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We are populating in a universe where economic system and economic challenges have changed our position points, our day-to-day lives, even the manner we think. Today the Centre point of any national or single policy, program, or undertaking, merely focuses on economic prosperity, development and growing. The expansion/development/progress in economic system is straight relative to the public assistance of the people. Industries, particularly fabricating sector non merely doing life comfy and epicurean but besides assisting the states and persons to turn economically. Industry provides occupations, generates grosss, pays revenue enhancements and finally contributes in national and single income.

World over 97 % of all businesses/industries falls in the class Small & A ; Medium Enterprises, normally known as SMEs ( the term Micro Small & A ; Medium Enterprises, besides used in Africa ) . The part of these SMEs in the universe GDP is really important ( figure 1 ) . ( TBL, 2011 )

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In Pakistan 9 out of every 10 endeavors are SMEs, this immense proportion shows the importance of SMEs in the economic development of the state ( SMEDA, 2010 ) . In short, SMEs history for approximately 30 % of Pakistan ‘s GDP, 15 % of investing, and 80 % of employment ( SMEDA, 2010 ) .A Harmonizing to UNIDO ( United Nations Industrial Development Organization ) they besides play a outstanding function as bing or possible manufacturers of export goods. It is justifiable to state that SMEs are the most of import factor of economic development in Pakistan.

Individual SMEs normally faces so many restraints such as economic systems of graduated table, confer withing services and remain unable to maintain the full advantages of market chances. Their little size and isolation put them off from the invention because it needs more finance and specialised accomplishments. Evidence from developing and developed states shows that concerted dealingss and joint action are more likely when endeavors operate in propinquity and portion concern involvements such as markets for merchandises, substructure demands or disputing external competition. Within such bunchs, endeavors ‘ joint enterprises are stronger, because of the critical mass of interested parties, more cost-efficient due to shared fixed costs and easier to organize, with propinquity furthering common cognition and trust ( UNIDO, 2001 ) .

The geographical concentration of concerns which are producing/selling a group of complementary or related merchandises and face common challenges and chances, are called “ Bunchs ” . In Pakistan, many bunchs have been emerged in industrial every bit good as agribusiness sector, such as wood work in Chinyot, Punjab, Fan bring forthing in Gujarat, rice processing in Larkana, and Banana Farms in Dadu, Sindh. A really new and emerging industrial bunch is Motorcycle Manufacturing and its allied industries in Hyderabad, Sindh.

This bunch is really important in many ways, because it emerged in a metropolis where, there were no any car industry exits, it grew quickly and still turning, as the new investing is coming continuously and new units are being developed.

In this research, it was tried to detect the factors that causes the development of this bunch and its rapid growing.

1.1 SMALL AND MEDIUM ENTERPRISES

“ SMEs are a major beginning of entrepreneurial accomplishments and creativeness and contribute to economic and societal coherence. They hold the key to invention & A ; competition and are besides emerging as planetary participants, by take parting in world-wide production and supply ironss. ” ( eBusiness usher for SME ‘s, p.8, 2008 ) . This statement focussing, plenty on the importance and possible function of SME ‘s in the economic development.

Definition of Small and medium endeavors differ from state to state, part, sector etc. , but briefly SMEs are companies whose figure of worker or grosss falls below certain bounds. European Union ( EU ) standardized a Small concern, as with 50 employees and the constitution which employs less than 250 employees, is categorized as medium. But US describes Small concern with 100 worker, whereas, Medium endeavor as with 500. In Canada a concern belongs to fabricating sector and have near about 100 employees, is categorized as Small endeavor, but for the service sector it is limited to 50 workers. A Medium-sized concern in Canada is that, which have fewer than 500 forces. Another class of concern harmonizing to head count is Micro Enterprises, which is most popular in Africa, but now has besides been accepted as a separate entity in Europe and bounds to fewer than 10 workers ( SMEDA, 2010 ) .

In developing every bit good as developed economic systems SMEs are much greater in figure. In Europe 99 % of all houses are SMEs, and about 65 million people are working in them ( European Commission, 2003 ) . The Micro and Small Enterprises ( MSEs ) sector plays an of import function in the general industrial economic system of the India. It is assessed that in footings of value, the sector histories for approximately 39 % of the industrial end product and around 33 % of the entire export of the province. This sector employs about 31 million people in 12.8 million SMEs ( Indian Ministry of Agro and Rural Industries, 2005 ) . The labour strength of SMEs is about 4 times greater than Large Scale Enterprises ( LSE ) , the cardinal advantage of this sector is its employment potency at low capital investing. These figures besides represent the other economic systems in the universe. SMEs histories for 40 % to 50 % of GDP of the universe and about 99 % of concern Numberss globally. ( ASI, 2011 ) .

Harmonizing to SMEDA ( Small and Medium Enterprises Development Authority, 16-07-2009 ) , SMEs constitute about 90 % of all the concern concerns in Pakistan ; employ 80 % of the non-agricultural work force ; and their portion in the one-year GDP is 40 % , about. But this sector has fiscal and other restraints excessively, which need to be addressed earnestly, in order to accomplish optimal end products.

1.2 INDUSTRIAL/BUSINESS CLUSTER

The importance of geographics in economic system was highlighted by Paul Krugman, in his book Geography and Trade ( 1991 ) . The construct of industrial/business bunch is chiefly based on the geographics. “ An Industrial/business bunch is a geographic concentration of interrelated concerns, providers, and associated establishments in a peculiar field ” .

The term industrial bunch besides know as Porterian Cluster, was introduced by Michael Porter in The Competitive Advantage of Nations ( 1990 ) . Economists relate it with the Alfred Marshal ‘s construct of agglomeration economic systems. Michael Porter claims that a concern bunch affect the competition in three different ways ; foremost by heightening the efficiency of the companies in the bunch, secondly by driving invention in the field and in conclusion by exciting new concerns in the field.

There are many types of bunch based on their location and cognition ( Saxenian, 1994 ) ;

Techno Clusters – These bunchs are high technology-oriented, good adapted to the cognition economic system, e.g. Silicon Valley.

Historic Know-how-based Clusters – They founded on more passe activities that maintain their border in know-how over the old ages even centuries. These bunchs are frequently industry specific. For illustration: Ajrak doing in Hala and wood work in Chinyot.

Factor Endowment bunchs – They are created because a relative lead they might hold, linked to a geographical place. For illustration comestible oil industry in Malaysia, because the environment and atmosphere suits the cultivation of Oil Palm.

Industrial bunch besides occurred at a location where sufficient resources and capablenesss accumulate, and every industrialist/capitalist want to set up concern at that place. A location can be industrialized and clusterized by giving it a cardinal place in a specific subdivision of industry, with a vital/maintainable competitory advantage over other locations, or decisive universe domination in that field.

1.2.1 Industrial/Business Clusters in Pakistan

There are many concern bunchs in Pakistan, some are in agribusiness sector like Rice cultivation in Larkana and its spillovers e.g. rice mill, and banana farms in Dadu and Tando Allahyar. Manufacturing industrial bunchs have besides been developed here, for illustration electrical fan industry Gurjat, athleticss good and surgical instruments in Sialkot, fabric industry in Faisalabad. Some bunchs are centuries old like Ajrak doing in Hala, while some are being emerged like bike fabrication and its allied industries in Hyderabad.

1.3 MOTORCYCLE INDUSTRY

Motorcycles are one of the most common and low-cost type of motor vehicle and motor-powered conveyance in many parts of the universe and, for most of the universe ‘s population. There are more than 200 million bikes are in usage around the Earth or about 33 bikes per 1000 people ( Shuhei, 2006 ) . 58 % of entire bikes are on the roads of Southern, Eastern and Pacific Asia.

Gottlieb Daimler and Wilhelm Maybach at Bad Cannstatt, Germany in 1885 designed the first bike and named that Reitwagen ( “ siting auto ” ) ( Tony Long, 2007 ) . It was developed as a matter-of-fact trial bed for their new internal burning engine, instead than a true paradigm vehicle, accordingly it was non produced commercially. Before Reitwagen, steam propulsion two wheeler have been designed foremost by Gallic Michaux-Perreaux in 1868 ( Setright, 1979 ) , followed by the American Sylvester H. Roper of Roxbury, Massachusetts in 1869 ( Falco, Charles M. , 1998 ) . Roper besides produced 10 more transcripts of the steam powered motorcycle. Those bikes were really different from today ‘s one, in form and engineering.

Picture 2.1: Replica of the Daimler-Maybach Petroleum Reitwagen.

In 1894, with the name of Hildebrand & A ; Wolfmuller first series production of bike was started and first to be called a bike ( German: Motorrad ) ( Brief History of the Marque: Hildebrand & A ; Wolfmuller. 2007 ) . In the initial stage of bike production history, many makers of bikes modified their designs to lodge the new internal burning engine. As the engines became more powerful and designs of bike get matured, the figure of bike manufacturers increased.

Up to World War-I, the biggest maker of bike in the universe was India, bring forthing over 20,000 motorcycles per twelvemonth ( Walker, 2006 ) . In early 1920s, Harley-Davidson gained this award, with their bikes being sold by traders in 67 states ( Jeremy Cato 2003 ) . In early 1930s or late 1920s, German maker DKW ( Dampf-Kraft-Wagen ) took over as the largest maker ( Bill Vance, 2009 ) . Right after World War-II boulder clay mid-1950s, British manufacturer BSA ( Birmingham Small Arms ) Group become largest manufacturer in the universe and produced up-to 75,000 bikes. From 1955 to 1970s German company NSU held the place of main company ( Wikipedia, 2010 ) . Small two-stroke bikes were globally popular ( particularly in Americas and Europe ) from 1960s to 1990s, analysts partly give this recognition to Walter Kaaden ‘s engine work in the 1950s at East Germany. ( bike museum, 2009 ) . Today, Harley-Davidson and BMW are popular trade names and supply considerable markets, but industry and market is chiefly dominated by Nipponese manufacturer. Other of import companies include KTM ( Austria ) , Triumph ( UK ) , Ducati ( Italy ) and Piaggio group of Italy. The king of beasts ‘s portion of universe bike market is being captured by the Japanese trade names, such as Kawasaki, Suzuki, Honda and Yamaha. Minimal Numberss of bikes are being produced in Japan, but its trade names control about 50 % of planetary market with solid being in the LLC ( low cost states ) such as Thailand, China, India, Pakistan, Indonesia etc. , ( CSF, 2006 ) . Chinese trade names commanding more than two tierces of the Chinese market but still the basic designs are modeled round the popular Nipponese theoretical accounts. Hero Honda and TVS of India to a great extent rely on their Nipponese spouses for theoretical account inventions and basic designs. R & A ; D for the industry is expensive every bit good as clip devouring that is why above states use the developed theoretical accounts of Nipponese trade names. The Nipponese makers named supra have fiscal musculus every bit good as the proficient capableness to set about the needed R & A ; D.

The planetary bike industry is chiefly dominated by Nipponese companies such as Honda, Kawasaki, Suzuki, and Yamaha, although Harley-Davidson and BMW continue to be popular and supply considerable markets. Other major makers include Ducati, Piaggio group of Italy, Triumph ( UK ) and KTM athleticss bikes of Austria.

Today, this country is dominated largely by Chinese companies ‘ e.g. Chang Jiang Motorworks, Hi-Bird and Jincheng Group, followed by Indian companies with Hero Honda emerging as the large maker of two Wheelers. Other major manufacturers are Bajaj and TVS Motors. The four largest bike markets in the universe are all in Asia: China, India, Indonesia, and Vietnam ( O’Malley, 2007 ) .

Harmonizing to Anwar Iqbal ( 2003 ) the industry Worldwide has seen a enormous growing in the past 5 old ages. Production in 2010 has been estimated at 45.0 million units with China bring forthing 20.0 million units, while the entire domestic market has merely reached around 15 million units. This planetary rush in market has besides been felt in Pakistan where the industry in the fiscal twelvemonth ended June 2010 manufactured more than 245,000 units ( Auto Mark ) .

1.3.1 Motorcycle Industry in Pakistan

Motorcycle fabrication in Pakistan, was initiated by a adult male from Lahore Mr. Hamid Omer, who designed and made his Wooden Motorcycle with 4-Stroke electric generator engine in 1960, decidedly it was non a commercial undertaking ( Picture 1.2 ) .

Picture 1.2: First motorcycle produced in Pakistan

The first commercial bike production in Pakistan was started by Atlas Honda Group, in 1964. Advancement in bike fabrication / piecing are follows ;

Year

Activity

1960

:

1960-Mr. Hamid Omer from Lahore designed and made his Wooden Bike with 4-Stroke Electric Generator Engine.

1964

:

Atlas Honda Group starts bring forthing Motorcycles.

1967

:

Dewan Yamaha Limited introduced its motorcycles.

1982

:

Pak-Suzuki Motors marketed its two-wheelers.

Early on 1990s

:

Pakistan Cycle Industrial Cooperative Society Limited ( Sohrab ) launches its rhythms with motors.

Today

:

There are more than 70+ Motorcycle Brands on Pakistani roads.

Atlas Honda the most seasoned bike maker in Pakistan installed its first works in 1963 at Karachi, today there are 17 MMUs in the metropolis about 24 % of entire MMUs in the state. As Karachi ‘s part to Pakistan ‘s fabrication sector sums to about 30 per centum and GDP is about 20 % of the entire GDP of Pakistan ( ADB, 2005 ) . A PricewaterhouseCoopers survey released in 2009, which surveyed the 2008 GDP of the top metropoliss in the universe, calculated Karachi ‘s GDP ( PPP ) to be $ 78 billion. It confirmed Karachi ‘s position as Pakistan ‘s largest economic system, good in front of the following two biggest metropoliss Lahore and Faisalabad, which had a reported GDP ( PPP ) in 2008 of $ 40 billion and $ 14 billion, severally. Karachi ‘s high GDP is based on its mega-industrial base, with a high dependence on the fiscal sector. Karachi has several big industrial zones such as Karachi Export Processing Zone, SITE, Korangi, Northern Bypass Industrial Zone, Bin Qasim and North Karachi, located on the peripheries of the chief metropolis. Its primary countries of industry are fabrics, pharmaceuticals, steel, and cars. In February 2007, the World Bank identified Karachi as the most business-friendly metropolis in Pakistan. Keeping all the facts about the metropolis ‘s industrial civilization, the figure of MMUs installed here are non oculus catching.

Today the biggest ball of bike makers is in Lahore. Lahore is the 2nd largest fiscal hub of Pakistan ( GC-GDP Ranking, 29-03-2011 ) and has industrial countries including Kot Lakhpat and the new Sundar Industrial Estate ( near Raiwand ) . Lahore ‘s economic base is wide and varied. The metropolis is the technology hub of the state. Major industries include the industry of cars and bikes, place contraptions, steel, telecommunications, information engineering, chemicals, pharmaceuticals, computing machines, technology, and building stuff. A major industrial agglomeration with about 9,000 industrial units, Lahore has shifted in recent decennaries from fabricating to service industries. Some 42 % of its work force is employed in finance, banking, existent estate, community, cultural, and societal services. The metropolis is the state ‘s largest package bring forthing centre, and hosts a turning computer-assembly industry. Keeping in position the industrial background, the clustrization of bike manufacturing/assembling industry in the metropolis is non surprising.

Fig 1.2: Percentage of MMUs in different countries of state

Beginning: determination during research.

Hyderabad is an of import commercial Centre in Sindh, where many industries are established including: fabrics, cement, fabrication of glass, soap, ice, paper, clayware, plastics, hose Millss, sawmills and tanneries. Handicraft industries, including Ag and gold work, lacquer ware, ornamented silks, and embroidered leather sandals, are besides good established. City is bring forthing about all of the cosmetic glass bracelets in state. Hyderabad is a major commercial Centre for the agricultural green goods of the environing country, including millet, rice, wheat, cotton, and fruits.

A simple analysis of industries of the metropolis reviles that different industries are working in Hyderabad, but at that place was non a individual unit related to cars, until Fateh group introduce its motorcycle “ Hero ” in 1998. Initially they were put ining auto fabrication works with proficient support of Hyundai of Korea, but for some grounds that trade was non materialized. Today there are 12 MMUs in Hyderabad and one is in Kotri, on the other side of River Indus.

Chart 1.1: Number of MMUs in Year

Beginning: Interviews Conducted

18 % out of entire MMUs in the state are in Hyderabad, and they produced 23 % of entire production of bikes in 2010. They are using about 10,000 individuals, straight and indirectly.

Chart 1.4: Fig 1.3: Ratio of Production of Motorcycles in Hyderabad with remainder of the state.

Hyderabad

Rest of Pakistan

Entire

0.34

1.16

1.50

Production of Motorcycles in 2010 ( million )

Beginning: APMA, March-2011

The above figures are deviating attending, in a metropolis where there was non a individual car manufacturer/assembler 11 twelvemonth ago, now lodging 13 bike makers ( one is in Kotri ) , 02 Tractor assembly programs and 3 CNG-Rickshaw manufacturers. 04 among top five Pakistan Motorcycle trade names are in Hyderabad. Why?

1.4 RESEARCH OBJECTIVE

Surveies on bunch and SMEs chiefly cover the established SMEs bunchs and normally their focal point remains on the quickly industrializing economic systems like China and India. Most of these surveies focus on the behaviour and rating of their public presentation, their impact on the market facets of invention. Very few attempts have been made to look into the factors, behind the creative activity of those bunchs, particularly when a bunch is in advancement.

This research is important because no any survey have been conducted about the Clustering of Motorcycle Manufacturing Industry in Hyderabad. Today these MMUs are categorized as SMEs but some of them are traveling to be Large Scale Enterprises ( LSEs ) , as they are engaged in fabrication of CNG-Rickshaws every bit good as of Tractors. Bull-eye of the survey is to place the factors those causing/caused this bunch in comparatively short period. This will be accomplished by concentrating on following aims: –

To place the factors doing the bunch of Motorcycle Manufacturing industry in Hyderabad.

To indicate out the most influencing factor ( s ) .

To analyze the industrial/manufacturing policy of authorities in order to place the inducements to the industrialist particularly of Hyderabad.

To analyze the industrial bunchs in other metropolis, to happen similarities with Hyderabad.

1.4 RESEARCH METHODOLOGY

This research is consists of a assorted methodological analysis, where qualitative survey is conducted to place the factors and so quantitative informations aggregation is to analyze the factors. However, Quantitative manner is dominant to qualitative manner of informations analysis.

The survey focuses on the factors behind the constitution of bike fabricating units in Hyderabad.

At the first phase the different factors for illustration: inexpensive labour, environment, handiness of parts, etc were identified through literature reappraisal and qualitative informations aggregation. The desk research sing authorities policies of fabrication and industrial sector was conducted. After placing the factors a questionnaire study was conducted to acquire penetration of the factors and how the directors looking at the different identified factors.

The informations were so analyzed through statistical package to analyze all the factors and to place the factors which are responsible in the growing of this bunch.

1.5 SCOPE AND LIMITATIONS

The bike fabrication industry in the metropolis is in constellating stage, as new entrants are coming and few rivals have left the market. Therefore, this analysis of the factors doing the bunch in Hyderabad is a timely survey. The directions of MMUs in Hyderabad are wholly Seth based, no proper organisational construction is at that place and corporate civilization is a unusual construct. All makers are partnerships concerned and private limited companies, so their studies are non publically available. Peoples working there are non decently educated and they take a new individual as rival, resultantly they are really loath to inform about their organisation. The reluctance of enterprisers to describe on the values such as gross revenues, income and rewards paid, and their ability to supply accurate retrospective informations and information every bit good as accurate rating for current assets, inputs and end product airss a major challenge to mensurating public presentation of the MMUs. On the other manus, simpler steps such as fluctuations in the figure of individual engaged may non to the full reflect the world of their public presentation. But few friendly people are besides working at that place. However, it is managed to acquire relevant information through study. One MMU have left the market, but director responded and it is included in the analysis.

Chiefly this survey focuses on the Factors “ doing the industrial bunch ” in Hyderabad. And it would supply utile information to policy shapers to invent the policies, maintaining in position the land facts of the metropolis, in order to pull more investors to speed up the economic activities. This attempt can be utile for the investors to analyse the chances here.

1.6 STRUCTURE OF THE THESIS

The 2nd Chapter reviews the literature relevant to the research i.e. in the countries of Industrial Clusters, Small and Medium Enterprises, Motorcycle Industry and SMEs Cluster & A ; Motorcycle Industry in Pakistan. Government policies related to industrial and fabrication sector will besides be highlighted.

Third Chapter elaborates the elaborate research methodological analysis of the present survey. It besides informs about the method of informations aggregation and analysis.

Fourth Chapter presents the findings of the research. Assorted factors that motivate the investors for puting in Hyderabad and in Motorcycle fabrication will be discussed for each house individually. A comparing between most influential factors would besides be presented.

Fifth Chapter gives decisions and suggests some policy steps for the development and betterments of the industrial and fabricating sector of the metropolis in the visible radiation of findings of the survey. Recommendations for new entrants are besides given.

Mentions of all the literature reviewed and studied, during the research are given at the terminal. Survey questionnaire and list of houses surveyed are given as appendices.

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