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SMEs have always represented the model of socio-economic policies of Government of India which emphasise judicious use of foreign exchange for import of capital goods and inputs; labour intensive mode of production; employment generation; non-concentration of diffusion of economic power in the hands of few (as in the case of big houses); discouraging monopolistic practices of production and marketing; and finally effective contribution to foreign exchange earning of the nation with low import-intensive operations. SMEs are established in almost all major sectors like food processing, agricultural inputs, chemicals and pharmaceuticals, engineering, electrical goods, electronics, electro-medical equipment, textiles and garments, leather and leather goods, bio-engineering, sports goods, plastics products, computer software, etc. (Sampath, 2006) This study is focused on food processing industry. Food processing industry itself includes snacks and confectionery, health food, dairy, spices and pickles etc. (IBEF) which reflects variety in the nature products and segments. However, the focus is on food processing industry overall. Food processing is the set of methods and techniques used to transform raw ingredients into food or to transform food into other forms for consumption by humans or animals either in the home or by the food processing industry. Food processing typically takes clean, harvested crops or slaughtered and butchered animal products and uses these to produce attractive, marketable and often long shelf-life food products. Similar process is used to produce animal feed (Wikipedia). India is the second largest producer of food next to China and is booming with a growth rate of 20 per cent a year. It has the potential of being the biggest with the food and agricultural sector contributing around 26 percent of the Gross Domestic Product (GDP). Key to giving a fillip to India's food production would be minimisation of all the wastages in the food distribution and tapping the myriad possibilities that biotechnology and functional genomics offer (Processing and Value Addition). SMEs got a chance to grow after economic liberalisation in the country at one hand, and now they are in front of big business houses through organised retailers at another. This irony

has brought them not only to the internal parallel competitors but before the big players. The problems before them are their survival and growth. The market is consumer oriented. Hence a study has been conducted to evaluate the impact of major determinants of purchase intention of consumers and enable the entrepreneurs with strategic advantage.

2. Food Processing Enterprises in India

A brief review of food processing enterprises in India is required for this study. The Indian food market is estimated at over US$ 182 billion, and accounts for about two thirds of the total Indian retail market. Further, according to consultancy firm McKinsey & Co, the retail food sector in India is likely to grow from around US$ 70 billion in 2008 to US$ 150 billion by 2025, accounting for a large chunk of the world food industry, which would grow to US$ 400 billion from US$ 175 billion by 2025. The food processing industry is presently growing at 14 per cent against 6-7 per cent growth in 2003-04. The industry received foreign direct investments (FDI) totalling US$ 143.80 million in 2007 -08 against US$ 5.70 million in the previous fiscal. The cumulative FDI received by the industry from April 2000-August 2009 stood at US$ 878.32 million (IBEF). According to Economic Watch, the Government of India has stepped forward for strengthening the food processing industry in India. The Cabinet Committee on Economic Affairs (CCEA) approved a proposal to raise allocation of plan fund from Rs.98.00 crore to Rs.295.00 crore for the Scheme of Technology Upgradation / Modernisation / Establishment of Food Processing Industry (FPI) units during the X Plan period. The enhancement will be met from within the existing X Plan allocation of the Ministry. Through this initiative more funds will become available for expenditure under the scheme so as to promote technology upgradation /modernization/ establishment of food processing units in the country. The scheme will actively be engaged in activities covering all segments viz., fruits & vegetables, milk products, meat, poultry, fishery, oil seeds and such other agri-horticultural sectors leading to value addition and shelf life enhancement including food flavours and colours, oleoresins, spices coconut, mushroom etc.

The major objective of the scheme is to have a cascading and demonstration effect among entrepreneurs for promotion of food processing industries in the country. The scheme also aims at increasing the level of processing, reduction of wastage and value addition (Economic Watch). The food processing industry is one of the largest industries in India - it is ranked fifth in terms of production, consumption, export and expected growth. The industry is worth Rs 350,000 crores including Rs. 99,000 crores worth of value added products. Food processing is a large sector that covers activities such as agriculture, horticulture, plantation, animal husbandry and fisheries. It also includes other industries that use agriculture inputs for manufacturing of edible products. Processed food industry in India contributes 6.3% of the GDP, and accounts for 13% of export and 6% of the capital investment. India produces about 600 million tonnes of farm produce annually (Processing and Value Addition). This brief information dictates of a wide scope for food processing enterprises in India. 3. Literature Review Small enterprises have different strategies of grabbing a considerable market share from those of big business houses. For instance, the amount of capital allocated for promotion programmes like advertisements are very high for MNCs in comparison to small enterprises. In such circumstances, SMEs cannot stand before MNCs. Similarly, price cut, cash discount etc. can easily be borne by MNCs but it is a crucial task for SMEs. It suggests that price and promotion mix completions will be a difficult task for SMEs. Hence, if an enterprise is a manufacturing unit, the strategies of product orientation along with customer relation, home delivery etc. will be effective for it. Since the food processing enterprises are associated with manufacturing business, the above strategy will be appropriate to win a higher market share. A literature review is glanced to have a theoretical background and establish the variables for the study. Kotler (2003, 16) discusses product variety, quality, design, features, brand name, packaging, size, services, warranties and returns to be the constituents of product mix. For the

products like processed food, quality, brand, variety and packaging have been taken to be the major determinants. Small enterprises have a limited geographical area of market to be covered. So, home delivery facility serves convenience to the customer and determines the purchase intention. Purchase intention has been explained as the likelihood of purchasing a product by the consumer. Loudon and Bitta (2007, 436, 498) find that behavioural intention, among other factors, acts as a predictor of purchase decision behaviour. Clawson (1971) explains that from the measurement of speed, direction and size of shifts in buying likelihoods for a product over several periods in various market segments, the marketer may discover what trends are taking place as well as the timing and size of their potential impact on sales. The product concept assumes that consumers will buy the product that offers them the highest quality, the best performance, and the most features. A product orientation leads the company to strive constantly to improve the quality of its product and to add new features that are technically feasible (Schiffman and Kanuk, 2007, pp 5). Hawkins et. al (2007, 22) finds product position as the most basic outcome for a firm of marketing strategy which is an image of the product or brand in the consumers mind relative to competing products and brands. This image consists of a set of beliefs, pictorial representations, and feelings about the product or brand. Perceived quality of a product influences the consumer behaviour to a considerable extent. Consumers often judge the quality of a product on the basis of a variety of informational cues that they associate with the product. Consumers believe that they base their evaluations of product quality because that enables them to justify their product decisions as being rational or objective product choices (Schiffman and Kanuk, 2007, pp 178). If the consumers meet a higher quality than their perceived one, they have a positive intention to purchase the product. In case of processed food, quality can be measured in terms of taste, hygiene etc. Product variety, also known as assortment breadth, is also a reason to buy a product. Normally customers prefer a greater assortment because more choices increase the chance of

finding what they need (Kotler, 2003, 511). The availability of greater variety of product causes a higher purchase intention. Packaging includes the activities of designing and producing the container for a product (Wikiversity). Product mix denotes product development, packaging, branding, and research (Product Mix). Wickford (2009) finds that a leader in qualitative and quantitative research for the consumer packaged-goods industry, over 50 percent of shoppers' purchase decisions are made at the shelf. Since packaging of a product is the first thing that a consumer sees, it plays a vital role in differentiating a brand from the competition. Kotler (2003, 16, 547) find that transportation facility for products, that is home delivery system, has a significant impact of purchase intention of consumers of food products. Okoroafo and Koh (2009) conduct a study on family owned business and find that a proper delivery system of products has a significant study on purchase intention.

1. Clawson C. Joseph, How Useful are 90-Day Purchase Probabilities?, Journal of Marketing, 35, 43-47, October 1971. 2. Economic Watch, food processing industry,, last accessed on 15th October 2009. 3. Hawkins Del I, Best Roger J., Coney Kenneth A and Mookerji Amit, Consumer Behavior, Tata McGraw Hill Publishing Company Limited, New Delhi, Ed. 2007, ISBN 0-07-060086-4. 4. IBEF Food Industry, last accessed on 1st December 2009. 5. Kotler, Philip Design: A Powerful but Neglected Strategic Tool, Journal of Business Strategy, 1984, 16-21. 6. Louden L David and Bitta J. Della, Consumer Behaviour, Tata McGrawHill Publishing Company Limited, New Delhi, Ed. 2007, ISBN 0-07-047381-1.


Okoroafo Sam C. and Koh Anthony, The Impact of the Marketing Activities of Family Owned Businesses on Consumer Purchase Intentions, International Journal of Business and Management, Oct. 2009, Vol. 4, No. 10, pp 5-7.


Processing and Value Addition, An Overview of Post Harvest Value Addition in India, last accessed on 15th October 2009 from


Product Mix, Marketing Concepts, Last accessed on 15th December 2009 from

10. Sampath








competitive?,, 2006, last accessed on 15th December 2009. 11. Schiffman, Leon G. and Kanuk, Leslie Lazar, Consumer Behavior, Prentice Hall of India, New Delhi, Ed. 2007, ISBN 978-81-203-3086-3 12. Wickford Hannah The Impact of Packaging on a Consumer, last accessed on 15th October. 13. Wikiversity, Packaging and Labeling,, last accessed on 1st December 2009. 14. Wikipedia, Food processing,, last accessed on 1st December 2009.