant	Significant
Hindrance caused by government interference	Yes	Insignificant	Significant	Significant

Table 5: Summary of results of Post Hoc Tukey HSD test

Challenge	Mean value			Mean Difference			Conclusion
Challenge	Micro	Small	Medium	Micro - Small	Micro –Medium	Small-Medium
High Imports	4.62	4.48	3.06	.14	1.56	1.42	High imports isa major challenge for micro and small enterprises.
Lack of trust when associating with MNCs	4.66	4.60	2.62	.06	2.04	1.98	Lack of trust towards MNCs is a major challenge for micro and small enterprises.
Low scale of operations	4.59	4.34	2.66	.25	1.93	1.68	For micro and small enterprises their low scale of operations is a major challenge, for medium it is not so.
Weak management and less training	2.66	3.83	4.46	-1.17	-1.80	-0.63	Weak management is a challenge for medium enterprises and not for micro and small enterprises implying that as scale of operations increases so increases the management related problems.
Hindrance caused by government interference	3.96	3.81	4.57	0.15	-0.61	-0.76	Governmentinterference isa major hindering factor for all enterprises.

To summarise, the important strategies which could be used to promote integration of MSMEs in the global supply chain include;

i. Raising finances can provide the trigger for MSMEs to get integrated into the Global supply chain process and take benefits from its integration.

ii. The government should facilitate ease of doing business through proper tax structure for MSMEs. Strict multiple compliances and regulatory hindrances are one of the key challenges being faced by them currently. They must be eased out.

iii. Greater impetus needs to be put on RandD and innovations. This will enable MSMEs to offer greater value addition to the global supply chain and derive maximum benefits from Global value chain.

iv. Conduct entrepreneurial training programs for training MSMEs managers and owners on global standards and educate them on how to effectively target Global supply chains.

7. CONCLUSION:

The present research had two objectives viz. first, to identify the challenges being faced by MSMEs in their integration into the global supply chains; second to explore strategies suitable for MSMEs to integrate into the global supply chain process. This study has been carried out in the context of auto components firms operating in Gurgoan cluster. The questionnaire to capture these two dimensions of the research has been developed by following the appropriate process and was administered on 50 professionals who have been associated with firms in Gurgaon auto-component cluster. ANOVA and Post Hoc Tukey HSD statistical techniques have been used to further process the data and draw useful conclusions related to the present research. On challenges front, the research shows that challenges being faced by micro and small enterprise are similar in nature but are different from medium enterprises. The major problems faced by micro and small enterprises in their integration into GVC include; lack of trust when associating with MNCs, high imports, low scale of operations, low degree of control due to presence of major players, hindrance caused by government interference, and inability to meet standards or specifications for products. The problems faced by medium enterprises are found to include the following; hindrance caused by government interference, weak management and less training, low degree of control due to presence of major players, inability to meet standards or specifications for products, and lack of access to needed technology. On account of these challenges, the MSMEs in general face lot of hurdles while integrating in the global supply chain process. These challenges are much harsher for micro and small enterprises and are observed to be less for medium enterprises on account of their size.

The linkage between Global value chain and MSMEs performance is observed to be direct. Therefore, the need is to provide incentives to MSMEs and remove hurdles they face in the process of their integration with global supply chains for an all-round growth. The strategies to increase MSMEs participation in global supply chain include; provisions for easy access to raise funds, increase in ease of doing business and efforts towards promotion of RandD, innovations and entrepreneurial training programs to effectively integrate into global supply chains.

8. MANAGERIAL IMPLICATIONS:

The findings of the study have important managerial implications. First, the study has diagnosed the challenges which MSMEs faces in the process of their integration in global supply chain. It also point out the benefits which firms can reap while being a part of global supply chains and the strategies which firms can follow for their integration. The study clearly brings forth the importance of training and development programs to educate the managerial cadre on different aspects of GVC and thus gain competitive advantage. These training programs shall enhance the capability of the managerial cadre and thus decision making process in the firms, which is essential to take advantage of the forces of competition and globalisation.

9. LIMITATIONS OF THE STUDY:

The present study has been carried out on a small sample from auto component cluster of Gurgaon, therefore the findings of the study cannot be generalised for MSMEs in other clusters like textiles, leather, footwear, and electronics. To make the inferences of the study applicable to these sectors there is a need to carry out the study encompassing these sectors and on a larger sample size. However these limitations does not undermine the importance of the findings of this study as the present study has been carried out by following a rigorous research methodology.

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Received on 20.11.2016 Modified on 16.12.2016

Asian J. Management; 2017; 8(1):59-67.

DOI: 10.5958/2321-5763.2017.00009.9

Challenge	Mirco	Small	Medium
Lack of trust when associating with a MNC	Rank 1	Rank 1	Rank 13
High imports	Rank 2	Rank 2	Rank 6
Low scale of operations	Rank 3	Rank 3	Rank 12
Low degree of control due to presence of major players	Rank 4	Rank 5	Rank 3
Inability to meet standards or specifications for products	Rank 6	Rank 4	Rank 4
Lack of access to needed technology	Rank 7	Rank 6	Rank 5
Hindrance caused by government interference	Rank 5	Rank 8	Rank 1
Inadequate local institutional support like electricity and water supply	Rank 10	Rank 11	Rank 9
Less awareness of opportunities and challenges derived from various trade agreements	Rank 12	Rank 12	Rank 11
Inadequate business networks with foreign companies	Rank 15	Rank 15	Rank 15
Intense competition with existing players in the market	Rank 11	Rank 13	Rank 10
Lack of necessary manpower and financial resources	Rank 14	Rank 14	Rank 14
poor marketing capability	Rank 8	Rank 9	Rank 7
weak management and less training	Rank 13	Rank 7	Rank 2
higher transaction cost relative to large enterprises	Rank 9	Rank 10	Rank 8