UNIT : 1

Q.Explain the concept of entrepreneurship ?

ANS:

Entrepreneurship is the ability to identify an investment opprtunity and to organise an entrprise

in order to contribute for the economic growth . Entrepreneurship combines many qualities
such as innovation ,risk combining factors for production .

Entrepreneurship is the ability and readiness to develop, organize and run a business
enterprise, along with any of its uncertainties in order to make a profit. The most prominent
example of entrepreneurship is the starting of new businesses.

Meaning of Entrepreneur

The entrepreneur is defined as someone who has the ability and desire to establish, administer
and succeed in a startup venture along with risk entitled to it, to make profits. The best
example of entrepreneurship is the starting of a new business venture. The entrepreneurs are
often known as a source of new ideas or innovators, and bring new ideas in the market by
replacing old with a new invention.

According to Richard Cantillon : Entrepreneurship is a matter of foresight and willingness to

assume risks, which is not necessarily connected with the employment of labour in some
productive process.

Q.What are the characteristics of entrepreneurship?

ANS: Not all entrepreneurs are successful; there are definite characteristics that make
entrepreneurship successful. A few of them are mentioned below:

1.Innovation :Entrepreneur does things in a new and better way.this makes an

Entrepreneur to innovate new things ,new methods and look for new markets .

2.Decision Making : Doing things in a new and better manner leads to innovation .In
addition to innovation ,entrepreneur has to take decisions under uncertainty .This
decision making activity is one of the important features of entreneurship.

3.Building the Organisation :Building an organisation requires lot of skills and one can
build an organisation effectively by delegating reposibility to others.

4.Managerial skills :Managerial skills and leadership are the most imp[ortant
characteristics of entrepreneur ,they mu7st have the ability to lead and manage .

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5.Resource mobilisation : An entrepneurs job is to fill the gaps .Through mobilisation of
resources ,an entrepreneur has to Marshall all the inputs to realise final product .

6.Risk Taking: The risk taking is the reward which enables the entrepreneur to maxinise
his profits .The performance of the enterprise is the outcome of risk bearing capacity of
the entrepreneur.

7.Accepting Challenges :Another important Characteristics of the Entrepreneurship is

accepting the challenges of the market with a view to exist in the competative economy
.

Q.What are the elements of entrepreneurship ?

ANS: The elements of entrepreneurship are as follwos :

1.Motivation and Commitment : The term motivation has been derived from the word
motive , it refers to state of mind that moves or actives or energies and directs our
behaviour towards the goals.the performance oif entrepreneur depends on ability and
willingess to perform the task which purly depends on his education ,knowldge ,skill and
level of motivation and commitment about the goals .

2.Abilities and Skills : Entrepreneurship provides the abilites and skills of entreprenur
fot the sucess of the enterprise .the individul posses the required skills appropriate to
the kind of business that they are proposing to run .

3.Resources : the third element of entrepreneuriship is resources. thes includes human

and non human resources .It is not only purely about money and equipment but also
about intellectual capability ,entrepreneurship enable to identify the resources required
by the organisation for getting the job done .

4.Strategy and Vision : The entrepreneurship provides a strategy and vision in terms of
thinking short term and long term ahead and having some idea of where that business
might be in the future and prepares action plan to achive that goal .

5.planning and organisation :The entrepreneur must provide a logical and scientific
basis for planning the business operations ,need of raw materials ,and men ,production
schedules ,sles ,inventory ,advertising ,coustomer needs etc.for systematic business
lpanning , the entrepreneur must be able to formulate goals ,policies ,procedures
,programmes .proper planning minimises cost .

6.Choosing a profit making idea : Entrepreneurship helps in choosing a profit making

idea .Business idea is key to sucess .The idea may come from internal and external
sources.following discovery and validation of the idea ,entreprenur also considers the
profitability which will generate income and makes the business a successful unit .

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 7.Legalities : Entrepreneuriship provides the attention to the legal formalities .Rules and
regulation differ on the basis of type of organisation selected to carry on its business
activites .

Q. What are the determinants of entrepreneurship?

ANS: The determinant of successful entrepreneurship discussed by classical viewers suvh as

Cantilion, peay, Marshall, Schumpter Knight and Kirzner are detailed below:

1.Alterness and foresight

2.Bearing the risk

3.Leadearship qualities

4.Family background and education

5.Ability to deal with uncertainities

6.Creativity

7.Knowlege of trade

8.Technical knowledge and willingness to change

9.Total commitment

10.Drive to achieve and grow

11.Innovative mind

12.Organising abilities

13.Motivation

14.Taking initiative and personal responsibility

15.Persistent problem dsolving

16.Seeking and using feedback

17.Integrity and reliability

18.Dynamism of Enterpreneur

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19.Aptitude and will power

20.Self confidence and control

The above factors will determine the qualities required to exhibit entrepreneurial skills in the
effective management of enterprise.

Q. Explain the importance of enterpreneurship?

ANS : The importance of entrepreneurship is summarized as follows:

1.It develops managerial capabilities-

The most significant aspect of entrepreneurship lies in the fact that it helps in identifying and
developing managerial capabilities of entrepreneurs.An entrepreneur studies a
problem,identifies its alternatives,compares the alternatives in terms of cost and benefits
implications and finally choses the best alternative

2.It creates organization-

Enterpreneurship helps in the creation of organization. It guides the entrepreneurs to assemble

and coordinate physical, human and non human resources and direct them towards the
achievement of enterprise objectives through specialized managerial skills.

3.It improves standards of living

Enterpreneurship creates products and services which are very much needed by the society.
With the setting up of productive organizations, entrepreneurship helps in making a wide
variety of goods and services available to the societies which helps in higher standards of living
of the people.

4.It leads to economic Development-

Enterpreneurship involves creation and use of innovative ideas, maximization of output from
given resources, development of managerial skillsetc., and all these factors are very essential
for the economic development of a country.

5.It generates employment-

Enterprenership helps in generating employment directly and indirectly. It helps the

entrepreneurs to become self-emplpoyed and self sufficient and gives a honourable life to
them.

6.It leads to balanced regional development-

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The entrepreneurship traits of entrepreneurs helps in

Removing regional disparities by setting up industries in backward areas.

7.It imp[roves per capita income-

Enterpreneurship enables the enterpreneurs to develop the skills of locating and identifying the
opportunities to establish their own enterprises . They possess the capacities to convert the
latent and idle resources like land , laboure, capital into goods and services.

Q.Explain the importance of creative behavior ?

ANS: Creativity refers to as the production of new or novel ideas that are useful and entails
change. In the present business scenario enterprises have to become leaders in creativity and
leadership.Enterpreneurs blend their imagination and creativity with systematic and logical
thinking. Mihaly Csikszentmihalyi defines “Creativity as any act, idea or product that changes
and exsting domain or that transforms an existing domain into a new one”. The importance of
creativity of entrepreneur as follows:

1.It changes an existing domain or transforms an existing domain into a new one

2.It involves originality of thinking and uniqueness of presentation.

3.It leads to indepth curiosity, commitment and illumination of an idea, product or service
required by the society.

4.It facilitates the ability to transcend the mental barriers.

5.It is preceded by investigations and gathering of market information.

6.It allows the entrepreneurs to apply their subsconsious to mull over the tremendous amounts
of ideas and information that they accumulated during the preparation phase.

7.It enables to evaluate new idea to determine its value and worth pursuing.

8.It provides right type of goods, to the right customers at right place and at right timr.

9.It helps in adopting the new technology to introduce innovations in the product line.

10.It helps the entrepreneurs the entrepreneurs and enterprises to withstand in the
competition and to maintain or improve its status.

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Q.Explain the barriers to or problems of entrepreneurship?

ANS:The following are the some barriers to of entrepreneurship :

1.Lack of viable project- The enterprises cannot survive without economic feasibility. If the
entrepreneurs assessment of project viability is incorrect, the project started is undoubtedly a
failure. Hence, every entrepreneur should be in a position to predict the economic viability of
the proposed project which gives the desired results.

2.Lack of market knowledge- Normally, the micro and small enterprises do not have sufficient
resources to gather market information from time-to-time. Hence, the entrepreneurs lack the
knowledge of changes that are taking place in the markets.

3.Lack of technical skills- Most of the micro and samall and medium enterprises lack technical
skills. These enterprises are facing technical problems such as ineffective methods, processes
and procedures in performing activities, performing tasks with poor tools and technioques, do
not provide common workshops, continue the outdated production operations etc.

4.Lack of initial capital- The small entrepreneurs have a problem of initial capital. They lack
both long term and short term capital which leads to instability of their profits.

5.Lack of business knowledge- Some of the entrepreneurs are lacking kmowledge of business
activities such as production, trade, banking, trade, banking, insurance, warehousing,
transportation, finance, distribution, advertising, packaging etc.

6.Lack of motivation- Some of the entrepreneurs do not have quality of enthusiasm from
within himself to get the job done in the required manner.

7.Lack of social stigma- The entrepreneurs are expected to have a stigma for societal needs.
But some of the entrepreneurs lack the understanding of feelings of the people, faith and
beliefs.

8.Time pressures and distractions- Time factor is the most important aspect in achieving the
objectives of the organization. Some of the entrepreneurs are falling in managing time in
executing business operations.

9.Legal Constraints- Some of the entrepreneurs are unable to adhere to the rules and
regulations of different acts relevant to the business operations of the enterprise.

10.Monopoly and Protectionism- In order of maximize profits and to increase their market
share, some of the enterprises are attempting to charge unreasonably high prices, which is
making the large enterprises becoming monopolist in the market.

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11.Other problems- The other problems such as inhibitions due to patents, fragmented
markets. Costliness of the new product development process and shorter growth periods for
successful products are also contributing for the failure of the enterprises.

Q.Explain the role of entrepreneurship as a solution to society’s problems ?

ANS:The role played by entrepreneurship as a solution to society’s problems are stated below :

1.Satisfy the needs of people- Enterpreneurs solve many problems and bring a product or
service to the world that people need to satisfy their desired.

2.Generates employment- Enterpreneurs have the opportunity to get paid well in addition to
this, they can provide livelihood to many of the unemployed of the society.

3.Contributes for the development of economy- Enterpreneurs are forced to learn, change,
adapt, get tough and innovative which the industry to grow and contributes for the
development of economy.

4.Satisfaction to grow- Enterpreneurship fulfills the inner desire of the entrepreneurs to prove
what they are. It gives satisfaction and helps them to grow at a remarkable pace.

5.Develops leadership- Enterpreneurship is rewarding to mentor and train new hires and then
witness their development and growth to become leaders in the industry. The skills of the
people are very much developed with the enterprwneurial activities.

6.Adds value to society- The entrepreneurship enables the entrepreneur to add value to
society. The products and services come into existence because of the efforts of entrepreneur.

7.Reconnects and assist people- Enterpreneurship helps the entrepreneur to reconnect with
and assist people.

8.Formation of capital- Enterpreneurs efforts to mobilize the capital results in motivating

investors to divert their idle savings in the industrial securities. Investment of public money in
industrial sector helps the country to use such resources for productive purposes.

9.Balanced regional development- Enterpreneurs help to remove regional disparities by setting

up industries in the backward areas.

10.Improvement of per capita income- Enterpreneurs possess the capacities to convert the
latent and idle resources into goods an and services.

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Q. Explain the dimensions of entrepreneurship ?
ANS: The following are the various dimensions of entrepreneurship :

1.Strategic orientation :

Strategic orientation describes the factors that drive a company's formulation of strategy. A
promoter is truly opportunity driven. His or her orientation is to say: "I am going to be driven
only by my perception of the opportunities that exist in my environment and I will not be
constrained by the resources at hand." A trustee, on the other hand, tends to say: "How do I
utilize the resources that I control?" Within these two poles, the administrator's approach
recognizes the need to examine the environment for opportunities but is still constrained by a
trustee-like focus on resources. An entrepreneurial orientation places the emphasis on
opportunity.

2. Commitment to opportunity

As we move on to the second dimension it becomes clear that the definition of the
entrepreneur as creative or innovative is not sufficient. There are innovative thinkers who
never get anything done. It is necessary to move beyond the identification of opportunity to its
pursuit. The promoter is willing to act in a very short time frame and to chase an opportunity
quickly. The duration of their commitment, not their ability to act, is all that is in doubt.
Commitment for the trustee is time consuming and, once made, of long duration. Trustees
move so slowly that it sometimes appears they are stationary; once there, they seem frozen.

3. Commitment of resources

Another characteristic we observe in good entrepreneurs is a multi-staged commitment of

resources with a minimum commitment at each stage or decision point. The issue for the
entrepreneur is this: what resources are necessary to pursue a given opportunity? There is a
constant tension between the amount of resources committed and the potential return. The
entrepreneur attempts to maximize value creation by minimizing the resource set and must, of
course, accept more risk in the process. On the other hand, the trustee side deals with this
challenge by careful analysis and largescale commitment of resources after the decision to act.
Entrepreneurial management requires that you learn to do a little more with a little less.

4. Control of resources:

Entrepreneurs learn to use other people's resources well and to decide over time what
resources they need to bring in-house. Good managers also learn that there are certain
resources you should never own or employ. Very few real estate companies employ an

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architect. They may need the best but they do not want to employ him or her because the need
for that resource, though critical to the success of the business, is temporary. The stereotype of
the entrepreneur as exploitative derives from this dimension. The entrepreneur is adept at
using the skills, talents and ideas of others. Viewed positively, this ability has become
increasingly valuable in the changed business environment. It need not be parasitic in the
context of a mutually satisfying relationship.

5. Management structure :

The promoter wants knowledge of his or her progress via direct contact with all of the principal
actors. The trustee wants relations more formally, with specific rights and responsibilities
assigned through the delegation of authority. The decision to use and rent resources and not to
own or employ them requires the development of an informal information network. Only in
systems where the relationship with resources is based on ownership or employment can
resources be organized in a hierarchy. Informal networks arise when the critical success
elements cannot be contained within the bounds of the formal organization. Many people have
attempted to distinguish between the entrepreneur and the administrator by suggesting that
being a good entrepreneur precludes being a good manager. The entrepreneur is stereotyped
as egocentric and idiosyncratic and thus unable to manage. However, although the managerial
task is substantially different from that of the entrepreneur, management skill is nonetheless
essential. The variation lies in the choice of appropriate tools.

6. Reward philosophy :

Entrepreneurial companies differ from administratively managed ones in their philosophy

regarding reward and compensation. Entrepreneurial organizations are more explicitly focussed
on the creation and harvesting of value. In start-up situations, the financial backers of the
organization - as well as the founders themselves - have invested cash and want cash out. As a
corollary of this value-driven philosophy, entrepreneurial companies tend to base
compensation on performance (where performance is closely related to value creation).
Entrepreneurial companies are also more comfortable rewarding teams. More administratively
managed companies are less often focussed on maximizing and distributing value. They are
more often guided in their decision making by the desire to protect their own positions and
security. Compensation is often based on individual responsibility (assets or resources under
control) and on performance relative to short-term profit targets. Reward in such organizations
is often heavily oriented toward promotion to increased responsibility levels.

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Q.Write a short note on Intrapreneurship .

ANS : An intrapreneurship is a phenomenon of empowering the employees within the

organization, by valuing their ideas and converting them into a profit-making model for the
business. The organization would bear the associated risk and loss if the intrapreneur’s project
failed. It is the combination of employee responsibilities with his/her entrepreneurship skills
that creates an intrapreneur. An intrapreneur is the employee who avails an opportunity,
develops an idea and takes it to the next level for the betterment of the organization.

Characteristics of Intrapreneurship :

Intrapreneurs are often falsely conceptualized as entrepreneurs. Yes, they are entrepreneurs,
but in the skin of employees.

Let us now read below the features of intrapreneurship to go through this concept in detail:

 Diversification: Intrapreneurship promotes teams with people of different gender, age

groups, culture and fields.
 Innovative Approach: It is a creative initiative for the progress of both the employee and
the company.
 Restoration Concept: An intrapreneur adds value to an existing company by improving
the products, services, methods or perceptions.
 Mutual Benefit: Through intrapreneurship, an employee achieves empowerment and
self-actualisation; and the company also grows remarkably.
 Calculated Risk: The risk involved in an intrapreneur’s project is well analyzed and
planned before it is onboard.
 No Investment by Intrapreneur: The intrapreneur is the brain behind the idea but need
not put even a penny into the project. The company funds it at every stage of business.
 Profit-Sharing Agreement: In many organizations, a profit-sharing agreement is signed
mutually between the company and the employee.

Importance of Intrapreneurship :

The present-day market is highly volatile. Constant improvement and creative inputs have
become quite essential for companies to stay in the competition.

Intrapreneurs have the solution to many such problems. Let us now see how can
intrapreneurship help:

 Penetrate New Markets: An intrapreneur’s idea sometimes lead to availing of the

business opportunities prevailing in the new or existing market.

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  Employee Empowerment: The company can strengthen its bond with the workforce by
granting them authority along with responsibility.
 Optimum Human Resource Utilization: Intrapreneurship provides an opportunity to the
employees for outperforming their key responsibility area.
 Economic Stability: It is also undertaken to address market instability and economic
downturns through rapid innovation.
 Innovative Growth: Idea generation is the basis of development. Thus, to nurture an
entity well, intrapreneurs play a significant role in the business.

Hurdles in Intrapreneurship :

When an organization head towards adopting intrapreneurship as a part of its corporate

culture, the following barriers may arise on the way of making such improvements:

 Multiple CEOs: If a company has more than one CEO with different mindsets, then the
employee may not get equal support from each one of them, for intrapreneurship
practice.
 Cultural Issues: Many of the other employees who do not take intrapreneurship seriously
or keep themselves away from such practice may raise problems.
 Talent Acquisition Problems: Identifying an intrapreneur within an employee is a
challenging task for the human resource department.
 Adverse Market Response: The consumers sometimes feel that the innovated product
fail to meet their requirements.
 Lack or Shift of Suitable Resource: An intrapreneur leaving the organization or the
company unable to appoint one, may lead to its failure.

Q. Write a short note on technopreneurship.

ANS : It is a blend of two words such as “technology” and “Entrepreneurship”. Thoroughly, it is

a kind of entrepreneurship in the field of technology. The process of technopreneurship is a
combination of technological advancements and entrepreneurial skills. In the products and
services transformation, an integral part of technopreneur is technology.

A technopreneur is a person who revolutionizes the prevailing economic order by making the
best use of technology at hand. They introduce new concepts of products and services in the
market. When technopreneurs enter the market, all they have is an idea.

Importance of Technopreneurship:
Creating Employment Opportunities
When startup businesses, then there is an increase in the pool of job opportunities as they
need manpower to run all business operations. In the same way, technopreneurship creates

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jobs and helps the nation to combat the problem of unemployment. It increases the
employment rate of an economy
Local Resources
Various natural and productive resources are available that every entrepreneur can utilize for
business success. The usage of local resources increases its value and reduces the rate of
resource wastage.
Business diversification and decentralization
An Entrepreneur can find out the business opportunities and locate them in areas that are
suitable including remote areas.
Read More: Role And Importance of Entrepreneurship
Technological advancement
By being a creative and innovative technopreneur, they play an important role in the field of
utilization as well as the development of technology.
Capital formation
Investment is an integral part of a business and an Entrepreneur requires funds to start up and
take their business to the new heights. They take financial assistance from the investors and
financiers and utilize the public savings that lead to economic development.
Promotion of entrepreneurial activities
The young generation gets a chance to work with such technopreneurship firms and learn nuts
and bolts how to get success. It also inspires these teammates and employees to grow and start
up their business firms too.

Q. Write a short note on cultural entrepreneurship .

ANS :Cultural entrepreneurship is truly key to economic development as cultural development.

In emerging countries, the cultural factor is second to agriculture for employment and offers a
true path to development in these economies. Cultural entrepreneurship create markets where
there is an empty niche like world music and Putumayo. Cultural entrepreneurship is a win-win
scenario, developing new audience as well as the opportunity for creating revenue to invest
back into cultural content.

DEFINITIONS

GENEVIEVE TREMBLAY: Cultural entrepreneurs are cultural change agents and resourceful
visionaries who organize cultural, financial, social and human capital to generate revenue from
a cultural activity.

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CHARACTERISTICS :

1.Vision and values- Enterpreneurial culture implies vision, values, norms and traits that are
conducive for development of the economy.

2.Manifestation of culture- Enterpreneurial culture manifests itself in their pattern of behavior,

forms or art and music, language and customs and practices in the beliefs that are shared with
people.

3. Transmission of culture- Enterpreneurial culture is learned and is passed on from one

generation to another generation. It is nurtured, fostered and promoted.

4.Generates revenue- Cultural entrepreneurs are cultural agents who organize cultural,
financial, social and human capital to generate revenue from a cultural activity.

5.Enhances livelihood- Cultural entrepreneurs innovative solutions result in economical

sustainable cultural enterprises that enhance livelihood and create cultural value and wealth
for both creative producers and consumers of cultural services and products.

6.Economic and socio-cultural activity-Enterpreneurial culture is an economic and socio-

cultural activity based on innovation, exploitation of opportunities and risk taking behavior.

7.Training of professionals- Cultural entrepreneurship is the training of professionals for the

creative industries in the fields of art and culture.

CHALLENGES OR PROBLEMS:

1.Lack of entrepreneurial culture- The entrepreneurs lack entrepreneurial culture. With the
result they do not have a strong belief in their projects and hesitate to invest their physical,
psychological and other resources in the venture

2.Fear of risk- Cultural entrepreneurship involves and economis and socio-cultural activity
which is based on innovation, exploitation of opportunities and risk taking behaviour. But the
cultural entrepreneurs fear the risk in such activity and fall in their attempts to run the business
successfully.

3.Non static in nature- Culture includes a set of learned beliefs, values, attitudes, habits and
forms of behaviour that are shared by society and are transmitted from generation to
generation within that society.

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4.Needs training- Cultural entrepreneurs need training in the areas of patterns of behaviours,
arts, music, language, customs and practices, beliefs etc., that are shared with others.

5.Sub-cultural variations- The cultural entrepreneurs have to segment the larger markets into
smaller sub-groups or sub-culture groups that are homogenous in relation to certain customs
and traditions.

Q .Write a short note on international enterprneurship.

ANS : International business occurs when a business sells its products and services to a
purchaser who loves in a different country. The international entrepreneur who intends to
carry on international business has to study the differences in legal systems, political systems,
economic policy, language, accounting standards, labour standards, living standards,
environmental standards, local culture, corporate culture, foreign exchange, tarrifs, import and
export regulations, trade agreements, climate, education, incentives, subsidies etc., of the
countries concerned.

CHARACTERISTICS AND IMPORTANCE OF INTERNATIONAL ENTERPRENEURSHIP:

The characteristics and importance of international entrepreneurship are as follows:

1.Creates demand for products- International entrepreneurship creates demand for the
products and services both in domestic and international markets. Considering the demand for
the products in international markets, the entrepreneur formulates suitable programmes to
capture the foreign markets.

2. Products reaching maturity stage- International entrepreneur can sell his products in foreign
markets which have reached the maturity stage of their life cycle in domestic markets and earn
profits by their sales.

3.Lower manufacturing costs- Enterprises which are incurring high level of fixed costs can
lower their manufacturing costs by spreading the costs over long number of units by selling the
products globally.

4.Enhancement of reputation- The international entrepreneur can enhance the

entrepreneurial competitiveness and reputation by making available products in the
international markets. The brand image and goodwill of the Enterprise is bound to increase
with international entrepreneurship.

5.Ensures quality of products- The international entrepreneur in the process of satisfying

foreign customers have to produce products as per their standard specifications by which

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entrepreneur will not only produce quality products for international markets but he also
provides quality products in the domestic markets.

6.Adopt CRM- The international entrepreneurs adopt the customer relationship management
strategies to provide better and qualitative services to their customers.

PROBLEMS OR CHALLENGES OF INTERNATIONAL ENTERPRENEURSHIP :

1.Problems of attitude- The international entrepreneur may find it difficult to set up his
international business in a new country if he has negative attitude that foreign market is
unknown to him.

2.Problems of information- The intertnational entrepreneur may not be aware of market

conditions in the host country. He is a new entrant in the international market and he may find
it difficult to get information on tastes and performances of customers, the strength of
competitors, the entry regulations of host countries etc.

3.Problem of network- The international entrepreneurs network with established business

companies makes it easy to take-up business activities in host country.

4.Problems of finance- The international entrepreneurs business involves huge risk in

processing finances from the financial institutions. They impose large number of restrictions
and stipulate rules and regulations for financial assistance to the international business.

5.Problems of tariff- Tariff refers to duties levied by the government on imports imposing tariff
raises the cost of the imported goods which also increases the price of the finished product
exported to foreign countries.

6.Problems of non tariff- These are the obstacles to imports other than tariffs such as testing
certification, and the bureaucratic hurdles that have effect of restricting imports.

7.Problems of technical aspects- The international entrepreneur has to satisfy the technical
aspects of foreign countries, without which the goods cannot enter the foreign markets.

8.Problrms of culture- The international entrepreneur is a new entrant in the host country.

9.Problems of pricing- The international entrepreneur has to adjust his prcing policies
according to the local economic conditions and customs.

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Q .Write a short note on netpreneurship .

ANS : It is also called as Internet business entrepreneurship. It refers to a small start-up which is
solely online-net based-with no physical office.Their website/blog/e-presence is the office. For
e.g. it can be a freelancer, working from home taking projects online or launching e-marketing
campaigns.

DEFINITION

Longman Dictionary of Contemporary English- Netpreneur is someone who has started an

internet business. It is a process of identifying and starting a business venture, sourcing and
organizing the required resources and taking both the risks and rewards associated with the
venture.

CHARACTERISTICS :

The characteristics or attributes of netpreneurs are as follows:

1. It is net based- Netpreneurship is the net based with no physical office. Their
website/blog/e-presence is the office. It enables the entrepreneur to make money
online.
2. Undertakes risks and rewards- Netpreneurs identify and start the business venture ,
organize the resources and take both the resources and rewards associated with the
venture.
3. Biggest shift in business- Netpreneurship is the biggest shift in business. Net working
sales like face book, you tube, flicker, twitter, what’s app etc. (social media) give
entrepreneurs a chance to engage their customers and communicate message.
4. Geography is history- Netpreneurship leads to boundaries of all kinds to disintegrate-
between countries, industries, organizations, suppliers, customers and communicate
message.
5. Loyalty over brand- Customers are driven by greater choice vendors and the ease of
switching among them makes brand loyalty a more difficult task. Consumer
expectations rise and buyer’s tolerance for poor service and quality reduces to a greater
extent. Thus, introducing virtual loyalty over brand becomes a very difficult task
6. Multi-Disciplinary- The entrepreneurs are creating successful solutions by integrating
diverse disciplines like technology, content, graphic services and relationships. These
aspects are more popularly used in the netpreneurship than in the traditional type of
business.
7. Collaboration- The netpreneurs can’t work alone. They enable to engage and involve
stakeholders every step of the way, from product conception through research and

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development, packaging, delivery, support and the ongoing improvement process. Thus,
the collaboration of all these activities is needed in the netpreneurship.

PROBLEMS OF NETPRENEURSHIP :
The following are the changes or the problems of net entrepreneurs:
1.Flexibility- The speed of change around the net requires that a business be much
more flexible and adaptive than ever before. The netpreneur must be expert at reading
and interpreting.
2.Speed of change- With the advance in computing, globalisation, the changing
expectations of stakeholders and the emergence of internet, the speed of change is
faster than ever.
3.Experimentation- The netpreneur must be willing to try out new ideas in the markets.
He may not find time to undertake traditional market research to evaluate the
performance of product and services.
4.Continous innovation- The netpreneur should go for constant innovation. The
competitor’s unrelenting force and the markets demand for improvement makes it
imperative that netpreneur should focus his attention on innovation.
5.Co-operative competition- The netpreneurs have to depend on co-operative
competition without which their survival becomes difficult in the market.
6.Distribution network- The real challenge in today’s world is identifying the suitable
distribution for the enterprises products and services.

Q .Write short note on ecopreneurship.

ANS : The term ecopreneurship is coined to represent the process of principles of
entrepreneurship being applied to create business that solve enterpreneurisal problems
or operate sustainably.
DEFINITION
Gwyn Schuyler- Ecopreneurs are entrepreneurs whose business efforts are not only
driven by profit but also by a concern for environment.

CHARACTERISTICS :
1.Identify business opportunities- Like all other entrepreneurs the ecopreneurs should
also identify a feasible business opportunity research it, hamess resources to give a
shape to idea into a reality.
2.Undertakes a risk- All the ecopreneurs undertake business ventures which involve a
measure of risk which may result in profit or loss.
3.Effect on natural environment- The commercial activities of ecopreneurs have effect
on the natural environment.
4.Intentionally of entrepreneurs- The intentions of ecopreneurs, their personal belief
system, their set of values and aspirations are to protect the natural environment.

17
5.Demonstrates concern- Ecopreneurs connotes the idea of developing a busuiness
while at the same time demonstrates a concern for ecological and social needs of
present and future generations.
6.Authority and power- The ecopreneurs do not get stuck up with trying to hang on to
the authority and power hierarchy they create in their venturesbafter such business
grow and become established in the markets.

BARRIERS/PROBLEMS OF ECOPRENEURSHIP:
1.Lack of enforceable regulations
2.Adverse environmental conditions
3.Resistance from potential users of the services provided by ecopreneurs to alternative
technology and products.
4.Inadequate protection of intellectual property rights.
5.Issue of finance for innovations by environmental entrepreneurs.
6.Ecopreneurship faces the problems of marketing hostilities from both the established
businesses and financial institutions.

Q. write a short note on social entrepreneurship .

ANS :Business is not merely profit making occupation but a social function which
involves certain duties and requires to follow the ethics also. It depends on society for
existence, sustenance and encouragement. Social entrepreneurs carry the business with
innovative solutions to society’s most pressing social problems. They are ambitious and
persistent, tackling major social issues and offering new ideas for large scale changes.
DEFINITION
J. Gregory Dees: Social entrepreneurship is an attempt to draw upon business
techniques and private sector approaches to find solutions to find solutions to social,
cultural or environmental problems. This concept is applied to a variety of organizations
with different sizes, aims and beliefs.

CHARACTERISTICS:
The characteristics of social entrepreneur are as follows:
1.He tries to shrug off the constraints of ideology or disciplines.
2.He identifies and apply practical solutions to social problems, combining innovation,
resourcefulness and opportunity.
3.He innovates a new product, a new service or a new approach to a social problem.
4.He focuses on social value creation and in this process he may be willing to share his
innovations and insights for others to replicate.
5.He jumps in before ensuring they are fully resourced.
6.He will have an unwavering belief in everyone’s innate capacity, often regardless of
education, to contribute meaningfully to economic and social development.

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PROBLEMS OR BARRIERS :
1.Functioning-
Some social entrepreneurs are able to generate sufficient income through the sale of
beneficial goods and services, but many of the entrepreneurs are unsuccessfull. Other
funding opportunities include corporate investment, donations and government
funding. Thus fund raising a crucial for the social entrepreneurs.
2.Communicating value-
The social enterprises deliver more than commercial value and it is additional social
value that often ignites the passion of the social entrepreneur. But social value can’t be
measured easily and it is difficult to communicate the bottom line of investors, donors
or community at large.
3.Formulating a strong strategy-
The social entrepreneur find it difficult to formulate a long term strategy, define
appropriate goals and drive growth in a sustainable manner. The social enterprise has to
create multiple benefits which implies that it has to set multiple goals, all of which must
be evaluated in terms of cost of provision to ensure true value creation. Astrong
strategy will identify a unique value proposition compared to other organizations and
indicate clearly what the organization will not do.
4.Changes in the mission-
Formulating a good strategy for the social enterprise will help to mitigate the possibility
of mission creep. The frequent changes in mission may lead to apprehension in the
minds of investors, donors or community at large.
5.Lack of support-
The social entrepreneurship will be successful only when the social sector gets the
support of the community in return. This can be achieved when the community and its
leaders have a clear understanding of the sector, find ways to support policy changes to
enable social enterprise to flourish with required amount of funds.
6.Other problems-
The other problems faced by the social entrepreneurs are conveying the business idea,
finding time, government approval, maintaining quality of products and services,
sustaining employees, competition from others, promoting awareness of proposed
activities and acquiring technologies to update in the related areas.

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 UNIT : 2

Q. Write a short note on micro enterprise.

ANS : Meaning :

A micro enterprise is a type of small business having less than 10 emplyoees and investment upto RS
25 lakhs on plant and machinery excluding the values of land and building .The term micro
enterprise connotes different entities and sectors depending on the country .

characteristics of micro enterprise :

The following are the important characteristics of micro enterprise :

1.Its a type of small business having less than 10 employees.

2.its investment in plant and machinery is less than RS 25 lakhs.

3.These enterprise are operetated by micro entreprenuers not by choice but by necessity.

4.Thes enterprise have little access to commercial banking sector and they often rely on micro loans
or micro credit of micro finance institutions .

5.These units are run on the basis of sole trading type of business organisation.

6.Profits generated by micro enterprise would be quite low.

advantages of micro enterprise :

The advantages of micro enterprises are as follows :

1. Micro enterprises add value to a country’s economy by creating jobs enhancing income,

strengthening, purchasing power, lowering costs and adding business convenience

2. These enterprises have been accepted as the engine of economic growth and for promoting

equitable development.

3. These enterprises provide employment potential at low capital cost .

4. The development of these enterprises is a proven way to strengthen viable, small businesses,

resulting in increased household income, savings , and thus , alleviating the crunch of economic

poverty.

5. Micro enterprises enable to serve the basic objectives such as poverty and reduction,

empowerment of woman.

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 6. Micro enterprises development contributes to widening the pool of entrepreneurship available to
society and it broadens the base of the private sector.

Q. What is small -scale enterprise?

Ans: These enterprises differ from large scale enterprises and can be identified in terms of
the following features :
* The capital used is supplied by the proprietor or through means like partnership or in part
from financing agencies set up for this purpose.
* these enterprise too generally use power -driven machines.
*Like large scale enterprise they also employ modern production methods, engage labour
on wages ,produce for expanded market or ancillary enterprise ,sell to large industries
*the capital employed should not exceed Rs 5 core.
Q. what are the Essentials Characteristics of Small Enterprises?
Ans :following important essentials characteristics:
Ownership: They have a single owner. So it is also known as a sole proprietorship.
Management: All the management works are controlled by the owner.
Limited Reach: They have restricted area of operation. So they may be a local shop or an
industry located in one area.
Labor Intensive: Their dependency on technology is very little because they are dependent
on labours and manpower.
Flexibility: Because they are small, they are open and flexible to sudden changes, unlike
large industries.
Resources: They utilize local and immediately available resources. They do better utilization
of natural resources and limited wastage.

Q. Explain the objectives of small scale industries?

ANS: Some objectives of the small scale industries are mention below:
To create more employment opportunities
To aid improve the rural and less developed regions of the economy.
To reduce regional imbalances
To ensure maximum utilization of unexploited resources of the country
To assure equal distribution of income and wealth
To solve the unemployment problem
To attain self-reliance
• To utilize the latest technology aimed at producing better quality goods at lower costs.
Q. Explain the role / importance of small scale enterprise?

2
ANS :Small scale industries are those industries in which production, manufacturing and
providing the services are executed on a small or micro scale.
In a country like India, the small scale industries play a very important role in generating
employment, improving the financial status of people, development of rural areas and
removing the regional imbalances.
Let us look into the roles and importance of small scale industries in India:
1. Employment generation: Small scale industries are one of the best sources of
employment generation in India. Employment is one of the most important factors that
determines the growth of a nation. Therefore, development of small scale industries should
be encouraged for the development of more employment opportunities in the nation.
2. Less Capital Requirement: Small scale industries are less capital intensive than the large
scale industries. Capital is scarce in developing countries like India and therefore, small scale
industries are most suitable for maintaining the balance.
3. Use of resources and development of entrepreneurial skills: Small scale industries allow
for the development of entrepreneurial skills among the rural population which is not
having the scope of large scale industries. These industries help in the appropriate use of
the resources available in the rural areas, which leads to development of rural areas.
4. Equal income distribution: Small scale industries by generating employment
opportunities create equal income opportunities for the youth of the underdeveloped
areas. This leads to the growth of the nation in terms of employment, human development.
5. Maintains regional balance: It has been seen that large scale industries are mostly
concentrated in the large cities or restricted to areas which leads to migration of people in
search of employment to these cities. The result of such a migration is overcrowding of the
city and damage to the environment. For sustaining a large population, more of natural
resources need to be utilised.
6. Short production time: Small scale industries have a shorter production time than the
large scale industries which results in flow of money in the economy.
7. Supporting the large scale industries: Small scale industries help in the growth of the
large scale industries by producing ancillary products for the large industries or producing
small components that will be useful for the assembling of final products by the large scale
industries.
8. Improvement in Export: Small scale industries contribute to around 40% of the total
exports done by India, which forms a significant part of the revenue earned from the
exports. Small scale industries work towards increasing the forex reserves of the country
that reduces the load on balance of payment of the country.
9. Reduce the dependence of agriculture: Most of the rural population will be dependent
on agriculture and this creates a burden on the agricultural sector. Small scale industries by
providing employment opportunities to the rural population provides more avenues for
growth and also paves way for a more arranged distribution of occupation.

3
Q. Explain the role of small business in rural india.
ANS:
1. Provides Employment in Rural Areas: Cottage and rural industries provide employment
opportunities in the rural areas as these are labour oriented enterprises. In Indian rural
areas ample labour is available.
2. Improve Economic Condition: Small business provide multiple source of income to the
rural households. SSI improves economic conditions and standard of living of people living in
those Areas.
3. Prevent migration: Development of rural and village industries can also prevent
migration of the rural population to urban areas in search of employment.
4. Utilisation of Local Resources: SSI use local resources e.g. coir, wood and other products.
5. Equitable distribution of rational Income: Small Scale Industries and cottage Industries
ensure equitable distribution of national income. This helps to reduce the gap between rich
and the poor in the country.
6. Balanced Regional development – These enterprises are often dependent on local source
of production. This way, industries do not just limit themselves to a particular place but
diversify. This helps in balanced regional development.

Q.EXPLAIN THE Problem of Small Scale ENTERPRISE?

ANS:The problem of small scale enterprise are as follows :

1. Finance: Non-availability of sufficient funds in order to carry out business operations is an
important problem faced by small scale industries. Bank sit at to grant financial help to
these units.
2. Raw Material & Power: Small scale units are unable to buy raw materials in bulk due to
lack of funds and storage facilities. Shortage of power is another factor which leads to under
utilization of plant capacity.
3. Marketing: Small scale units generally face difficulties in marketing of their products and
services as they are hardly any funds for Advertising or sales promotion. They depend on
intermediaries who exploit them.
4. Technology: Majority of small scale enterprises are using old techniques of production
because they cannot afford new techniques, machines and equipment necessary for
modernising product. As a result, their cost of production increases.
5. Competition: Small scale firms face competitions not only from large industries but also
from multinational companies.
6. Other problems:
• Lack of Managerial Efficiency.
• Lack of Demand of Produced Goods.
• Labour Problems.
• Burden of Local Taxes.
• Poor Product Quality.

Q. Exploain the role of government assistance to small industries.

4
 ANS:Some of the support measures and programmes meant for the promotion of small and
rural industries are grouped in following two categories.
(i) Institutional Support
(a) National Bank for Agriculture and Rural Development (NABARD) The NABARD provides
loans and advances to State Government for a period not exceeding 20 years to enable to
State Government.
(b) The Rural Small Business Development Centre (RSBDC) It is set up by the World
Association for small and medium enterprises and is sponsored by NABARD. It aims at
providing management and technical support to current and prospective micro and small
entrepreneurs in rural areas.
(c) National Small Industries Corporation (NSIC) Its main focus was on
• To supply indigenous and imported machines in easy instalments.
• To procure and supply imported raw materials.
• To export of products of SSI.

(d) Small Industries Development Bank of India (SIDBl) SlDBI was established in 1989 as a
public corporation. Its main object is to promote. Finance and develop the small scale sector
in India.
(e) The National Commission for Enterprises in the Unorganised Sector (NCEDS) The NCEUS
was constituted in September 2004, with the following objectives
• TO improve productivity of small scale enterprises.
• To generate more employment opportunities.
(f) Rural and Women Entrepreneurship Development (RWED) This programme encourages
rural people and women RWED provides the following
• Enhancing human and institutional capacities.
• Providing training for women entrepreneurs.
(g) World Association for Small and Medium Enterprises (WASME) Common schemes
offered by WASMe are
• Integrated Rural Development Programme
• Prime Minister Rozgar Yojana
• Training of Rural Youth for self-employment
• Jawahar Rozgar Yojana
(h) Scheme of Fund for Regeneration of Traditional Industries (SFURTl) This fund is used
• To improve the technology of traditional units.
• To create sustained employment opportunities.
• To set up traditional industries in various parts of the country.
(i) The District Industries Centre (DIC) The DIC Programme was started on 1 May 1978 to
provide assistance to small scale industries at the district level.
These centres provides all the promotional activities such as identification of suitable
scheme preparation of feasibility report arranging for credit etc.

5
(ii) Incentives Some of the common incentives offered are below

(a) Land
(b) Power
(c) Water
(d) Sales Tax
(e) Octroi
(f) Raw materials
(g) Finance
(h) Industrial estates
(j) Tax holiday

Q. Explain the differences between Cottage and Small Scale Industries?

ANS: Differences between cottage and small scale industries :

(i) The location of cottage industries is restricted in villages whereas the small scale
industries are mostly located in urban and semi-urban areas.

(ii) Cottage industry being a household industry is mostly run by the members of the family
and therefore do not maintain hired labourers. But the small industries are mostly run by
hired labourers.

(iii) Cottage industries are producing goods for meeting local requirements whereas small
industries are producing goods to meet the demand for the people living in a wider area.

(iv) Cottage industries are investing a very little amount of capital and are working with
simple tools. But the small industries are investing a comparatively higher amount of capital
(presently the limit has been raised from Rs. 60 lakh to Rs. 3 crore) and are working with
machines run by power.
(v) Cottage industries are mostly located in the house of the artisans itself whereas the small
scale industrial units are located in the industrial and business complex.
(vi) Cottage industries are being operated both as part time and full time occupation but the
small scale industries are mostly operated as full time occupation.

(vii) Cottage industries are mostly operated in unorganized manner whereas the small
industries are maintained to some extent in an organized manner.

(viii) Cottage industries are engaged in the production of traditional goods like earthen
vessels, khadi goods, cotton and coir mattress, handmade shoes etc. whereas the small
industries are engaged in sophisticated goods like electric fan and bulbs, radio, tape-
recorders, television, mixer-cum-grinder etc.

Q.Define business group?

6
ANS : DEFINITIONS OF BUSINESS GROUPS

The meaning and definitions of Business groups is given by various experts in the following
manner:

1. Leff : Business group is a group of companies that does business in different markets
under common administration or financial control whose members are linked by relations of
inter-personal trust on the basis of similar personal ethnic or commercial background .

2.James R. Maclean: Business group is a cluster of legally distinct firms with a managerial
relationship. The relationship between the firms in a group may be formal or informal .

3. Powell and Smith-Doerr: Business group is a network of firms that regularly collaborate
over a long time period.

Q.What are the characteristics of business groups ?

ANS : The characteristics of Business groups are as follows:

1. Set Clear Objectives: In business groups, the objectives are set in a clear manner. The
goals set must be specific, measurable, relevant and achievable within the time frame.

2. Commitment of members : The members of the group have to ensure to work for
consensus on decisions. Ideally, every member of the group shares opinions, perceptions
and feeling with other team members.

3. Encourages Interactions : The members of the business group are encouraged to take
ideas and suggestions from other members of the group. Individuals trust and support their
fellow members and involve them in decision making.

4. Lines of communication: the business group requires a mechanism for communication

between the group leader and other members of group . Consistent communication in the
form of new letters, status reports, emails, and meetings and ensures the information on
what has been achieved and yet not to be achieved.

5. Definite decision making process: A successful group definitely follows a specific decision
making process. This avoids the pitfall of extended and unproductive discussions that can
result in frustration and inactions.

6. Common Administrations : In business group, a group of firms which undertake business

in different market come under common administration and financial control.

7. legally independent : Business group is a set of firms and it is deemed as legally

independent. It can take independent and co-ordinated actions.

7
8. forms for a reasons: The business group is consist of number of firms or individuals
forming a unit for a reason or cause.

Q.Explain the roles and importance of business group

ANS : In most of the countries, business groups are playing a pivotal role in shaping the
industrial activities. The role or the importance of business groups are as follows:

1. Facilitate Development: A defining characteristics of most of the developing countries is

the inadequacy of basic services to support organised economic activity. These groups are
dominating all most all the developed and developing economics. They are helping to avoid
the problem of finance and contributing for the development of industrial sector and
economy of the nation.

2. Organisational structure: Business groups that dominate the landscape of virtually all
developing countries provide an organisational structure that is better suited to dealing with
the poor availability of basic inputs and services.

3. Share Common Brand Identity: The business groups often share common brand identity
like Tata group and reliance group in India, Samsung group Korea. They draw on a common
labour pool and rely on each other for financing.

4. Large investment: The business groups facilitates access to capital. They ensure that
groups are particularly well placed to make the large investments in public infrastructure
substitutes that small unaffiliated firms might not find it rational to undertake.

5. Copes wit increased risk : The greater size of diversification of business groups allow the
group to better cope with the increased risk that often comes with locating production
facilitates in less developed area.

6. Compensate for shortages: The business groups are able to compensate for shortages in
physical inputs, either by providing these inputs directly from affiliates else where or by
making arrangements for their providing through already existing supplier network.

7. Balanced regional development : The business groups diversify the industrial activities to
regions where governments have failed to provide basic services.

8. Formal and informal ties: The business groups often adopt a network structure which
means that the group members are bounded by various formal and informal ties. This
enable to develop intra group relationships.

Q.Write a detailed note on family business.

8
ANS :

DEFINITIONS OF FAMILY BUSINESS

CARLACK, RANDEL S., MANFRED F.R. & ELIZABETH: A family business is a commercial
organization in which decision making is influenced by multiple generations of a family-
related by blood or marriage- who are closely identified with the firm through leadership or
ownership. Owner manager entrepreneurial firms are not considered to be family
businesses because they lack the multi generational dimension and family influence that
create the unique dynamics and relationships of family business.

TYPES OF FAMILY BUSINESS :

The various types of family businesses are given below:

1. Family Owned Business: It is a profit making organisation with number of voting share. It
is not necessary to hold majority of shares by members of single extended family. The family
business is significantly influenced by other members of family also.

2. Family Owned and Managed Business: It is also a profit making organisation with
number of voting shares. It is not necessary to hold majority of shares by single extended
family. This business has activity participation by one family member in the top
management of company so that one or more family members’ ultimate management
control. Hence under this type of family business, the family members own the business and
retain the management of business also.

3. Family Owned and Led Business: It is a profit organisation with member of voting shares.
It is not necessary to hold the majority shares of members of single extended family. In this
type of family business one or more family members will actively participate in the top
management of the company. Hence one or more family members have ultimate
management control. But in this method of family business, one member has major
influence on business activities who is in charge of regulating activities of business and other
members of family.

RESPONSIBILITY AND RIGHTS OF MEMBERS OF FAMILY BUSINESS :

The rights and responsibilities of members(share holders)of family business are as follows:

1. Knowledge of Operations: The members of family business have the responsibility to get
knowledge of business operations i.e. products and services offered, locations of top
manager, industry, extent of competition existing, performance evaluation etc.

9
2. Financial information: The shareholders of family business should have the information
on financial position of the concern i.e. income statement and balance sheet. This will help
the member to know the financial strength of the firm and to formulate the policies,
strategies for future.

3. Attending Meetings: The shareholders of the family business concern have the
responsibility and right to attend all the meetings and caste voting if situation demands,
They have to participate in the discussions and extend all the required cooperation to take
resolutions in such meetings.

4. Board members: The members of the family business have the responsibility to screen
members and their appointment an ratification. They have to understand and access the
need for broad members qualifications and fulfilment of statutory requirements.

5. Generating business Leads: The members of the family business have obligation to
generate business leads wherever possible and useful.

6. Providing Additional Capital: The shareholders of the family business concern are
expected to provide additional investments if required in the business. This will help the
organisations to avoid shortage of capital wherever needed in the expansion programme of
the firm.

CHARACTERISTICS OF FAMILY BUSINESS :

The characteristics of family type of business are as follows:

1. UNIFORMITY IN OPERATIONS- Family businesses are ideal in nature, since they adopt the
principles of the founder of business.

2. SUCCESSION OF BUSINESS- Family business has a possibility for perceptual succession. It

determines future effectiveness in terms of company operations.

3. TALENT OF FAMILY MEMBERS- The family ensures effective utilization of in house talent
in family. The members of the family will have belongingness and their skills and talent are
quite useful for the business.

4. DEDICATION OF FAMILY- The dedication and attachment of family members toward

family business ensures survival of business through toughest times;

5. EFFECTIVENESS OF BUSIUNESS- The effectiveness and existence of family business is

determined in the basis of attachment of members within the family.

6. MEMBERS OF BUSINESS- The family business may be comprised of one or more than one
family in business corporations.

10
7. CONTRIBUTION- Family members who are not contributing or not involved in business
are also considered as part of business.

IMPORTANCE OF FAMILY BUSINESS

ECONOMIC DEVELOPMENT- Family business plays a crucial role in economic development

0f most of the countries. The small scale industry, service sector and newly emerging retail
sector are owned by family business which are contributing for the increased supply of
product and services to the company at large.

MOTIVATES FOR NEW VENTURES- The family business creates the spirit of
entrepreneurship. It enables the country to grow in its national income and reflects its
development. It enables to take initiative and bring new ventures in the country.

WELFARE OF GENERAL PUBLIC- The family business not only contributes for development of
the economy but also undertakes philanthropic services to the society.

AVOIDS CONFLICT AND DIFFERENCES- The family business lowers the transaction cost. The
partnership and other forms of business involve in outsiders, usually leads to conflict or
differences in the long run. In case of family business, all the members in a family are
affected by loss incurred in the company.

QUICK DECISSION MAKING- I n family business the size of the managing team is small
compared to the other forms of business organization. The decision making process involves
less period of time which helps to take timely decisions by family business concerns.

INFORMATION- Since family business is a private firm, it is not required to take decisions in
accordance with pressure from other sources. The strategies of business need not to be
revealed to outsiders of business.

CONFILICTS IN FAMILY BUSINESS :

In every business we find some pitfalls or problems or conflicts. The family business is not an
exception for conflicts which are detailed below:

1. Lack of Focus and strategy: In the initial stage, the family business perform in a effective
manner. But in the transition period, the business tends to lose its track from its actual
version.

2. Lack of professionalism: The family business units data maintenance practice is not on
par with private enterprises which becoming a major hurdle in the decision making process.
Since the professionalism is lacking in data maintenance, the decision are not proving to be
fruitful.

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3. Disparities in Education levels: The disparities in educations level of members of family
business unit will also pose problem to the family enterprise, it is because some members
may be driven to follow obsolete methods while others may focus on implementing latest
technology and practices in business. This may raise conflicts in the minds of members of
the family business.

4. Separation of business: The rivalries between siblings of family business may end up in
separation or division of family enterprise. Thus, the business comes to an end abruptly and
sometimes the divided members may find it difficult to continue the business.

5. Attitudinal Differences: In the running the family, we may also find difference in the
attitudes of employees. This leads to disparities treatment of employees and conflicts and
the gaps between employees and employees, employees and management may be
widening.

6. Short term approach: The family business adopts short term business approach which
leads to an absence of investment and product development.

7. Family Interest and Business Interest: In family business, we come across another
problem i.e. the enterprise may not be able to identify family interest and business interest
separately. They are unable to differentiate these two interest in the family concern.

RESOLUTIONS TO AVOID CONFLICTS IN BUSINESS :

The following remedies or resolutions are offered to avoid conflicts ion family business:

NEGOTIATION- It involves adopting negotiation among family members to resolve the

conflict and agree on common terms

ARBITRATION- In this resolution for conflict, the elder person of the family is given power to
frame rules and control business activity.

LEAD PERSON- The remedy of conflict suggests that a person who has ability to maintain
better relationship with key individuals of business and understand business and manage
the same should be appointed as lead person for the business.

GOOD COMMUNICATION- A proper communication of information among family members

about present business and utilization of available resources in business helps to avoid the
conflicts.

PROFESSIONALISM- Including professionalism in family business helps to retain effective

talent, proper documentation, planning and implementation of strategies for success of
business.

12
EXPAND BUSINESS- The family members should be encouraged to expand the existing
business. This will help to have independent family business unit for the conflict members
and problem should be resolved.

ABILITY TO CHANGE- The business enterprises should have the abilities to change according
to changing needs of the business. They have to renew their strategies on regular basis to
meet demand of changing situation to compete in the market.

CONTEMPORARY ROLE OF MODELS IN INDIAN BUSINESS :

ROLE MODEL

Role model refers to a person who serves as an example of the values, attitudes and
behaviours associated with a role. Role models can also be persons who distinguish
themselves in such a way that others admire and want to emulate them. For example a
successful doctor, teacher, engineer, entrepreneurs or businessman can be described as a
role model for the people who aspire the same avocation. Therefore role model implies a
person regarded by others, especially younger people, as a good example follow.

India is the land of the best people and personalities. Sometime the print and electronic
media may not cover them regularly but they are real model of every youth in India. The list
includes eight men and women entrepreneurs namely;

1.Mukesh Ambani

2.Dilip Shanghvi

3.Azim premji

4.Srichand P . Hinduja

5.Lakshmi Mittal

6.Nita Ambani

7.Arundhati Bhattacharya

8.Indra Nooyi

ROLE MODEL- MUKESH AMBANI

Mukesh Dhirubhai Ambani born on 19th April 1957 is the chairman of Reliiance Industries.
The net worth of his business is estimated at $20 billions at the end of 2015. Born to iconic
and legendory visionary and entrepreneur Dhirubhai Ambani, inherited his position but not
fathers wealth. The net worth of Mukesh Ambani is the result of the business genius inside
him. He joined with his father’s business genius inside him. He joined with his father’s
business at the age of 24 and immediately made his presence felt with some significant

13
changes. He was instrumental in realizing his father’s dream of a global expansion which not
only raised the profile of reliance but also their production from a few hundred thousands
tons to over 12 million annually. Ambani, later ventured into the petrochemical industry
with the creation of world’s largest grassroots petroleum refinery in Gujarat. He also went
on to set up one of India’s largest communications companies in history i.e, Reliance
Communications Limited with his brother Anil Ambani. Mukesh Ambani’s net worth would
be around $85 billion making them the richest family on earth.

Mukesh Ambani was ranked at the 39th richest person of the world and third year in a row
an Indian by business magazine Forbes. In 2014 Ambani was ranked 36 on Forbe’s list of
world’s most powerful people. He has largest investment programmes over Rs 2lakh crores
of which Rs 1lakh crore is commited to strengthen refinery and petrochemical business and
another Rs 1lakh crore is invested in enabling the realization of Digital India. The Reliance
Industries is committed to create societal value at par with financial value. They intend to
provide employment opportunities to hundreds of thousands of people in the consumer
business of different regions. It is a partner with large number of small business, kirana and
budding entrepreneurs and make them more productive. The firm intends to create
ecosystem which will catalyse entrepreneurship through their real businesses. Ambani
foresee huge opportunities in transforming the agricultural sector through Retail business,
which has a unique value and supply chain model. His vision of re-inventing education,
finance, retail, health care through innovations deployed over 4G will usher in the digital
revolution in the country. The Reliance enjoys sustained value creation over the past one
decade under the chairmanship of Mukesh Ambani. Its turnover is 370% net profit is 200%,
exports are 800% and net worth is 450%. He is a iconic leader personifying extreme
innovation, excellence and execution. He is never short of creating disruptive practices and
generating exponencial value i.e, for the company, for the nation and for the people.
Reliance India Limited is one of the leading Indian companies in terms of market value.

He is holding a number of important positions on various committees, boards and

institutions of national and international importance. He also received a number of national
awards and international awards and the Harvard Business Review has also ranked him as
the fifth best performing CEO among the top 50 CEOs of the world.

ROLE MODEL-DILIP SHANGHVI

Dilip Shanghvi is an Indian Businessman and one of the richest persons of India, as
announced by Forbes. He founded Sun Pharmaceuticals in 1983 with a partner. The net
worth of the business is 15.9 billion US Dollars for the year 2015.

Shanghvi was born in a small town of Amreli in Gujarat on 1st January 1955. His father was a
wholesale drug businessman in Kolkata. He started his pharma company with just five
products and five people. He has succeeded in the industry by deciding to stress on niche
markets like lifestyle and psychiatry drugs. The company’s revenue has grown fourfold and
now it s tands at a staggering $. 22.37 billion. The first unit of sun pharmaceuticals was

14
setup in Gujarat to manufacture Psychiatry medications. Shanghvi had a talent of turning
suck unit into profit making unit. This is reflected with the takeover of sick unit of Caraco
Pharma in 1997, which is now turned into profit making enterprise. He has been consistent
and balanced in his expression plans and implementation. In this direction he made
headlines by making the move to acquire trouble ridden drug maker Ranbaxy and
contributed for enhancing company’s revenues significantly. Each of his acquisitions was
well planned and they enabled him to diversify business to new sectors. The takeover of
Milmet Labs enabled the Sun Pharmaceuticals to venture into opthomology. In 1987, when
the company began selling products nationwide, it was ranked 108 th. But now it enjoys sixth
position. The company continued its expansion and joint ventures with several European
and US drug majors. The year 2012 was a significant year of the company. It is because, it
acquired two US companies viz, URL Pharma Inc and DUSA Pharmaceuticals Inc. However,
the acquisition of Israel based Taro made Sun Pharmaceuticals a big player in overseas
market and helped Sanghvi to redefine success in the pharmaceutical industry. United
States remains a large remains a large source of Sun’s revenue, it has enough scope for its
expansion.

He was awarded Entrepreneur of the year in 2010, India Businessman of the year in 2011
and Padmashri Award from Government of India in 2016.

ROLE MODEL-AZIM PREMJI

Azim Hashim Premji was born on 24 July 1945. He is an Indian business tycoon, investor and
philanthropist and chairman of Wipro limited, informally which is known as the Czar of the
Indian IT industry. He was responsible for guiding Wipro in the last four and half decades of
diversification and growth and finally to emerge as one of the global leaders in the software
industry. The net worth of his business is $5.7 billions He converted the outfit into India’s
third larges outscourcing firm with $4.9 billions revenue.

In 1945, Mohd. Hashim Premji, the father of Ashim Premji incorporated Western Indian
Vegetable Products Ltd., at Amalner, a small town in the Jalgaon district of Maharashtra. It
used to manufacture cooking oil under the brand name sunflower vanaspathi and a laundry
soap called 787, a byproduct of oil manufacture. After the death of Mohd. Hashim Premji, in
1966, Azim Premji took charge of Wipro. It was dealing in hydrogenated oil manufactruring.
But, Premji diversified the company’s activities to bakery fats, ethnic ingredients based
toiletries, hair care soaps, baby toiletries, lighting products and hydraulic cylinders. In 1980,
he recognized the importance of the emerging IT field and changed the name of company as
Wipro. This company entered the high technology collaboration with an American company
Sentinal Computer Corporation.

Azim Premji foundation, a non-profit organization was established in 2001 with a vision to
provide qualitative education in rural areas. Now, it functions across Karnataka,

15
Uttarakhand, Rajasthan, Chhattisgarh, Pondicherry, A.P., Telangana, Bihar and Madhya
Pradesh in close partnership with various state governments. To improve school education
in India, he has transferred 213 million equity shares of Wipro Ltd., held by a few entities
controlled by him the Azim Premji trust which is considered as the largest of its kind in India.

He is recipient of many awards and honours from various institutions. In 2010, he was voted
aiming the 20 most powerful men in the world by Asia week. He was twice been listed
among the 100 most influential people by Time magazine. He received ‘Padma Bhushan’ in
2005 for his outstanding work in trade and commerce, “Padma Vibhushan” in 2011, the
second highest civilian award from government of India. In 2015, University of Mysore
conferred the honorary doctorate to Azim Premji.

Premji owns 73% of Wipro and also owns a private equity fund, Premji invest, which
manages his $2 billion worth of personal portfolio. In 2013, he gave away 25% of his
personal wealth to charity and pledged to giveaway the rest of 25% in the next five years. In
July 2015, he gave away an additional 18% of his stake in Wipro taking his total contribution
so far to 39%. Azim Premji is the first Indian to sign up for “The giving pledge”, a campaign
to encourage the wealthiest people to make a commitment to give most of their wealth to
philanthropic causes. He is the third non-American to join this philanthropic club. Thus his
value systems and business ideologies are motivation for the new entrepreneurs to startup
their enterprises.

ROLE MODEL- LAKSHMI NIVAS MITTAL

Lakshmi Nivas Mittal is an Indian born steel magnet who is currently based in the UK. He is
the chairman and CEO OF Arcelor Mittal, the world’s largest manufacturer of steel. He was
born on 15 June, 1950 in Sadalpur Town in Rajasthan state. He is the owner of Majority 38%
of the total shares in Arcelor Mittal and is also the co-owner of the Queens Park Rangers F.C.
with 34% stake in the professional football club.

Till 1990s, the family owned a cold rolling mill for steel sheets in Nagpur and an alloy steel
plant near Pune. Now, the family business is run separately with a large integrated steel
plant near Mumbai, Mittal’s net worth is estimated at $13.6 billion according to Forbes,
2015. He stands sixth on the list of world’s richest persons. He is also second richest man in
Europe and the richest man in UK for the fifth time in a row. He is solely responsible for the
tremendous growth of his business in and around the world. Today his company has a
production capacity of 42.1 million tons of steel, and one of every five cars use stell
produced by his company. In the last few years Mittal steel has made a number of
acquisitions, buying up a network of steel producers in Kazakistan, Romania, Ukraine and
US. Today Mittal steel is the only truly global steel producer in the world with operations on
14 countries, spanning 4 continents.

16
Mittals’s philanthropic activities are highly appreciable. He set up Mittal’s Champions Trust
to support 10 Indian athletes for the Olympics. The Mittal group made many donations so
far to hospitals, educational institutions etc. He received many national and international
awards which includes the prestigious ‘Padma Vibhushan’ award from government of India
in 2008.

17
 UNIT : 3

STIMULATION OF ENTREPRENEURSHIP

The primary objective of developing countries like India is to achieve repaid, balanced and sustained
rate of economic growth. This is possible by encouraging entrepreneurship in both public and private
sector undertakings. The government has to devise an efficient and effective political, economic,
social, technology and cultural strategies to ensure a desirable co-ordination of all the sector of
economy. This stimulates many new entrepreneurs to setup enterprises and thereby solves many of
the society’s problem.

WHY STIMULATION IS REQUIRED :

The entrepreneurs need stimulation on account of the following reasons:

1. Market Survey: He has to undertake a market survey of the line chosen by him before establishing
an industrial unit. This would help in gaining an insight into the existing marketing conditions and
market reaction for the production.

2. Undertake risk: Any business poses risk for entrepreneurs. They may succeed or fail. They cannot
foresee the way it will be. Successful entrepreneur tend to launch ventures that fail between these
two extremes. Moreover and contrary to popular belief entrepreneurs generally avoid ventures that
involved pure gamble.

3. Personal Qualities: Entrepreneurs need personal characteristics such as intuition, vision

optimisms dynamism , enterprise and determination. Some of these qualities may be inherent but
some other can learnt by proper training in the entrepreneurship. Hence, entrepreneurs need
stimulation to undergo training to acquire unique qualities to setup an enterprise.

4. Managerial Competencies: The entrepreneurs need to posses managerial competencies.

Normally, they are scared of managing the until and try to depend on the hired personnel. It may
prove unsuccessful for continuation of the unit.

5. Technological Changes: The most dynamic forces, shaping people’s destiny is technology. An
entrepreneur has to watch the trends in technology. The level of technological development in the
industry creates an opportunity for an entrepreneur to develop new products.

6. Marketing Efforts: The knowledge of market and marketing strategies cannot be underestimated
for the development of entrepreneurship. The entrepreneur must posses the knowledge of
marketing environment to survive for a longer period in the market .

6. Infrastructural Facilities: The entrepreneurs who wish to establish their enterprises are
stimulated with the availability of infrastructural facilities in the region where the business is
proposed. Facilities such as roads, water, power, supply, workshop, banks etc. Also stimulate the
entrepreneur to set up the business.

8. Other Factor: Normally, there is a reluctance from the elders when an inexperienced young
people desire to become an entrepreneur an account of several reasons:
a) They lack experience in undertaking the venture .

b)Prevalence of difference between present and prospective occupations.

c) uncertainty prospects of new business.

d)Fearing of losing money and esteem.

e)Difficulties in procuring capital from internal and external sources.

f) Fear of occupational and geographical mobility,

g)Publicity of entrepreneurial failures.

h) sacrificing lucrative job, if he is already in job.

MEASURES TO STIMULATE ENTREPRENEURESHIP:

The entrepreneurs are stimulated to become entrepreneurs by internal factors and external factors.
The internal factors include educational background, occupational experience, desire to work
independently in manufacturing line, family background etc.

Internal Stimulating Factors

The internal factors which stimulate the entrepreneur to setup an enterprise are detailed below:

1.Educational Background: The educational background of the entrepreneur makes him to acquire
the knowledge of staring an enterprise. The knowledge of proposed unit and the feasibility analysis
helps the new entrepreneur to take a decision of starting an enterprise.

2.Occupational Experience: The entrepreneur may be engaged in some activity for his livelihood.
This occupational experience, many a times works as a stimulation to start his own enterprise and
provide employment to many others also.

3. Work Independently: Some people may have the desire to work independently instead or
working as employees of other firms. The attitude of the people also stimulates the make
entrepreneurs to take up their own venture.

4.Family Background: The family background of the people also stimulate them to become
entrepreneurs. In some families the elders and other well wishers might be engaged in
entrepreneurship activities already.

5. Availability of Finances: Sometimes the people may have sufficient money to setup an enterprise.
Availability of own finances and other external sources of funds tempts him and stimulates him to
implement the business idea.

6.Managerial and Leadership Skills: Managerial and leadership skills possessed by the new
entrepreneur may also stimulate him to setup enterprise. The ability to lead and manage the
business shall motivate him to materialise the new project idea.

External Stimulating Factors

The entrepreneur’s decision to setup an enterprise is also influenced by external stimulating factors
such as assistance from government, assistance of financial institutions, availability of technology,
marketing assistance, infrastructural facilities etc. The details are discussed below:

1. Government’s Assistance: The measures taken by government to encourage the setting up of

new industries, stimulates the entrepreneurs. After attaining independence, the planned
development undertaken by the government, made the environment conducive to entrepreneurial
growth. Heavy stress on repaid industrialization, expansion in domestic in demand, change in
composition of imports and rigid control over imports proved a blessing and stimulated most of the
entrepreneurs.

2.Financial Assistance: The entrepreneur are also stimulated to setup an enterprise with the
financial assistance offered by many if the financial institution. Availability of the liberal institutional
finance helps the young entrepreneurs to setup their own enterprises.

3. Availability of Technology: The availability technology is greately inflicting or stimulating to setup

an enterprise to develop new ideas, new products and new marketing efforts. The ever changing
technology has given scope for creativity and innovation in the marketing efforts.

4. Availability of Marketing Assistance: We have an institutions to provide marketing assistance to

new entrepreneurs. They are Director General of Supplies and Disposal, National Small Industries
Corporation Ltd. , International Trade Fair and Exhibitions, Small Industries Development
Organisation, Indian Trade Promotion Organisation and Trade Centres. These institutions provide
industrial information, Library and documentation, testing and quality control etc.

5.Infrastructural Facilities: The availability of infrastructural facilities like ready made buildings,
water, power, transportation, warehousing, insurance, communication system etc., are stimulating
the entrepreneurs to setup their own enterprises. We have industrial estates in almost all districts
head quarters to provide these facilities to new entrepreneurs at a very nominal rates.

6. Machinery on Hire purchases: All the entrepreneurs may not be having a strong capital base and
they may lack resources to buy very expensive machinery single handily. The National Small
Industries Corporation Limited supplies machinery and equipment to small enterprises on hire
purchase basic.

7.Availibility of Qualitative Labour: The emergence and growth of entrepreneurship depends on the
quality of labour that is availability but not the quantity of labour. But in developing economics like
India, population is more, immobility of unskilled labour is prevalent which has a curse on capital
intensive technologies.

8. Availability of Raw Materials: Shortage of raw materials discourage the entrepreneurs to set up
an enterprise. Shortage of raw materials; inferior quality, high price of materials etc., are leading to
high cost of production which adversely affecting and discouraging the new entrepreneurs.

9. Training Facilities: The entrepreneurs are also stimulated by the training programmes of Industrial
Extension Service by Development Commissioner and Small scale Industries Organisations.
10. Knowledge Transfer: In recent times, we find a close co-operation of research and business
communities. This co-operation is leading to transfer of knowledge which is unlocking the hidden
entrepreneurial potential of the entrepreneurs and the regions.

SUPPORTNG ORGANISATIONS:
At Central Level

The government has setup various organisations which specialize in industry’s promotion and
entrepreneurship development in different sectors. These organisations provide policy framework
support, in addition to training and financial aid. The various organisations which support the
industrial activities are:

1. Khadi and Village Industries commission.

2. COIR Board.

3. Small Industries development bank of India.

4. National Manufacturing Competitiveness Council.

5. National Skill Development Corporation.

At State Level

Apart from these central government’s supportive measures, we also find the state level initiatives
supporting the industrial units. Individual states across India have setup specially focussed
organisations which work towards the development and support of small scale industries. These
organisations run specific promotional schemes in addition to providing financial support to
industries. At state level we find State Financial Corporations (SFCs)and State Industries
Development Corporations (SIDCs) which support the industrial undertakings.

Development Support Organisations

Government of India also setup various organisations that are the forefront in providing support and
training for budding entrepreneurship. Some of the important organisations which work for the
development of skills of entrepreneurs are:

1. Central Footwear Training Institute, Agra

2. Idno-German Tool Rooms Ahmadabad, Indoor and Aurangabad.

3. Central Tool Room, Ludhiana.

4. Central Institute of Tool Design, Hyderabad.

5. Central Tool Room and Training Centre, Bhubaneswar.

6. Circle Telecom Training Centre, Kolkata.

7. Indo-Danish Tool Room, Jamshedpur.

8.Instittutes for Design of Electrical Measuring Instruments, Mumbai.

9. Electronics Service and Training Centre, Ramnagar.

10. Fragrance and Flavour Development Centre, Kannuaj.

International Organisations

Apart from the government and industrial organisation, we also find internal organisations which
support the entrepreneurs and their industrial activities. A higher responsibility lies with global
associations which play a developmental role in formulating trade and industrial policies by various
international governments. Some of the important international organisations which support the
entrepreneurship promotion are as follow:

1. International Network for SMEs

2. WIPO Small and Medium Sized Enterprises.

3. United Nations Industrial Development Organisation(UNIDO)

4. World Trade Organisation(WTO).

5. European Commission-Enterprise and Industry.

6. Innovations-SMEs.

7. Canadian International Development Agency.

8. Small and Medium Sized Enterprise Centre, Canada

9. SME Centre, Hongkong.

10. Small and Medium Enterprises in Ireland.

11. SME information of Japan.

12. World Trade Centre, Mumbai.

FINANCIAL ASSISTANCE TO ENTREPRENEURS:

The industrial undertakings can obtain finance for their projects under three categories. They are
term loans l, bridge loans and working capital. The details are given below:

• Term loan: Long term requirements for acquiring fixed assets like land and building, plant
and machinery and for security deposit and working capital margin
 • Bridge Loans: This loan is granted for a short duration to enable the entrepreneur to
continue with the implementation of the project till the term loan, applied for and
sanctioned is disbursed by the financial institution.

• Working Capital: Shot term advances for working capital in the form of
pledge/hypothecation/cash/credit/bills facility.

Application for Financial assistance

After the project is finalized provisional registration and other Formalities and completed the
Entrepreneurs has to submit an application for financial assistance along with the project report
to the Financial institutions/bank for consideration of terms loan . Similarly a separate
application has to be made to the bank for working capital requirements.

Enclosure of application for term loan

Along with the application submitted to the Financial institutions/bank the following document
have to be enclosed

• Copy of the project report.

• Copy of the partnership dead/ memorandum and articles of association

• Quotation in respect of plant and machinery

• Copy of possession receipt agreement to lease in respect of land

• Income tax assessment order or income tax clear related to partner and director.

• Copy of proposed building plans .

• Architect’s estimates in respect of factory building.

• Copies of balance sheet and profit and loss account previous 3 years relating to the
associate concerns if any of the promoteest.

MARKETING ASSISTANCE TO ENTREPRENEURS :

Marketing is the complex process of creating customer for product and services. It involves knowing
and reaching out to customers, listening very carefully to their needs and preferences and acting to
service them better every time. Effective marketing planning and promotion begin with gathering
factual information about the market place.

A very important part of marketing plan should be overall promotional objective to communicate
message create an awareness of product service, motivate customers to buy and increase sales. Care
should be taken regarding the following:

Advertising and promotion

• Determining overall advertising and promotion budget.

 • Formulating advertising and promotional objective.

• Deciding present method of promotion

• Ascertaining competitors method of promotion

• Evaluation of the effectiveness of advertising and promotion efforts.

Long term strategic marketing

• Plan to solve this problems.

• Goals stated under marketing overview still valid if not, what are the new goals.

• Plan to achieve these goals.

These essential elements underlying effective marketing efforts are targeting main strategy lactics
and promotion evaluation and marketing sure that the message reach targeted people.

Marketing Assistance to Small Units

Since marketing is a very complex activity the assistance is provided to the enterprise in following
ways:

• Government stores purchase programme: Under this scheme, the Director General of
Supplies and Disposal (DGS and D) makes purchase and behalf of the government of India
for various needs of its department DGS and D have reserved more than 400 items for
exclusive purchase from the small scale sector.

• NSIC: The national small Industries corporation limited has plans to provide assistance in
marketing the product of SSI sector both at home and abroad.

• International exhibition and fair: The entrepreneur are assisted by the government to
participate in international exhibition and trade fairs.

• Trade Centres: The trade centres are established with an object to serve as meeting point
for buyer and seller. These centres are located at Jaipur, Bangalore, Kanpur, Ludhiana,
Hyderabad, Ahmedabad, Bhubaneswar and Cochin by government of India.

Thus, the marketing assistance is available to the entrepreneur which makes the selling
efforts.

INDUSTRIAL ACCOMODATION FOR ENTREPRENEURS:

For any Industrial project, selection of a suitable industrial site is very important decision and
is based upon several consideration. Therefore advanced planning is required to study
market potential, general business, climate in the area etc. The details are as follows:

• Nearness to market and nearness to raw materials.

 • Availability of power and water.

• Availability of modern transporting system and cost of transport for procuring raw
materials, dispatching finished goods and speedy delivery.

• Taking an industrial shed or plot in an industrial estate with essential services such as
power, adequate water supply and facility for effluent delivery.

• Availability of required skills/prevailing wage rates.

• Climatic conditions/environmental factors affecting the industry.

• For establishing a manufacturing or industrial supply business to be ensured that the

site allow for future expansion

• Incentives/concession applicable for industrial backward areas and so on.

• Availability of freight, express and parcel delivery services.

Industrial Estates

In order to give Philip to enterprise for locating their business, the government set up industrial
estate. The land is acquired by the government and then it is developed from Industries point of
view. Arrangements are made for sewer, water, electricity, transportation, warehousing etc. At
present, there are about 662 Industrial Estates in India. The industrial estate program began with
opening of the first estate in Okhla near Delhi in 1957.

Application Formalities

The application of plot in industrial Estate is made on prescribed from along with following
enclosures:

• Copy of provisional registration certificate.

• Project profile or brief project report.

• Plan indicating utilisation of land.

• Details of constitution of the unit e.g. Proprietary, partnership, private/public limited

company etc.

• Copy of receipt of prescribed amount of earnest money.

Normally within one to two months the plots allotted and registered in the name of unit and
subsequently the plants are approved her construction of shed.

TECHNOLOGY ASSISTANCE TO ENTREPRENEURS:

By technology we understand all the skills, knowledge and procedures for making, using and
doing useful things. It is a systematic application of scientific or other organised knowledge
to practical tasks. The most dynamic forces, shaping people destiny in technology. An
entrepreneur has to watch the trends in technology. The level of technological development
in the industry creates an opportunity for an entrepreneur to develop new products. New
technology means new ideas new products and new marketing efforts. This requires an
entrepreneur to keep an eye on fast charging technology.

Now a days there are many startups that have emerged by exploring new and
innovative technology with extensive market research. Tech startups can also expand their
reach to potential customers with the help of world wide web. Having an online presence an
greatly influence the reach of entrepreneurial ventures and help accelerate their growth.
Technology is constant by evolving with changing times due to varying consumers
preferences and the entrepreneur are also expected to change accordingly. Business is no
longer just about buying and selling of goods and services but how technology can be used
to assist and expand those services. People can now access any service they desire of the
internet, many business which began as startups have become successful after gamering
customer mostly through their online presence.

TECHNOLOGY ASSISTANCE:
A no if measures have been initiated by Indian government to encourage the use of
technology by entrepreneur in their undertakings . The various boards and institutions which
help in the development of technology are detailed below:

• Technology development Board: India government constitute the technology

department board in September 1996 under the technology development board act
1995 as a statutory body to promote development and commercialisation of indigenous
technology and adaptation of imported technology for wide application.

• Technology Incubation and Development of Entrepreneurs (TIDE) Scheme: The TIDE

scheme is implemented by department of electronics and information technology
initially this scheme was launched in 2008, but it has been revised and extended till
march 2017.

• Incentives provided by the government: The government provided certain incentives to

promote R and D in the areas of technology as detailed below:

• The department of science and technology formulated and implemented a

scheme in 1973 to recognise in house research and development centres of
Industries by registration. These centres are eligible for certain fiscal benefits
such as:

• Import of critical material and equipment under open general

license.

• Grant of foreign exchange for deputation of export from abroad.

• Allocation of special controlled materials.

 • Exemption of excise deities.

• Income tax exemption upto 100% of the expenditure incurred or R

and D

• Preferential treatment in licensing for utilisation of indigenously

developed technologies.

• Industries sponsoring research project with national laboratories under CSIR are
eligible for income tax deduction.

• Depreciation rate higher than 50% is allowed to users of indigenous developed

technologies.

• Central and state Financial Corporation operate several incentives schemes such
as interest subsidies to encourage Industries who ventures to commercialisation
newly developed indigenous technologies.

• The IDBI operates a venture capital fund created by government of India by

imposing 95% cess on all imported technologies.

This, we find government of India is offering a number of benefits to

Entrepreneurs to adopt the new technologies which contribute for expansion
and success of the many business enterprises.

ENTREPRENEURS ASSOCIATIONS :

Introduction

Entrepreneurship plays an important role in the development of society. It is the barometer of

overall economic, social and industrial growth. It facilitates large scale production and distribution. It
has widened the area and scope of marketing of goods and services. We find large number of
entrepreneurs in all the region’s and their problems also manifolded. In some cases, the problem led
to failure of enterprises or product and services.

TiE- Global ENTREPRENEURSHIP Organisations

TiE is the world largest network of entrepreneurs with over 13,000 members worldwide. It was
founded in 1992 in silicon valley by a group of successful entrepreneurs corporate executives and
senior professionals with role in the Indus region. It has 61 chapters across 18 countries. TiE mission
is to foster entrepreneurship globally through mentoring, networking education, incubating and
funding. It provides role model and one-on-one mentorship and encourages across binder trade and
free enterprises policies internationally. It has a singular focus on wealth creation through
entrepreneurship

India Entrepreneur’s Club

It is an information destination, dissemination latest news, success and failure stories about
entrepreneurs with an aim to motivate and educate them to develop and expand beyond defined
boundaries. It has a mission to create entrepreneurs for the nation, a platform for the entrepreneurs
, and a market place offering discounts on various services and products used by them.

Federation of Indian Women Entrepreneurs (FIWE)

FIWE is a national level Organisations founded in 1993. It is one of India’s premier institution
which focuses on woman empowerment and dedicated towards entrepreneurship
development. It has large membership base of 15000 individual members/professional and
28 members association spread throughout the country. It provides EDP training, skill
development training, technical know-how, industry research and experience to the woman
entrepreneurs.

Young Entrepreneurs Society

All India Association of Industries (AIAI) has initiated young entrepreneurs society (YES) in
2001 to motivate and groom young individual with entrepreneurial drive in the age group
21-35 years. It educated them on the industry trends in the era of globalization through a
vibrant calendar of events. YES members mainly represent family owned business or first
generation entrepreneurs who have ventured into manufacturing, trading or service
providers. It advocate for enterprises from the smallest to the largest from all the sector
across India. It actively participate in policy work representing enterprises to the
government on trade and business policies and made several submission to regulatory
reforms.

Indian STEPs and Business Incubators Association (ISBA)

ISBA was started in the year 2004 by a small group of Science and Technology Entrepreneurs Parks
(STEPs) and technology business Incubators which were established by Department of Science and
Technology , Government if India. Today, it has a membership of more than 70 Organisations that
are into entrepreneurship development and incubating. ISBA is a non-profit society under the
Society registration act 1860.

Thus we find many Organisations working at national and international levels. Even at regional
level, we find entrepreneurs associations almost in all the the 29 states of our country. In Odisha
also a number of entrepreneurs associations are functioning such as Orissa Young Entrepreneurs
Association (OYEA), Odisha Industry Association etc.

Role of Entrepreneurs Association

Entrepreneurs associations have been playing a significant role in the entrepreneurship

development and for the success of the enterprises. These associations have become global leaders
on entrepreneurship. The following aspects reveal the role and significance of entrepreneurs
associations;

• Opportunity to share challenges: Entrepreneurs association gives an opportunity to share

the challenges of being an entrepreneur. It is because , it connects with peers and facilitate
an exchange of experience.
 • Undertakes Survey: EAs undertakes survey to predict economic trends in a number of areas,
including job creation, profit and debt loads, economic forecasting and the business
environment. These surveys help the entrepreneurs to identify the market trends in
entrepreneurship.

• Wealth Creation : EAs focus on wealth creation through entrepreneurship. It holds regular
workshop and provides role models and one-on-one mentorship. It encourage across
borders m trade and free enterprise policies internationally.

• Motivation: EAs are information providers. They disseminate latest news, success and
failure stories about entrepreneurs m, business owners and entrepreneurs with an aim to
motivate and educate them develop and expand the entrepreneurial activities.

• Defacto Barometer: Entrepreneurs association in considered as a defacto of overall

economic, social and Industrial growth. It facilitates large scale production and distribution
and widens the scope for marketing of goods and services.

SELF HELP GROUPS (SHGs) AND ENTREPRENEURSHIP :

Introduction

The self help groups have been established with a mission to make people in rural place socially and
economically independent. They aim to make rural people socially, economically and politically a
powerful force force. SHGs enable social interaction and assuming responsibilities by members. They
often provide material assistance, as well emotional support. Most of the SHGs are located in. The
SHGs are also found in their countries, especially in South Asia and Southeast Asia.

Definitions

• SHG is a village based financial intermediary committee usually composed of 10-20 local
woman or men.

• SHG is a voluntary, small group structure for mutual aid and for accomplishment of special
purposes.

Characteristics

On the basis of above definition, the characteristics of SHGs are summarised are as follows

• It is homogeneous group of micro entrepreneurs with affinity themselves.

• It is a voluntary association which encourages savings of the members

• It is a group wherein the members mutually agree to contribute to a common fund.

• It facilitates loans to members for productive and emergent credit needs.

• It decides the rate of interest, period of loan and other terms and conditions a determined
by the group members.

• It is a village based financial intermediary committee composed of local women or men.

 Objectives

The objective of SGHs are:

• To reduce poverty in rural communicate.

• To make rural people economically, socially and politically viable.

• To provide regional balance in rural circumstances.

• To make the rural population self reliant.

Schemes Offered

The various schemes that are offered under the SHGs are;

• Entrepreneurial development programme.

• Agricultural training for rural poor.

• Effective life style improvement programmes.

Structure

SHGs composed of 10-20 local women or men. A mixed group is generally not preferred.
Members make small regular savings for few months unit enough capital is accumulated to
begin lending, many SHGs are linked to banks for the delivery of micro credit. This system
eliminates the need for collateral and is closely related to that of solidarity lending, widely used
by micro finance institutions. Normally, they use flat interested m rate on the loans given to its
members.

Role of SHGs

The role of SHGs in the entrepreneurship development which is detailed below:

• Generate income: Entrepreneurship activity undertaken by SHGs provides self employment

for those who have stated a business of their own and enhances their economic status of
the rural sector as well. It transforms many entrepreneurs into successful business personal
and generates income for the rural communities.

• Encourage Thrift: The SHGs are voluntarily formed by homogeneous groups to save
whatever amount they can conveniently save out of their earnings. The members mutually
agreed to continue to a common fund of the group from which small loans are given to the
needy someone. Hence, the eagerness to start their own enterprise makes them to save
something out of their earnings.

• Availability of Funds: The SHGs pools the savings of members and provide loans to them for
meeting their productive and emergent credit needs at such a rate of interest period of loan
and other terms as decided by the group. The problem of financial assistance from outside
agencies can be conveniently removed. There is no need to offer any security on the loans
borrowed from the group.
 • Converting into powerful force: SHGs aim to take rural people socially, economically and
politically powerful force. They enable social transaction and often provide material
assistance as well as powerful force. They enable social transaction and often provide
material assistance as well as emotional support they enjoy status in the society with a
improvement in their economic conditions.

• Undertakes EDPs: The members of the SHGs cultivate the entrepreneurship and develop the
required skills under EDPs. In EDPs the members are given training to become financially self
reliant by helping them to commence the suitable income generating activities.

Business Incubators:
Meaning of Business Incubators:

A business incubator is a company that helps new and startup companies to develop by
providing services such as management training or office space. This is also Facility
established to nurture young (startup) firms during their early months or years. It usually
provides affordable space, shared offices and services, hand-on management training,
marketing support and, often, access to some form of financing. Business incubators differ
from research and technology parks in their dedication to startup and early-stage
companies.

Research and technology parks, on the other hand, tend to be large-scale projects that
house everything from corporate, government or university labs to very small companies.
Most research and technology parks do not offer business assistance services, which are the
hallmark of a business incubation program. However, many research and technology parks
house incubation programs.

Definitions of Business Incubation:

(i) The National Business Incubation Association (NBIA) defines business incubators as a
catalyst tool for either regional or national economic development.

(ii) According to Allen and Rahman, “The universal purpose of a business incubator is to
increase the chances of a firm surviving its formative years, but the business incubator also
adds value by maximizing the firms’ growth potential.”

Types of Incubation Services:

Since startup companies lack many resources, experience and networks, incubators provide
services which helps them get through initial hurdles in starting up a business. These hurdles
include space, funding, legal, accounting, computer services and other prerequisites to
running the business.

Following are the most common incubator services:

(i) They help with business basics

(ii) They provide Networking activities

(iii) They provide Marketing assistance

(iv) Incubators help in Market Research

(v) They provide High-speed Internet access

(vi) Incubators Help with accounting/financial management

(vii) They help in providing Access to bank loans, loan funds and guarantee programs

(viii) Incubators help with presentation skills

(ix) They link to higher education resources

(x) They link to strategic partners

(xi) They provide Access to angel investors or venture capital

(xii) They organize Comprehensive business training programs

(xiii) They act as Advisory boards and mentors

(xiv) They help in Management team identification

(xv) They help with business etiquette

(xvi) They provide Technology commercialization assistance

(xvii) They help with regulatory compliance

(xiii) They provide Intellectual property management

Three Stages of Business Incubation Development:

(i) Physical facility support – Business incubation provided within physical facility

(ii) Support service – Business incubation as business support service

(iii) Networking facilities -Business incubators provide networking facilities to the members.
Types of Incubators:
There are a number of business incubators that have focused on particular industries or on a
particular business model, earning them their own name.

(i) Virtual Business Incubators:

These are also known as online business incubators.

Business incubators began in the 1950s and took off in the late 1990s as support for startup
companies who need advice and venture capital to get their ideas off the ground. As the
dot-com bubble burst, many high-tech business incubators did so too. Now the model of a
business incubator is changing.

Several of the incubator companies who survived the dot-com bubble switched to a virtual
model. The old incubator model required a startup venture to set up shop at the incubator’s
site. The virtual model, on the other hand, allows a company to garner the advice of an
incubator without actually being located at the incubator site.

This new model suits those entrepreneurs who need the advice an incubator offers but still
want to maintain their own offices, warehouses, etc.

(ii) Medical Incubator:

This is a business incubator focused on medical devices & biomaterials. For encouraging
innovation and entrepreneurship in medical technologies, through technology, busi-ness
incubation support is given to innovators, start-ups and industry.

(iii) Kitchen Incubator:

It is a business incubator focused on the food industry. Specialty foods are typically high-
value and, at least in the beginning, low production. Starting a commercial kitchen from
scratch can cost a huge amount of investment. The average food entrepreneur has to spend
plenty before even making their first batch of food item.

This need for low-cost kitchen space has led to the development of shared commercial
kitchens that can be rented for hourly or monthly rates. But finding a place to make
specialty food products is only the first step. Entrepreneurs who want to make a profit have
to successfully package, market, and sell their products, too and the food incubators provide
help with all this.

(iv) Public/Social Incubator:

This is a business incubator focused on the public good. Social incubators aim to provide
social entrepreneurs with the tools to expand their business. The challenging economic
environment is changing the landscape of how we do business. At one end, some businesses
avoid their social responsibility and, at the other, charities have to find ways to be more
business savvy to survive. India has embraced the concept, with a twist, creating the idea of
“social business”.

(v) Seed Accelerator:

This is a business incubator focused on early startups. Seed accelerators, also known as
startup accelerators, are fixed-term, cohort-based programs, that include mentorship and
educational components and culminate in a public pitch event or demo day. While
traditional business incubators are often government-funded, generally take no equity, and
focus on biotech, financial technology (“FinTech”), medical technology (“MedTech”), clean
tech or product-centric companies, accelerators can be either privately or publicly funded
and focus on a wide range of industries.

Unlike business incubators, the application process for seed accel-erators is open to anyone,
but highly competitive. There are specific types of seed accelerators, such as corporate
accelerator, which are often subsidiaries or programs of larger corporations that act like
seed accelerators.

(vi) Corporate Accelerator:

It is a program of a larger company that acts akin to a seed accelerator. A corporate

accelerator is a specif-ic form of seed accelerator which is sponsored by an established for-
profit corporation. Similar to seed accelerators they support early-stage startup companies
through mentorship and often capital and office space. In contrast to regular programs,
though, corporate accelerators derive their objectives from the sponsoring organization.
These objectives can include the wish to stay close to emerging trends or to establish a
funnel for corporate venture capital investments.

Corporate accelerators differ from Business incubators, which usually have a continuous
intake, due to their fixed-term, cohort-based or-ganization (similar to seed accelerators) and
are distinct to corporate venture capital which is a direct, targeted investment.

Venture Capital:
Introduction:- Venture capital is a form of financing especially designed for funding high technology,
high risk and perceived high reward project. While a conventional financier seeks to fund project
with proven technology and already established markets, a venture capitalists provides funds funds
to the entrepreneurs pursuing new and hitherto unexplored avenue and ideas.

Salient features of Venture Capital:

The salient features of Venture Capital are as follows:

• It is a high risk venture.

 • It finance high teach projects.

• It gestation period of benefits is quite long.

• It also assist the units with marketing and managerial skills and expertise.

• It makes a provision for conditional loans.

• It is a long term investment.

• It seeks a return commensurate with the success of the ventures.

FORMS/MODELS OF VENTURE CAPITAL

Guidelines on Venture Capital

The government of India issued some guidelines on November 18, 1998 mainly to promote a broad
framework for the operation of the Venture Capital companies in the country. The main features of
these guidelines are given hereunder.

• All India Financial Institutions, the SBI and other scheduled banks are eligible to float such a
fund.

• Minimum size of the fund should be rs. 10 cores.

• In the event of public issue, the promoters shares is to be more than 40% of the issued
capital.

• Foreign holding will be allowed up to 25% provided it comes from multilateral international
financial organisations, development institutions or mutual funds.

• The NRIs investment is allowed upto 74% in the capital on a non-repatriable basis and upto
25-40% on a repatriable basis.

• Debt-equity ratio should be limited to 1:1.5.

The Role of Functions of Venture Capital

The venture capital in any economy plays a vital role in fostering industrial development by exploring
vast and untapped potentialities of different regions. The important role or function of venture
capital are detailed below:

• Provides finance and skills: Venture Capital provide both finance and skills to the new
enterprise. It provides seed capital assistance to finance innovations even in the prestart
period. He imparts all the skills in the area of technical, commercial, managerial, financial
and entrepreneurial.

• Fills the Gap: Venture capitalists fills the Gap in owners fund to support the successful
launching of new business or the optimum scale of operations of the existing business. Thus,
venture capitalists help in establishing new business and stimulates existing firm’s to achieve
optimum performance.
• Ensures Adequate Finances: The venture capitalists also undertakes the responsibility to see
that the firm has proper and adequate commercial banking and receivable financing.

• Identity Outstanding Corporate Achievers: The venture capitalists assist the entrepreneurs
in locating, interviewing and employing outstanding corporate achievers to professionalise
the film’s activities.

• Promotes Entrepreneurship: The venture capitalists help the small and medium first
generation entrepreneurs to translate their ideas into reality. Thus, they promote and foster
entrepreneurship in the country.

• Protects the investors: The venture capitalists always benefit and protect the investors.
They are invited to invest only after the company starts earnings profits. This results in less
risk and healthy growth of capital market is ensured.
 UNIT 4

SOURCESS OF BUSINESS IDEAS

Introduction :

Idea generation is a creative process businesses use to generate new ideas, whether they're
tangible orintangible. It involves gathering ideas, research, testing, editing or revising, and
ultimately implementing theplan.

Sources of New Ideas:

The entrepreneurial idea is a feasible, financially sound, technically possible and socially
acceptable idea ofa project or product that may have utility lo perspective customers.

It is not possible for anyone to come up with an idea and in the very first instance, convert it
into a businessopportunity and start a small business on that basis.The majority of good
business opportunities do not comesuddenly.It comes from an established mechanism to
generate a large number of ideas so that at least one ofthe ideas has the potential for a
business opportunity. It requires a series of steps to finalize it into a profitablebusiness.This
is the first step in idea generation and evaluation.The entrepreneurs throughout the world
usethe following sources to tap to identify good ideas:

SOURCES OF BUSINESS IDEAS:-

Their are different sources and methods that helps us to develop a wide range of ideas.
Broadly, the most frequently used sources of business ideas for entrepreneurs are classified
as follows:

Primary source of business ideas

• Hobbies: While having fun at what they enjoy doing many people have started
business. Converting having into money making opportunities has worked for many
entrepreneurs. For instance, if you love to travel, perform arts or into hospitality you
can look at starting a business venture in the tourism sector. Example of hobbies
that make money include sports, cooking, piano, playing, photography etc.

• Self experience: Many investors find it convenient to choose business ideas in line
with their background . This because of them understands the terrain better. More
than half of the business idea comes from experience at work place only. A survey of
entrepreneurs found that most of the new startup companies are involved in
Industries where they had significant work experience.

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Secondary sources of business ideas:-

• Consumers: Potential entrepreneurship should continually pay close attention to

potential customers. This attention can take the form of informally monitoring
potential ideas and needs or formally arranging for consumers to have an
opportunity to express their opinions.

• Existing product and services: Potential entrepreneurship and intrapreneurs should

also establish a formal method for monitoring and evaluating competitive products
and services on the market. Frequently, the analysis uncover ways to improve on this
offerings that may result in a new product or service that has more market appeal.

• Existing Distribution Channels: Members of the distribution channels are also

excellent source for new ideas because of their familarity with the needs of the
market. Not only do channel members frequently have suggestions for completely
new products, but they can also help in marketing the entrepreneurs newly
developed product. By heading the suggestion and making the appropriate colour
change his company became one of the leading suppliers on non-brand hosiery in
that region of the United States.

• Government and Industrial Policies: The government and Industrial Policies can be a
source of new product ideas. New product ideas can come in response to
government regulations and new Industrial policies. Several government and
agencies and publications are helpful in monitoring patent applications.

• Research and development: The large source of new ideas is the entrepreneur own
research and development, efforts which may be a formal endeavour connected
with one’s current employment or informal lab in a basement of garage.

Idea and information sources:-

The above discussed primary and secondary sources and related to only generating the
business ideas. However, the ideas generated should be support by the sufficient theoretical
information. Thus there are different types of other sources of ideas and information which
can be helpful to generating new ideas and providing sufficient information to support the
business idea. They are identifying under the following broad heads:

• Literature as Idea and information sources.

• People as Idea and information sources

• Organisations as Idea and information sources

• Other ideas and information sources.

Literature as Idea and information sources:-

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Under this head of Idea and information sources, books, periodicals and technical report,
administrative director and other literature sources are most popular.

(A) Books

1. Handbook: The engineering field publishes a variety of handbook on data, procedures

and technical information. This publication are usually available through the library.
Example are mark’s standard handbook of mechanical engineering and the tool and
manufacturing engineering handbook published by the society of manufacturing engineers.
The latter handbook include a number of volume convering various topics such a material,
finishing and coating, machining and design for manufacturability.

2. Textbooks: Books are frequently a goods sources of information. Although technically

information may not be the most up-to-date by the time a book is publish , even some very
olds texts can sometimes provide or at least stimulates some interesting ideas.

3. Industry manuals: Many engineering associations produce manuals that provides general
(e.g., design procedures) and specific (e.g., motors, bearings) information about standards
product, parts and producers, nuts and bolts, for example are described in the SAE
handbook.

(B) Periodicals and technical reports

1. Trade magazine: There are a number of trade magazine that cover general design issues
or are targeted at a specialised technical field. These magazine are often a source of
solutions for current problems. Besides the article in this magazine, the advertisement can
provide a fruitful source of Ideas.

2. Research journal: Research journal are directly related to the specific area of the problem
which is to be solved may provide modeling and analysis of specific problems as well as
more general information that can lead to a design solutions. Example of these journals are
journal of engineering design, ASME Journal of heat transfer, and artificial intelligence in
engineering design and manufacturing etc.

3. Databases: Databases provides a mechanism by which articles from hundreds of technical

journals spanning numerous years can be search for special subject. Example of these
databases include “ The engineering index and the national technical information service
etc. These databases can be searched by the general categories or specific key words can be
used for more targeted searches.

(C) Directories

1. Thomas register: The Thomas register of American manufactures is a set of volume that
provide information about manufactures of a multitude of product and services. It can
typically be found in the library but is now convenient available

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2. Fraser’s Canadian Trade Directory: Similar to the Thomas register, Fraser’s Canadian.
Trade directory provide information about Canadian providers of product and services. It is
available in both hard copy and CD-ROM formals, and can also be accessed through the
internet at www.frasers.com where searches can be conducted within the categories of
company product/service or brand name.

3. Yellow pages: The yellow pages are another source for Suppliers and manufacturing it
availability from local suppliers is insufficient, yellow pages for other cities can often be
found at the library or on the internet.

4. Catalogues: There are hundreds of catalogue of parts assemblies and materials available
through vendors. These catalogue are often available through workshop and resources
centres or can be ordered by mailing away request cards often included in trade
publications.

(D) Other Literature source

• World wide Web: Searching the interest can lead to website belonging to vendors
manufacturers consultant design companies professional organizations and
educational centres etc. Information found on the internet is often more current
than what is published and often provide an email address to which questions and
requests for additional information can be sent.

• Brochures: Marketing publications available from competitors or for related

products can sometimes provide valuable information.

TECHNIQUES FOR GENERATING NEW IDEAS:-

The Entrepreneur’s identify more ideas from than opportunity because many ideas are
typically generated to find the best way to capitalise on an opportunity. The following are
different types of techniques which can be used to stimulate and facilities the generation of
new ideas for product services and business

• Brainstorming

• Focus Groups

• Observations

• Surveys

• Emerging trends

• Research and development

• Trade shows and association meetings

• Other techniques

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• Brainstorming: This is a process in which a small group of people interact with very
little structure with the goal of production a large quantity of novel and imaginative
ideas. Normally, the leader of the group asks the participant to share their ideas. As
group members interact, each Idea sparks the thinking of other, and the spawning of
class becomes contagious.

• Focus groups: These are group of individuals who provide information using a
structure format. Normally, moderator will lead a group of people through an open
in depth discussion. This technique is in excellent source for screening ideas and
concept.

• Observations: A method that can be used to describe a person or group of person

behaviour by proving.

• What do people Organisations buy?

• What do they want and can not buy?

• What do they buy and don’t like?

• Where do they buy, when and how ?

• Why do they buy?

• What are they buy more of?

• What eise might they need but can not that?

• Surveys: This is a process involves the gathering of data based on communication

with a representative sample of individuals. Questionnaires or interview are utilised
to correct data or the telephone or face to face interview.

• Emerging trends: The example is based on the population within your area may be
getting older and creating demand for new products and services.

• Research and development: Research is a planned activity aimed discovering new

knowledge, with the hope of developing new or improved product and services.
Researching new methods skills and techniques enable entrepreneurs to enhance
their performance and ability to deliver better product and services.

• Trade shows and Association meetings: This can be an excellent way to examine the
product of many potential competitors, uncover product trends and identify
potential product.

• Other techniques: This can be achieved by reading relevant trade magazines and
browsing through trade directors. This may include local, national and foreign
customers.

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TASKS IN DEVELOPING NEW BUSINESS IDEAS:-

For developing a new business ideas one could pursue the following tasks :

• Identify the value proposition of business ideas: This is to identify and briefly
describe the unique value that you may be able to bring your customers that your
competitors contract.

• Discuss product/services with the prospective customers: Would they buy from you
at the price with what frequency etc. ? Listen Carefully to what is being said, watch
carefully for qualifications, hesitations, etc. And don’t brow bear respondents with
your Ideas- you are looking for their views.

• Access the market using in depth market research

• How is the market segmented ( by price, location, change, etc.)?

• What segments are you targeting?

• How large are these segments ( in terms of value) and how are they
changing?

• What are the price/make up structure?

• What market share might be available to you bearing in mind your likely
prices, location, levels of promotion etc.?

• Analyse your competitors

• Who are they and how do they operate?

• Are they successful and why?

• How would do they react to your arrival?

• What makes you think that you could beat the competition?

• At whose expense will you gain sales?

• Consider possible start up strategies

• Will you be able to work from home or part time?

• Will you seek a franchise or set up an store concession?

• Will you start by buying in finished product for resale as a precursor to

manufacturing?

• Will you contract our manufacturing?

• Will you buy an existing business or from an alliance ?

• Could you lease or hire equipment, premises etc. Rather than buy?

6
 • How will you stimulates sale?

• Set approximate target and prepare First cut Financial projection: Estimate possible
sale and cost get a feels for orders of magnitude and key components and to
establish a rough break even point.

• Prepare a simple action plan: Cover the first year of operation to highlight the
critical tasks and lightly funding needed before the business starts generating a
positive cash flow.

• Critically examine ideas from all agencies

• Can I raise enough money?

• Can I get a premises/staff etc.?

• Will the product work?

• How will I promote and sell?

FEASIBILITY TEST OR BUSINESS IDEAS :-

A business ideas feasibility test can be defined as a controlled process for identifying
problem and opportunities, determining objectives, describing situation, defining successful
outcomes and accessing the range of cost and benefits associated with several alternative
for solving a problem.

It is an analytical tools that includes recommendations and limitations which are utilised to
assist the decision makers when determining at the business concept is viable.

Pre-Feasibility Study: Pre-Feasibility Study refer to the preliminary assessment of the

project ideas which helps in accepting or rejecting it. It enables to examine that potential
demand size of the market number of competitors, plant capacity, materials availability,
location and site, machinery, equipment, investment costs, project financing, manufacturing
costs etc.

• Feasibility Study: It enables to gets a detailed information in different aspects

relating to a project such as economic, technical, managerial, organisational,
commercial and financial. Further, the feasibility study is based on additional and
more reliable data collected through research studies, survey, pilot plant studies or
tests for the project ideas, it’s location and it’s techno economic environmental
conditions.

• Project report: The information gathered from feasibility studies and analysis
presented in various tables, reports and statement is consolidated into one single
report which is called as project report it is also called as feasibility report.

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IMPORTANCE OF FEASIBILITY TEST:-

The importance of the feasibility test can be identified as followed:

• Costs reduced: The research and information uncover in the feasibility test will
support the business planning stages and reduce the research time. Hence, the cost
of the business plan will also be reduced

• Abundance of information: A through viability analysis provide an abundance of

information that is also necessary for the business plan. For example a good market
analysis is necessary in order to determine the business concept feasibility.

• Supporting Evidence: A feasibility test should contain clear supporting evidence

from as recommendation. Recommendations will be reliant on a mix of numerical
data with qualitative, experience based documentation.

• Evidence for business Viability: A business feasibility test in heavily dependent on

the mutual results and analysis. It provides the stakeholders with varying degrees of
evidence that a business concept will be in fact be viable.

MEANING OF BUSINESS PLAN/PROJECT PROPOSAL:-

The business plan/project proposal is written document prepared by the entrepreneur that
describes all the relevant external and internal elements involved in starting a new venture.
It is often an integration of functional plans such as marketing finance manufacturing and
human resources. It also related to both short term and long term decision making from the
first three years of operations. Planning is a process that never ends for a business.

SIGNIFICANCE OF WRITING BUSINESS PLAN/PROJECT PROPOSAL:-

The business plan should be prepared by the entrepreneur with the consultation of experts
in the various fields such as lawyer, accountants, marketing consultant and engineers etc.
Sometimes business plans prepare by the Small Business Administration, services core of
Retired Executive, Small business development Centres, Universities, Friends and other
Relatives. However there are probably three perspectives that should be considered in
preparing the business plan or project proposal as mentioned below:

• Entrepreneur’s Perspective: The perspective of entrepreneurs, who understands

better than anyone else the creativity and technology involved in the new venture.

8
 • Market perspective: Market perspective Is too often and entrepreneur will consider
only the product or Technology and not whether someone would by it.

• Financial and Skills Perspective: The Entrepreneur’s should try to view is or her
business through the eyes of the investor. Sounds financial projections are required,
if the entrepreneur does not have the skills to prepare this information, then outside
source can be of assistance.

REASONS FOR WRITING A BUSINESS PLAN/PROJECT PROPOSAL:-

• Clarity: Writing a business plan or putting together an investor deck allow you to
think more clearly about what you are doing and where you are going. Key points to
remember through is that the minutes that your business plan hits the printer it is
already out of date, so do not depend on it as your to do list. Think of it as a
roadmap.

• Organisations: The biggest reason to right out a business plan regardiess of any
financing options concerns is that it can help you stay organized and remain on track.
Businesses without a plan can easily get of target, and revenue will suffer as a result.

• Practice Makes perfect: It’s great to write one simply to through it away. The mental
gymnastics are great. The plan is basically worthless the moment you are finished-
but it will force you to think about things you might not have otherwise.

• Confirm the math: A lot ideas sound great in papers and even in discussion.
However, simple math can makes or break an idea. Before we launch any new idea
we at least create a Financial model to project the return on investment from several
realistic scenarios.

• Foster Alignment: Writing a business plan is an ideal way to make sure that
everyone on your founding terms is aligned with the current and future plans for the
business.

• Iron out possible kinks: Writing a business plan allows to really thinking things
through. The plan should questions the validity of our ideas. The product/services
target market and so on. It should force to do our own proper due diligence.

• Hold yourself accountable: A business plan is a great tool that allows founder to
articulate their vision and future plans for their company. Once these are putting on
paper, they can serve as a guide to allow you to track your progress and hold
yourself accountable for the future.

• Know your message: Business planning is incredibly helpful for describing what you
do. Understanding who your competitors are, and creating a realistic three to five
years plan

Steps Involved in Writing a Business Plan:-

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Like any other project, writing a business plan has to be carefully planned and systematically
executed. This will improve the quality of the final business plan and it will also keep things
moving smoothly.

1. Define Purpose:

The business plan will serve its purpose better if its purpose is spelt out in the very
beginning. There may bemultiple goals in writing the business plan. For example, the
entrepreneur may be planning on using thebusiness plan to secure bank finance as well as
to attract a major corporation as a strategic partner. It is okayto have multiple goals, but
some amount of customizing should be done before placing it in front of differentaudiences.

2. Collect Information:

All sorts of information about the business and the industry should be collected. List out all
the informationyou already have with you, figure out the major gaps in information, and go
out there to get more information. Do not rate the quality of this information; just gather it.
At this point, the more you can find the better.

3. Write Down Things:

After enough information has been gathered, you can plan on starting the actual writing.
Think of a roughstructure appropriate for the business plan and start writing. It is important
to note down things on paperwithout being too particular about sequence and grammar.
Approach it like a brainstorming session. Do notbe critical of your efforts. Just make sure
that you are putting enough thoughts on paper.

4. Prepare a Rough Draft:

Now it is time to give shape to your business plan and make it concrete. Correct
grammatical mistakes andbreak up the written account into meaningful sections. Compare
your writing to your intended outline andmake necessary changes. As your work progresses,
you will need to make a note of what else needs to beadded. For some topics, more
information will be needed. At this stage of the writing process, you are going todecide on
the level of detail necessary to be included in the business plan.

5. Do Financial Analysis:

The numbers will continue to be important. After all costs and revenue estimates have been
arrived at, proforma financial statements are to be drafted. That will lead to drawing up the
sensitivity analysis, the ROIcalculation, the break-even analysis, and other financial rations.
The numbers should be realistic and consistent.

6. Finalize the Plan:

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Finalizing the business plan is certainly a hard job. Language and spellings have to be
checked, the numbershave to be scrutinized and formatting has to be completed. Even
small errors can leave a very bad impression. The business plan should not be ornate but
should have a professional look about it. Set a deadline forcompleting it and adhere to the
deadline. One good way to enforce a deadline is to tell some people that youwill be showing
them the business plan by a certain date. Now it will be hard for you to ignore the deadline.

7. Get the Plan Reviewed:

Do not review your business plan yourself. Ask someone else to do it. It could be a family
member, a friend, ora professional acquaintance. Even better would be if you could get a
number of people to do it.

PROJECT REPORT :

Meaning of Project Report

A Project Report is a document which provides details on the overall picture of the
proposed business. Theproject report gives an account of the project proposal to ascertain
the prospects of the proposedplan/activity. Project Report is a written document relating to
any investment. It contains data on the basis of which theproject has been appraised and
found feasible. It consists of information on economic, technical, financial,managerial and
production aspects. It enables the entrepreneur to know the inputs and helps him to
obtainloans from banks or financial Institutions. The project report contains detailed
information about Land and buildings required, Manufacturing Capacityper annum,
Manufacturing Process, Machinery & equipment along with their prices and specifications,
Requirements of raw materials, Requirements of Power & Water, Manpower needs,
Marketing Cost of theproject, production, financial analyses and economic viability of the
project.

OBJECTIVES OF PROJECT APPRAISAL:

The fundamental objectives of appraising a project are :

• to determine future expected contributions of project alternatives, to determine various

cost and benefits of those proposed actions

• to design a conceptual framework that helps monitor and evaluate the actions

In order to meet the above objectives, a project appraiser should seek an

Appropriate appraisal methodology i he methodology should be able to

• provide an integrated framework towards all types of goals (economic, political, Social,
commercial, etc),

11
• provide an organic link between goals pursued and alternatives considered,

• explicitly state values implied by goals and assumptions made,

• define the means of verification of theory and assumptions made,

• set a general and adaptable framework that is tailored to various characteristics ofProject
actions,

• focus on information that helps in determining sensitivities of the project outcometo

proposed assumptions,

• disseminate information to identify key variables that need close monitoring duringProject
execution,

• provide necessary flexibility' in the project design to adapt the projects toUnforeseen
developments or to new insights m the developmental process ,

• apply the information on the development of a project at micro level,

• focus on the significance and effectiveness of policies by providing necessary Information

to ex-post evaluation on the effects of a project,

• install an information system that provides a detailed project experience and gives a
Feedback so that future projects can be fine-tuned

CONTENTS OF A PROJECT REPORT:

Following are the contents of a project report.

1. General Information

A project report must provide information about the details of the industry to which the
project belongs to. It must give information about the past experience, present status,
problems and future prospects of the industry. It must give information about the product
to be manufactured and the reasons for selecting the product if the proposed business is a
manufacturing unit. It must spell out the demand for the product in the local, national and
the global market. It should clearly identify the alternatives of business and should clarify
the reasons for starting the business.

2. Executive Summary

A project report must state the objectives of the business and the methods through which
the business can attain success. The overall picture of the business with regard to capital,
operations, methods of functioning and execution of the business must be stated in the
project report. It must mention the assumptions and the risks generally involved in the
business.

3. Organization Summary

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The project report should indicate the organization structure and pattern proposed for the
unit. It must state whether the ownership is based on sole proprietorship, partnership or
joint stock company. It must provide information about the bio data of the promoters
including financial soundness. The name, address, age qualification and experience of the
proprietors or promoters of the proposed business must be stated in the project report.

4. Project Description

A brief description of the project must be stated and must give details about the following:

Location of the site, Raw material requirements, Target of production, Area required for the
workshed,Power requirements, Fuel requirements, Water requirements, Employment
requirements of skilled and unskilled labour, Technology selected for the project,
Production process, Projected production volumes, unit prices, Pollution treatment plants
required.If the business is service oriented, then it must state the type of services rendered
to customers. It should state the method of providing service to customers in detail.

5. Marketing Plan

The project report must clearly state the total expected demand for the product. It must
state the price at which the product can be sold in the market. It must also mention the
strategies to be employed to capture the market. If any, after sale service is provided that
must also be stated in the project. It must describe the mode of distribution of the product
from the production unit to the market. Project report must state the following:

Type of customers, Target markets, Nature of market, Market segmentation, Future

prospects of the market, Sales objectives, Marketing Cost of the project, Market share of
proposed venture, Demand for the product in the local, national and the global market, It
must indicate potential users of products and distribution channels to be used for
distributing the product.

6. Capital Structure and operating cost

The project report must describe the total capital requirements of the project. It must state
the source of finance, it must also indicate the extent of owners funds and borrowed funds.
Working capital requirements must be stated and the source of supply should also be
indicated in the project. Estimate of total project cost, must be broken down into land,
construction of buildings and civil works, plant and machinery, miscellaneous fixed assets,
preliminary and preoperative expenses and working capital.Proposed financial structure of
venture must indicate the expected sources and terms of equity and debt financing. This
section must also spell out the operating cost

7. Management Plan

The project report should state the following. Business experience of the promoters of the
business, Details about the management team, Duties and responsibilities of team

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members, Current personnel needs of the organization, Methods of managing the business,
Plans for hiring and training personnel, Programmes and policies of the management.

8. Financial Aspects

In order to judge the profitability of the business a projected profit and loss account and
balance sheet must be presented in the project report. It must show the estimated sales
revenue, cost of production, gross profit and net profit likely to be earned by the proposed
unit. In addition to the above, a projected balance sheet, cash flow statement and funds
flow statement must be prepared every year and at least for a period of 3 to 5years.

PREPARATION OF PROJECT REPORTS:-

Having decided upon the product and organisations, the entrepreneurs to his put his ideas
and other information sought in black and white. This should be done so efficiently that it
provides all the required information in reference to the project. The details gathered from
feasibility studies are presented in various tables, report and statements are consolidated
into one master report which is called as project report. The main objective of preparing
the report is to provide information for the project appraisal.

A project report generally covers the following aspects in details:

1. Introduction: Brief introduction of the proposed project.

2. Need: Need for deciding to setup of the project.

3. Unit: Constitution of the unit indicating proprietorship, partnership, corporate body

etc. The nature of unit indicates wheat ancillary to some large unit or not.

4. Promoters: The details of promoters and other key personnel should be furnished.
The bio data must give details on their education, jobs held and business activities
undertaken by them.

5. Nature of product: This should contain information on the description of the product
to be manufactured, the type of products to be manufactured, product capacity,
chemistry of product, specifications, properties, application and uses

6. Market potential: This should disclose information or general market trends,

estimated overall demand, proposed share of the unit, projected sales for first three
years, market segment proposed to be converted, details of own showroom, sales

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 force, middlemen and term and condition offered to them, value of order in hand if
received by the entrepreneur etc.

7. Manufacturing process and know how: This should provide details about process
flow chart, sequence of the operation and time taken for each operation, input
output ratios, between materials and finished product, selection of suitable
knowhow for the project, prospective collaborator and terms and conditions.

8. Plant and machinery: This should disclose details of machinery required for the
project, capacity of each machine and power required for them, technical details and
specifications, details of suppliers, price of each machine, procurement time and
availability in the market, list of imported machinery it required, reasons for
selecting the suppliers along with the details of quotations.

9. Location: This should also provide information regarding the total area and cost of
the land required, cost of land development, covered and uncovered area, estimate
of building including utilities such as water, electricity and other infrastructural
facilities.

Project Submission/Presentation and Appraisal :-

The project submission presentation is explaining about the project- both the product and
the process- to the evaluators . The presentation compliment the project documentation
and the product demo if any.
After gathering a large number of projects profile, the entrepreneur should consider the
following criteria for selecting a particular project.

1. Size of investment.
2. Location of the project.
3. Availability of Technology and technical collaboration.
4. Availability of best equipment.
5. Market facilities ( Availability of domestic and Industrial) etc.

Project Appraisal

Project appraisal is the process of transmitting information accumulated through feasibility

studies into a comprehensive from in order to enable, the decision makers undertake a
comparative appraisal of various projects and embark on a particular project or projects for
allocating scare resources.

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Objectives of Project Appraisal :-

Project appraisal is a tool for exact analysis of a designed scheme. It identifies and estimates
the expected cost and benefits of a project. Project appraisal is undertaken with the
following objectives:

1. To arrive at specific and predicted results of a project.

2. To get necessary information to determine the success or failure of a project.
3. To apply standard yardstick for determining the rate of success or failure of a
project.
4. To identify the expected cost and benefits of a project.

Aspects of Project Appraisal

A final view on the project proposal is taken on the basis of combination of factors like
technical, financial, commercial, management aspects etc. Weakness or deficiency in any
project does not prepare a ground for its rejection but care is taken to initiate suitable
action to minimise it’s impact on the project. It is essential to consider the following aspects
of Project viability, before deciding on further investment in the project.
1. Technical appraisal
2. Financial appraisal
3. Economic appraisal
4. Managerial appraisal
5. Commercial appraisal
6. Operational appraisal
7. Environmental appraisal

1.Technical Appraisal: Technical Appraisal refer to the review of product mix, production
capacities, process of manufacture, engineering know how and technical collaboration,
sources of raw materials and consumables, location and site, plant size, building plant and
equipment, manpower recruitments, water and steam gas, fuel electricity, bridges railway,
airways, latest knowledge to be adopted, availability of research and development facilities
etc.

2. Financial Appraisal: Implementing Project, involving large expenditure in a strategic

decisions it is both long term and not easily reversible. The financial appraisal is very much
required for the successful implementation of the project proposal.

Profitability Analysis: Keeping the overall objective of the enterprises and specifically those
of the project, a project analysis is to be undertaken to calculate the profitability indices
which are discussed hereunder:
1. Payback period
2. Average rate of return
3. Net present value

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 4. Benefits cost ratio, and
5. Internal rate of return.

1. Payback period (PBP): Payback period method is traditional method which is very
simple to understand and most widely used for profitability analysis of a project.
Payback period is the time required to recover the original investment through
income from the project.

Advantages: Payback period has the following advantages;

• It is highly suitable method when the project has shorter gestation period
and the Project cost is also less.
• It is very easy method to operate and simple to understand.
• It is highly useful to project which belong to high risk category and is
susceptible to rapid technogical changes.
• It is also useful to a concern which runs short of cash and is eager to get back
the cash invested in a capital expenditure project.
• Since this method consider the cash during the payback period of the project,
the estimate would be reliable and results will be accurate.
•
2. Average Rate of Return (ARR) : This method is considered to be an improvement
over the payback period method. It considered the earrings of a project during its
entire economic life. This method is also known as ‘Return of investment method’.
This ratio relates earning to investment, the following formula may be used for
calculating the profitability of a new investment.

3. ARR= Average annual earnings after tax ÷ Average investment

Decision rule : Accept or reject rule of the project is decided based on the
comparison of calculating ARR with the predetermined rate or cut off rate.
ARR must not only be higher than bank borrowing rate, but also above the
minimum acceptable profitability rare of the company.

Advantages: Following are the advantages of ARR method:

1. It is an easy method to understand and simple in its calculation.

2. It consider the earrings of the project during its entire economic life.

3. It is a profitability concept since it considered net earnings after depreciation and

taxes.

4. It helps in comparing the Project which defers widely in character.

Limitations: The limitations of ARR method are as follows:

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1. It ignores the time value of money.

2. It requires to resolve a host of variants relating to its components Viz., earnings,

gross, net or average investment.

3. It stipulates the minimum rate and if the profit do not attain this rate, they are out
rightly excluded from consideration.

3. Present Value (NPV): The methods discussed so far do not consider the time value
of money. It can be easily appreciated that a rupee today has a higher value than
rupee after a year from now. It is because, rupee is going to earn interest over the
next one year period. In other words all future amount will be required to be
discounted by the applicable interest rate to determine their present value. Thus,
the NPV may be defined as the excess of present value of Project cash inflows
(stream of benefits) over that of outflows (cash outlays). The net present value of a
future cash flow is calculated with the help of following formula
NPV= Present Value of cash flow – initial outlay

Advantages: The advantages of NPV are as follows:

1. It indicates the value added to the total assets of the firm by undertaking the
proposed investment at a particular rate of discount.
2. It allows for the recovery of the initial investment and interest, cost of investment.
3. It recognises the time value of money and consider all cash flows over the entire
economic life of the project.
4. It is consistent with the objective of maximising the welfare of the owners.
Limitations: The following are the limitations of NPV;

1. It is difficult method to calculate and use it.

2. It may not give a satisfactory answer when the project being compared involve
different amount of investment.
3. Under this method, profitability is not related to the capital. The project may be
having a high NPV but it may not be attractive owning to its high capital outlay.
4. Selection of a discount rate is another weakness of this method.

4. Benefits Cost Ratio (BCR): BCR method is a modified from for the NPV method. It is
the rate of gross discounted benefits to gross discounted costs. Hence, this may be
used as an extension of NPV and expressed in co-efficient or percentage. It is also
known as the Profitability Index (PI) method. The following formula may be used to
calculate the BCR or PI.

BCR or PI= Present Value of Cash Flow ÷ Present Value of Cash Outflows

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BCR is highly useful for ranking the project in the basis of their profitability. It suffers from
the same limitations of the NPV technique.

5. Internal Rate of Return (IRR): IRR method is owned by many names viz., yield
investment method, marginal efficiency of capital method, marginal productivity of
capital method, rate of return method, time adjusted rate of return method,
discounted cash flow method, yield method etc. IRR defined is that rate of interest
when used to discount the cash flow of an investment, reduce its NPV to zero.
Advantages: The advantages of IRR are as follows:

1. It recognise the time value of money and consider cash flow over the entire life of
the project.
2. It has a psychological appeal to the user, since values are expressed in percentage.
3. It does not required discount rate or cost of capital.
4. It is also consistent with the firm’s objective of maximising owner’s welfare.

Limitations: Following are the limitations of IRR

1. It is very difficult to use, as it involves complicated computations.

2. It assumes that the re-investment rate of cash flows is at IRR which may be different
for different project considered by a firm.
3. It may yield multiple rates when cash outflows take place at different periods and
decision making becomes more complicated.
4. It may yield inconsistent results NPV if, projects differ in their expected lives, or cash
flows or timing of cash flows.
5.
Economic Appraisal: It is evident that cost estimate and the overall project schedule would
be charged from what is mentioned in the feasibility report. This would change the
profitability of the project. There would be more changes as the project progresses but
despite these changes the project should still remain economically viable. It is, therefore,
not enough to forecast successively as things come to be known what the project would
take to complete it. It is necessary to check the economic viability of the project every time,
the time and the cost estimate change.

Managerial Appraisal: To judge the managerial capability of promoters, an appraisal should

be made regarding their resourcefulness, understanding and commitment. The
resourcefulness of promoters is judged in terms of their past experience, the progress
achieved in organising various aspects of the project and the skill with which the project is
presented. The understanding of the promoters is assessed in terms of the credibility of the
project plan including, interalia. The organisation structure, the estimated cost, the
financing pattern, the assessment of various inputs and the marketing programs and the
details furnished to financial institutions. The commitment of promoters is gauged by the

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resource i.e., financial, managerial, etc., applied to the project and the zeal with which the
objective of the project, short term as well as long term, are presued.

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 UNIT: 5
MOBILISING RESOURCES
MEANING OF START-Ups :-
A start-up is a company that is in the first stage of operations. This companies
are often initially banked rolled by their entrepreneurl founders as they
attempt to capitalized on developing a productor service for which they
believe that there is a demand. A start-up is a young company that is just
beginning to develop.
For the purpose of the government scheme start-up defined as “ it is an entity
of private limited company under the companies act 2013 or a registered
partnership firm under Indian partnership act 1932 or limited liability
partnership under the limited partnership act 2008 incorporated and
registered in India not prior to five years, with annual turnover not exceeding
rs 25 crore in any preceding Financial year working towards Innovation
development deployment or commercialisation of new product processes or
services driven by technogy or intellectual property.
Start-Up is an entity which is not formed by splitting up or reconstruction of
business already existence. The entity shall ceases to be Start-Up if it’s
turnover for the previous Financial year as exceed rs 25 crore or its is
completed 5 year of the date of incorporation registration.
A business covered under the definition of START-Ups it aims to develop and
commercialised a new product or service or process or a significantly improved
existing product or service or a process, that will create or add value for
customers or work flow.

MOBILISATION RESOURCES FOR START-Ups

Start-ups are usually small and initially financed and operated by a handful of
founders or one individual. These companies offer a product or service that is
not currently being offered elsewhere in the market, or that the founders
believe is being offered in an interior manner.
When starting a new company, generating founding to support business is
perhaps the single most important tasks at hand. Before embarking, if it is
necessary to determine how much funding is required and from where it will

1
come. For this purpose the following factor are considered in determining how
much funding is required.
 Time to market
 Employee salaries and benefit
 Space
 Equipment
 Travel
 Legal fees etc.
Funding for the company many come from one or more source, including sales,
grants and investors. The following are the various resources for mobilising the
required finance for start-up.
1. Organic Growth: Grow the business slowly based on its own initial stage
sales, without the need to raise any external funds. It is depends upon
the day to day operations of START-Ups business. This type of options is
available to some specified start-up business.
2. Start-up loan: If a person is starting a new business or he has been
trading for no longer than 24 months, he may be eligible for a
government backed start-up loan. This loans are unsecured personal
loans, which must be used for business purposes and a repayable at
fixed rate of 6% interest over annum.
3. Friends and family: Friends and relatives may offer Financial support.
Relatives and loved once are more likely to trust and invest their money
than a outsider, and they will probably demand lower interest and fewer
incentives than a commercial Organisations.
4. Personal savings: the suppliers with whom Start-Up company do
business can be a source of funds if they extend favourable credit terms
to start-up company, generally the credit period may extend up to 30
days.
5. Customer credit: start-up can create a form of credit by getting deposit
or pay in advance for the product or service from the customers. Start-
up may want to offer a discount as an incentive for their customer to
pre-pay the amount.
6. Leasing: Leasing is a rental arrangements that gives Start-Up the use of
an asset- such as a car or a piece of machinery – which some ones else
owns. The Start-Up will need to get their business of the ground.

2
 7. Account receivable financing: if start-up have receivables accounts that
have been invoiced but not yet paid. Start-ups may be able to use these
as a collateral for a small business loan.
8. Terms loans: These are simply instalments loans that are paid back at
regular intervals over a specified length of time.
Preliminary contract
A contract is an written or oral legally binding agreement between the parties
identified in the agreement fulfil the terms and conditions outline in the
agreement. A prerequisite requirement for the enforcement of a contract
amongst other things is the condition that the parties to the contract accept
the terms of the claimed contract.
The Start-Up preliminary contract can be of many types such as:
1. Contract with vendor
2. Contract with suppliers
3. Contract with banker
4. Contract with principal customer
5. Contract with employees
6. Partnership contract etc.

1. Contract with vendor: It is a legal agreement that clearly states the

provision and conditions of the work to be performed by a contractor. A
vendor agreement must always be accompanied with a statement of
work. A vendor will not start work without an acceptable form of
statement of work. A vendor agreement becomes valid and enforceable
when the customer and vendor sign the agreement in original.

2. Contract with suppliers: It’s an agreement between business and an

external suppliers for the delivery of a defined set of product and
services. A supplier contract is an legal agreement and is used as the
basis upon which to Measure the suppliers performance.

3. Contract with banker: Banking is a trust based relationship. There are

numerous kinds of relationship between the bank and the customer. The

3
 relationship between a banker and a customer depends on the type of
transaction. However the personal relationship between the bank and
it’s customer is the long lasting relationship. Some banks even say that
they have generation to generation banking relation with their
customer. The terms and conditions governing the relationship is not a
leaked by the banker to third party.

4. Contract with principal customer: customer contract are written binding

agreement that are made between a customer and a merchandiser.
Laws generally these type of contract to be made but they may be
subject to various restrictions based on consumer protection laws. The
contract may have to do with the return or exchange of various items.
Thus customers contract can be helpful for both the customer and the
seller, as they provide written guidelines for the transaction.

5. Contract with employees: A start-ups need a number of employment

agreement and legal documents ranging like offer latter, appointment
letter and non-disclosure agreement while starting operation. Therefore,
it is important for a entrepreneurs to understand the basics legal
framework and enter in employment agreements using well draped legal
documents.

6. Partnership contract: It is a contract which formally established the

terms of a partnership between two legal entity such that they regards
each other as partners in an commercial agreement. Therefore, it might
not be the common law arrangements of a partnership which by
definition create fiduciary duties and which also has joint and several
liabilities.

STAGES OF CONTACT MANAGEMENT:-

Contract play an significant role in the end of quarter crunch and are broken up
into stages to organize efforts and structure the typical contract process. The
process includes the following steps:

4
1. Initial Request: The contact management process begins by identifying
contract and pertinent document to support the contract purpose.

2. Authoring Contract: Writing a contract by hand is a time consuming

activity but through the use of automated contract management system
the process can become quite streamlined.

3. Negotiation the contract: Upon completion drafting the contact

employees should be able to compare version of the contract and note
any discrepancies to reduce negotiation time.

4. Approving the contract: The instance in which most bottleneck occur is

getting management approval.

5. Execution of the contract: Executing the contact allows user to control

and shorten the signature process through the use of e-signature and fax
support.

6. Obligation Management: This requires a great deal of projects

management to ensure deliverables are being met by key stakeholders
and the value of the contract is not deteriorating throughout its early
phase of growth.

7. Revision and amendment: Gathering all documents pertinent to other

contract initial drafting is a difficult tasks.

8. Auditing and reporting: Contract management does not simply entail

drafting a contract and them pushing them into the filling cabinet
without another thought.

9. Renewal: Using manual contract management method can using results

in missed renewal opportunities and business revenue lost.

5
BASIC START-UP PROBLEMS:-
1. Environmental Issues: Environmental issue such as global
warming, increasing energy costs and environmental regulations
are a challenging problems for any businesses try to make a profit.
According to the national federation of independent businesses
consumption poll small companies spend their primary energy
costs on operating vehicle healing cooling and for operating
equipment. Businesses can control cost using energy saving
device.
2. Labour problems: Start-up Business problems concerning the
regulatory laws for employees can result in compliance fines.
Employee are costly and some states require payroll taxes to be
paid quarterly no matter how profitable the business. Social
security and follow federal employment regulations such as the
occupational safety and health act and the fair labour standards
act
3. Funding problems: The financial crisis starting in 2007 is created a
lightening of all credit markets including business. Start-up
business face credit problem as lender closely examine both
personal and business finance prior to approving loans. To avoid
Start-Up business problems when getting financing make sure to
review the financial background of all business partner.
4. Business location: Start-up business face problem when selecting
location without considering the type of business they will
operate. Business location is an important factor determining the
ultimate success or failure of a start-up. They did not bear in mind
the fact that heavy recurring cost were involved in the purchase of
raw materials and come from a place that was far from the
location of their Industries.
5. Licencing and Permit Problems: All states require some type of
business registration for tax purposes to avoid Start-Up business
problems check with federal, local, government agencies to
determine licencing requirements. Businesses Start-Up can
contract their states business assistance agency for help to comply
with permit and licensing requirements. Start-up will need to
include licencing and fee costs in their business plan.
6
 Start-up India Scheme:-
Start-up India was a campaign that was first addressed by the PM
Narendra Modi on 15th August 2015 at Red Fort, New Delhi. This
campaign was introduced under the Government of India as an initiative
to develop over 75 startup support hubs in the country. The topic, ‘Start-
up India’ comes under (GS-II) Government Schemes of Indian Polity and
governance syllabus of the IAS Exam. For more details, one can visit the
official website – https:/startupindia.gov.in/
Start-up India scheme is an important government scheme that was launched
on 16th January 2016 with an aim to promote and support the start-ups in
India by providing bank finances. It was inaugurated by the former finance
minister, Arun Jaitley.
Organized by the Department for promotion of industry and internal trade, the
major objective of Startup India is to discard some of the restrictive States
Government policies which include:

1. License Raj
2. Land Permissions
3. Foreign Investment Proposals
4. Environmental Clearances

The Start-up India scheme is based majorly on three pillars which are
mentioned below:

1. Providing funding support and incentives to the various start-ups of the

country.
2. To provide Industry-Academia Partnership and Incubation.
3. Simplification and Handholding.

Registration for Start-up India:-

A person must follow the below-mentioned steps that are important for the
successful registration of their business under the Startup India scheme:

1. A person should incorporate their business first either as a Private

Limited Company or as a Limited Liability Partnership or as a Partnership
Firm along with obtaining the certificate of Incorporation, PAN, and
other required compliances.

7
 2. A person needs to log in to the official website of Startup India where
he/she has to fill all the essential details of the business in the
registration form and upload the required documents.
3. A letter of recommendation, Incorporation/Registration Certificate, and
a brief description of the business are some of the essential documents
required for the registration purpose.
4. Since the start-ups are exempted from income tax benefits, therefore,
they must be recognized by the Department of Industrial Policy and
Promotion (DIPP) before availing these benefits. Also, they should be
certified by the Inter-Ministerial Board (IMB) to be eligible for IPR
related benefits.
5. After successful registration and verification of the documents, you will
be immediately provided with a recognition number for your startup
along with a certificate of recognition.

Who is eligible to apply under the Startup India scheme:-

An entity is eligible to apply when:

 It is incorporated as a private limited company or partnership firm or a

limited liability partnership in India
 It has less than 10 years of history i.e. less than 10 years have elapsed
from the date of its incorporation/registration
 The turnover for all of the financial years, since the incorporation/
registration has been less than INR 100 crores

Startup India Benefits :-

After the launch of the Startup India scheme, a new program was launched by
the government named the I-MADE program which focused on helping the
Indian entrepreneurs in building 1 million mobile app start-ups. The
government of India had also launched the Pradhan Mantri Mudra Yojana
which aimed to provide financial supports to entrepreneurs from low
socioeconomic backgrounds through low-interest rate loans. Some of the key
benefits of Startup India are as follows:

1. To reduce the patent registration fees.

2. Improvement of the Bankruptcy Code ensuring a 90-day exit window.
3. To provide freedom from mystifying inspections and capital gain tax for
the first 3 years of operation.
4. To create an innovation hub under the Atal Innovation Mission.

8
 5. Targeting 5 lakh schools along with the involvement of 10 lakh children
in innovation-related programs.
6. To develop new schemes that will provide IPR protection to startup
firms.
7. To encourage entrepreneurship throughout the country.
8. To promote India as a start-up hub across the world.

Government Measures to Promote Startup Culture in the Country:-

1. As part of the “Make in India” initiative, the government proposes to

hold one Start-Up fest at the national level annually to enable all the
stakeholders of the Start-up ecosystem to come together on one
platform. You can know in detail about the Make In India program on
the linked page.
2. Launch of Atal Innovation Mission AIM – to promote Entrepreneurship
through Self-Employment and Talent Utilization (SETU), wherein
innovators would be supported and mentored to become successful
entrepreneurs. It also provides a platform where innovative ideas are
generated. Relevant details on Atal Innovation Mission AIM are available
on the linked page.
3. Incubator set up by PPP – To ensure professional management of
Government-sponsored or funded incubators, the government will
create a policy and framework for setting-up of incubators across the
country in public-private partnerships. The incubator shall be managed
and operated by the private sector. Read more on Public-Private
Partnership on the link provided here.
 35 new incubators in existing institutions. Funding support of 40%
shall be provided by the Central Government, 40% funding by the
respective State Government and 20% funding by the private
sector for establishment of new incubators.
 35 new private sector incubators. A grant of 50% (subject to a
maximum of INR 10 crore) shall be provided by Central
Government for incubators established by the private sector in
existing institutions.
4. A Startup India Seed Fund Scheme has been implemented with effect
from April 1, 2021. The scheme aims to provide financial assistance to
startups for proof of concept, prototype development, product trials,
market entry and commercialisation.

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 Startup India – State Rankings :-
States’ Startup Ranking Framework is an evolved evaluation tool aimed
to strengthen the support of States and UTs to holistically build their
startup ecosystems. The rankings are based on the criteria of policy,
incubation hubs, seeding innovation, scaling innovation, regulatory
change, procurement, communication, North-Eastern states, and hill
states.
The latest edition of the States’ Startup Ranking 2020 was released on
September 11, 2020. UPSC aspirants can visit the linked article and get
the list of top states with the best startup ecosystem.
The States’ startup rankings from 2019 and 2018 have been given in the
following tables for the reference of the candidates:

Characteristics of Start-ups: -

The term "start-up” has gained a lot of popularity these days. More and more
individuals are interested in becoming entrepreneurs and therefore open
their own business. Therefore, there are also more entities interested in
helping new businesses.
Although its presence in today's society is notorious, this concept still raises
some uncertainty about what it really means and what it represents .The
following set of features that all startups have in common.

Innovation:
a business this type need to have a differentiator competition in order to gain
competitive advantage in the market. It is innovation may be present in their
products or in the business model associated with company.
A innovation plays an essential role in the success of a startup, so
all entrepreneurs should seriously consider this aspect.

Age:
An startup is new company which is still in early stages brand management,
sales and hiring employees. Too often the allocation of this concept

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to Business who have been on the market for less than 3 years, however, this
is not true. That is, one company You can have 7 years and is still a startup.
Stop being a startup it depends not only on your age but on a specific set of
features.

Growth:
An startup is company whose goal is grow and expand rapidly, taking up to
sometimes drastic proportions. This is one of the points
that distinguished startup a Small business.

Risk:
Once a startup It has shed innovative strongly present, there are always
several associated uncertainties about ensuring the success of the business.
For this reason, these Business are considered risk investments with a high
failure rate.

Flexibility:
An startup is very dynamic and ready to adapt to the adversities that may
arise. Due to the need for validation of your business idea,
these Business need to be ready to tailor their product to meet customer
requirements.
This feature It is also present in the business model as there is a need to find
a sustainable business model.

Solving a problem:
Associated with your shed innovative, this Type of company focuses on solving
any existing problem in the market. So they focus on making a difference not
only in the marketplace but also in people's lives through your product or
service.

Scalability:
An startup is company in constant search of a business model that is scalable
and repeatable, that is, it can grow without the need to increase human or
financial resources.

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Work team:
These business they are usually made up of very few people. Although not the
only determining factor for the designation of startupIt is quite common to
define it in your working team there less than 100 people.
In short, we can consider that a start-up is a company that is in the early
stages of development in order to solve real-life problems through a product
or innovative service.

Types of start-ups:

After clarified the question of what is a startup, it is time to identify the

various types of businesses that they can present. Due to the increased
demand in this market, it is necessary that future entrepreneurs know
that types of startups exist and in which your idea fits.
According Steve Blank, a reputable entrepreneur of Silicon Valley, exist
6 different types of startups:

Lifestyle Start-ups:
founded by entrepreneurs They are working for themselves what else they
like. Examples of these are freelancers or web designers who have passion for
their work.

Small Business Start-ups:

Small business where the owner follows less ambitious goals, to provide only
a comfortable life for his family. Examples of these are hairdressing salons,
grocery stores, bakeries, among others.

Scalable Start-ups:
founded by entrepreneurs who believe from the beginning that can change
the world with their business idea and therefore worry about finding a model
scalable and repeatable business in order to draw the attention of investors to
boost your business. Examples of these are Google, Uber and Facebook.

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Buyable Start-ups:
This Business they are born with the goal of being sold to large companies after
achieving positive results that catch their attention. This one type start-up It is
very common in web solutions development companies and mobile.

Large Company Start-ups:

This Business They have the main objective of innovation and have a limited
duration of life. At Business fall into this category develop products or services
that revolutionaries become quickly recognized by the market. However, due
to market changes, the user preferences, competitive pressures,
these Business they tend to create new innovative products for new users of
different markets.

Social Start-ups:
Finally, there Business whose entrepreneurs They want to make a difference
in society and make a better world. Thus, the main objective is not to gain
profit, but rather to contribute positively to the community. One example is
the charity or charitable institutions.

DIFFERENCE BETWEEN STARTUP AND SMALL BUSINESS:-

Then we highlight the key attributes that these two concepts differ.

Motivation:
While small businesses are guided by profitability images and stable value over
the long term, start-ups They are focused on revenue and growth potential of
your business idea.

Business model:
An start-up It does not have a fixed business model, that is, explores the
possibilities as the opportunities to achieve a repeatable and scalable business
model. On the other hand, Small business is a focused enterprise to achieve an
effective business model that results from day one.

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Innovation:
Another difference lies in innovation. At start-ups yearn to develop an
innovative product that creates impact on the market or improve an existing
solution. On the other hand, small businesses They are not concerned with the
exclusivity of its products or services, just want to develop them efficiently.

Financing:
Unlike start-ups, as small businesses They do not look for high value
investments. In need of investment for the beginning of the business, they
often seek support in traditional methods, such as family, friends or bank
loans. On the other hand, investments in start-ups They have a key role and is
necessary to achieve the business model that results and grow sustainably.
Although the methods used in Small business They are widely used in the
beginning, alternative methods (Business angels, venture capitalists) are
becoming quite popular today.

Business Control:
Once the start-ups seek high levels of investment and there is a high risk in this
area, usually investors demand a part of the business, having power in the
decisions of this. On the other hand, Small business You have complete control
of their business.

Although these concepts are easily confused, they represent totally different
business models both in terms of objectives, structure or even financing. In
conclusion, it is indeed possible to identify difference between start-up and
small business.

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