Micro, Small and Medium Enterprises (MSMEs) can improve their revenues and boost their competitive advantage by diversifying across products, customers and geographies, according to a CRISIL study.
The study found that average sales of MSMEs with a diversified product/service, customer and geography base grew by 18 per cent in 2013-14, far higher than the 10 percent growth chalked up by players with limited diversification.
CRISIL believes that diversification enables an MSME to have a stable revenue stream and, therefore, heightens its competitive advantage vis-à-vis industry peers. The CRISIL analysis involved about 13,000 MSMEs rated on the basis of their 2013-14 (financial year April 1-March 31) financials.
The study revealed that 60 per cent of MSMEs with a diversified profile had a longer track record (more than 10 years) and were backed by their promoters’ extensive experience, compared with only 45 per cent for MSMEs with a non-diversified profile.
Thus, track record and promoters’ experience are key factors that enable MSMEs to diversify and, thereby, demonstrate their ability to achieve high scalability and maintain a healthy growth trajectory.
Source: Business Standard
