2008 University of Mumbai(Bombay) Administration M.B.A Human Resource Management MHRDM at JBIMS University Question paper
University of Mumbai
Q. Good project report or Business Plan?
It is essential for an entrepreneur & developing agencies since its provides necessary information about the unit to be set up. It eliminates difficulties encountered during project setup especially obtaining loans. It is basically an integration of functional plans, such as marketing, finance, operations & HR to establish company’s goals and objectives.
It basically addresses the questions:
· Where am I now?
· Where am I going?
· How will I go there?
Format of a Business Plan
1. Introductory Page.
a. Name & address of business
b. Name & address of the promoter & partnership if any.
c. Nature of business
d. Treatment of financial need
2. Executive Summary (3 0r 4 pages comprising of complete business plan)
3. Industry analysis
a. Future outlook & trends
b. Analysis of competition
c. Market segmentation
d. Industry forecast
4. Description of venture
b. Size of business
c. Office equipment & personnel
d. Background of entrepreneur
5. Production plan
a. Manufacturing process
b. Physical plant
c. Machinery & equip.
d. Name of suppliers of RM
6. Mktg. Plan
a. Pricing, distribution, promotion, product forecast & controls
7. Organizational plan
a. From of ownership
b. Identification of partners & principal share holders
c. Authority of principals
d. Mgmt team background
e. Role & responsibility of members
8. Risk Assessment
a. Evaluate weakness of business
b. New technology
c. Contingency plan
9. Financial plan.
a. Performa income statement & Balance sheet
b. Cash flow projections
c. Break even analysis
d. Sources & applications of funds
10. Appendix (containing backup material)
b. Mkt. research data
c. Leases & contracts
d. Price list for suppliers
Q. The Executive Summary of the Business Plan:
It is prepared after total plan is written. The executive summary should be two or three pages in length and should stimulate the interest of the potential investor. It should not be taken lightly by the entreprenuer since the investors uses the summary to determine the worth of the business plan. Determining what is important would be difficult since every business plan is different. A no. of significant issues should be addressed. First, briefly describe the business concept. Second, data that support the opportunity for this venture should be stated. E.g. trends and potential growth in the industry, internet business, growth in no. of I-net users, growth in avg time spent on the net. After establishing the reallity of the opportunity then state how it will be perused. What is the mktg strategy and how does it differs from others. Next highlight key financial results that can be achieved importance experience of entreprenuers, important contracts or other legal documents that are in place which can assist in selling the business venture to a potential customer.
Q Why Business Plan fails?
Generally poorly prepared business plan can be blamed due to one or more of the following factors,
· Goals set are unreasonable
· Goals are not measurable
· The entrprenure has not made the total commitment to the business or to the family.
· Entrepreneur has no experience in planned business
· Entrepreneur has no sense of potential threats or weaknesses to the business.
· No customer need for the proposed for the product or services.
Setting goals requires information about the type of business and the competitive environment. Goals should be specific and not so mundane as to lack any business of control. Entrepreneur may target a specific mkt share, units unsold or revenue. These goals are measurable and can be monitored overtime. Lenders or investors will not be inclined toward a venture that does not have full time commitment. Lenders or investors may expect entrepreneur to make financial commitments even if it means second mortgage or a depletion of savings. Lack of experience will result in failure unless the entrepreneur can attend the necessary knowledge or team up with someone. The entrepreneurs should document customer needs before preparing the plan. This can be identified from direct experience, letters from customers or mkt research. Clear understanding of needs and how the entrepreneur will effectively meet them is vital to the success of the new venture.
Q. Concessions & Incentives for SSI ?
SSI/ancillary units are the industrial units having an investment of not more than 3 crores rupees in fixed assets like plant & machinery’s. Whereas tiny units have 25 lac for the same as on 1998. However recently the govt. has reduced the invt. To 1 crore rupees for SSI & there has been no change for tiny units.
Following are the concessions /incentives offered by govt. to SSI
1. Investment Limits in P&M:
Govt. has reduced the ceiling of investment from 3 crores to 1 crore in 1999 wit a view to secure ownership & control of material resource & easing out the problem of unemployment. This ceiling for tiny units has been retained to 25 lac.
2. Reservation of Items in small scale sector manufactured exclusively:
At present 812 items are listed in this category. These items can be manufactured by large scale units also but with 50% export obligations
3. Reservation of Items for exclusive SSI purchases:
Director general of supplies & disposal (DGS&D) has listed down 358 items, which are offered at purchase price preference 15% as compared to large-scale units & other suppliers. National small industries Corp. Ltd. Does the mktg. Of SSI products to govt. under preferential purchase policy. This avoids multiplicity of registration with various agencies.
4. Text Incentives/ concession & deductions from profits & gains:
· If a unit is set up in backward area under factory act (sec 80HH) 20 % for 10 yr.
· Its is 20% for 10 yr. for SSI in rural area (sec 80HHA)
· 20% for industries setup under factories act for 7 to 9 yr., 355 for corp. society’s for 11 yr., 35% for co.’s for 11 yr.(sec80I)
· 25% for industries under factory act/ 100% for yr. & 25% for next 5 yr. If the unit is in backward area.
5. Exemptions & preferences from central excise duty:
If an SCI’s has a turnover of more than 3 crore then 2options are available
a. For 1st 1 crore duty in nill, cen-vat credit no permissible
b. For 1st one crore 60% normal duty an cen-vat credit permissible
Besides this they get relaxation in mode of duty payment & filing of returns
6. Foreign Direct Investment.:
In order to encourage modernization & technological upgradation equity participation upto 25% of total share holding by offer industrial undertaking or foreign collaborators in SSI is permissible. Beyond this approval in needed with a commitment of 75 % to export.
7. Policy of priority credit:
Nationalized commercial banks give priority to SSI’s, out of the 40% banks advances for priority sector, 15 to 17% goes to SSI’s. out of this 40% goes to tiny units having investment. 5 lac in plant & machinery & 20% for those having investment. between 5 to 25 lacs. The interest rates are also very low for these loans. Prime lending rates are applicable for loan above 2 lac.
8. Initiative for credit:
Reserve bank of India has directed 370 specialised SSI banks to provide working capital to SSI upto 20% for annual turnover limit upto 5 crore. Banks are advised to increase no. of SSI branches. Loan from SIDBI for tiny sector for credit availability has been increased form 50,000 to 2,00,000 rupees. The branch mangers are empowered to take the credit decisions at branch level itself to ensure smooth flow of operations.
9. OTC exchange of India.
Institutions like UTI , IDBI, LIC, GIC, ICICI has setup these exchange to raise resource from capital mkt. It provides trading mechanism like bought out deals, market making, sponsorships for convenient assess to capital market. The minimum requirement for a company to list on the exchange is 30 lac of post issue paid up capital./ It is helpful for entrepreneur to setup new ventures or expand activities. Exchange also provides trading in debentures unit of Mutual Funds, bonds. Exchange has state of art technology to promote transparency for transaction all over the country.
10. Incentive scheme for acquiring ISO9000
Since ISO is required for quality certifications for exports, SSI are given the incentives for acquiring the certification to the extent of 70% of cost of subject to the maximum of 75,000
11. Integrated technology upgradation & management program
Is implemented for energy conservation, pollution control, process mordification. This program is started for 12 clusters all over India for small scale Units in the 9th 5 year plan with the cost of 6.5 crore.
12.Technological bureau for small enterprises (TBSE)
It is a joint venture of small industries development bank of India (SIDBI) & the asian pacific centre for transfer of technology. TBSE offers under one roof assistance & prospecative small enterprises in sphere of technology transfer & fund syndication. The main objective is to have a speedy assess & transfer of technology. This beareau identifies willing collabroaters & extend support for financial assistance in terms of term loans, foreign currencies, venture capital, equity assistance.
13. Small Enterprises information & resource center
This provides data & information for samll enterpreneurs, exporters, market avenues seekers. It also provides technical knowhow. As on date this network has 21 electronic nodes.
14. Interest on delayed payment act.
This act was brought forward to safe guard the interest of the SSI units. In order to tackle the problem of settlement of dues from co.s .
a. Change in the penal rate of interest form 5% above the floor rate to 150% of the prime lending rate (PLR) of SBI
b. The agreed date of settlement of dues no to exceed 120 days form the date of acceptance.
c. Additional alternative Mechanism of arbitration & conciliation to resolve dispute between SSI suppliers & large scale buyers
15. Relaxation under environmental laws
As per the water & air pollution control the board of environmental pollution gives grants of approval to SSI’s except 17 categories which are heavily polluting. This granted consent is valid for 15 years provided there is no change in treatment or disposal system. However pollution control board can have random checks or call for any further info.
16. Common effluent treatment plant (CETP)
For cluster of SSI’s financial assistance is provided for above project.
· 25% subsidiary from central & state govt.
· 30% as loan at reduced rate from FI’s
· 20% as contribution from individual units
SSI’s are given some concession for expenditure on effluent disposal system. Training & awareness for cleaner technology are conducted by Dist. Collectorate SSI. The main obj. is to launch a campaign for waste minimisation.
17. Export Promotion Council
These are non-profit orgns. under Companies/ Society Registration Act established to promote SSI’s products in export market by direct mktg., Vendor development or opening of sales outlet abroad. These councils also take bulk orders from buyers and pass on to SSI units for deemed export. For this they charge nominal fees. These councils also decimate info. regarding exim policies, customs & excise duty rules. The membership charges for these councils are minimum for SSI’s
18. Industry related research institutes
19. SIDBI strategic initiatives
20. Credit guarantees for SSI’s
This is for guaranteeing the loans & advances upto 10 lac rupees without co-lateral or third party guaranty for SSI’s engaged in IT or software industries for 5 years.
Q. Who is an Entrepreneur, Define Entrepreneurship, State the Advantages of Entrepreneurship to an Individual & the nation?
Entrepreneur is a person who undertakes an enterprise with a chance of profit & loss. He is the person who can take moderate risk. He has the ability to work hard & capitalise on opportunity and has an urge for achievements & who has a desire for responsibility. He is the person with skill of organising & has some financial strenght.
Entrepreneurship is the process through which entrepreneur seeks innovative & employment i.e. doing new things or things in the new way.
Advantage to an individual:
1) It creates a self employment and a sense of self reliance i.e. freedom of idea adoption
2) It provides prolonged career for next generation i.e. no limited tenure of career
3) It enhances sense of innovativeness and creativeness
4) It provides modes of unlimited and high-retained income
5) It creates a sense of independence/satisfaction
6) It enhances per capita income via increase output
7) It initiates a structural change in society and business
Advantage to a nation:
1) Provides large employment: since entrepreneurial ventures are basically started as SSI utilizing labour intensive techniques thus generating lot of employment for regional man power
2) Wider distribution of wealth: increase in wealth output can be divided into various participants
3) Optimum utilization and mobilisation of regional resources: since entrepreneur relies more on local resources for production needs i.e. raw material and labour thus results in optimisation of resource utilization.
4) Closing the demand gap through appropriate opportunity: due to knack of seeking opportunity in the environment through study of demand gap and utilizing their venture to meet such demand gap
5) Export potential: since innovativation is an ongoing process for entrepreneurial venture this creates an export opportunity and hence increase exports potential.
6) Regional development: this is one of the key advantage which can be utilized disparities in regional development and also accelarate the pace of economic development
7) Enhance skills and savings
8) Stimulates innovation and efficiency
Q. Characteristics and guiding factors for successful Entrepreneur:
Personality traits: urge for achievement, determination to win, willingness for moderate risk, ability to identify and explore opportunity, analytical ability for strategic decision, perseverance, flexibility/capacity to plan and organise, prepaid for physical and emotional stress
Guiding factors: clear objectives, hr abilities, communication ability, technical knowledge, high energy level, motivator, self confidence, problem solver, goal setter.
Q. Factors affecting growth of Entreprenuership:
Change in attitude, expansion of educational horizon, supportive family structure, role models, professional support network, growing consumer class, easy access to money, venture capital availability, good technological access and infrastructure development, promotional policies and incentive schemes, decision making tools, respect for ethics and culture, environmental factor i.e. political, socio cultural, technology, legal, economic
Q. Entrepreneur for Economic Development:
Entrepreneur sets up enterprise wherein entrepreneur devotes resources, time and efforts to produce goods and services with increase in the productivity output, value addition, income and employment. Since entrepreneurship is low cost strategy, where entrepreneur plays a crucial role. The spirit of entrepreneurship is the drive for achieving higher goals, creativity innovative attitude. Thus spirit spreads like chain reaction in a dynamic society. In the economic development roles are to be played by everyone.
· Govt.: promotional i.e. facilitator and incentive oriented, neutral and regulator.
· Corporate: Intrapreneurship i.e. entrepreneur within an orgn.
· Individual: entreprenuership
Intrapreneur: is a person who focused on innovative and creativity who brainstorms dreams or ideas into profitable venture by operating within the organisational environment.
Intrapreneur is corporate entrepreneurship whereby an orgn seeks to expand by exploring new opportunities through new combination of existing resources. It is a tool for stimulating and capitalizing entrapreneur in and orgn. It is basically to retain knowledge, revenue generation through innovation, motivation to employee. It gives managers a freedom to try new idea by employing firm’s resources in a unique way.
Advantage of Intrapreneurship:
· It offers idea to build or improve corporate business.
· Capital required for ideal comes from internal source
· Establish corporate image, enhance the chance of success of Intrapreneur idea.
· It helps corporate in economies of scale in mktg, distribution and service
· It is a multiple disciplinary team activity with job security and prosperity
Q. Essential of Intrapreneur:
1) Vision: It is the basis of successful venture. Since Intrapreneur has ability to visualise from idea to actualisation.
2) Motivation: Intrapreneur is self motivated, but response to corporation reward and recognition, money is measure of success and not incentive for efforts.
3) Bias to act: Intrapreneur is achievement oriented i.e. they want to act to realise dream rather than entangling in planning cobweb. They look for incremental achievement.
4) Locus of control: Intrapreneur discourage system, since he is workaholic personality
5) Locus of risk: Intrapreneur are moderate risk takers since risk acceptance depends on their skills. Wild risk takers are not affordable to corporates.
6) Locus of status: Intrapreneur want to do the work on its own rather than delegating like managers
7) Failure and mistakes: Intrapreneur hide risky projects and ideas to ensure learning without political cost and public failure. They develop multi disciplinary team in the orgn and may beyond orgn boundaries for results.
8) Goal set up: Intrapreneur ourself are determined to do things not even asked for. They set goals and quality stds.
Q. Steps for setting Intrapreneurship in organisation:
Secure commitment to Intrapreneurship from top, upper and middle mgmt. without top mgmt support, orgn cant have necessary culture change for implementation. Sufficient time to be given to introduce the concept in the whole orgn through seminars. Intrapreneur is identified to be trained for resource utilisation, opportunity and market and the success plan is made.
Identified idea should be accessed with financial risk expectation in terms of results has to be specified in regards to time, volume and profits. There has to be mentor/sponser system for turning cultural orgn into Intrapreneural one.
Organisation should use technology to be competitive with larger firms through assess to large data bank.
Org. should have manager who is willing to train employees by experience sharing. Training should be given to employees for both basic entrepreneurship & co.s activity for marketable product/service.
Develop customer relations by tapping data base from rivals and helping retailers.
Org. should be more productive with fewer resources, the concept “ Lean & Mean” need to exist, i.e. control to be given to subordinates and are made well aware of the procedures so that operation can be run smoothly in the event of middle mgmt. downsizing.
Org. should have strong support structure because Intrapreneurship is a secondary activity not affecting the bottom line, so these venture should be flexible, innovative, authoritative, sufficient fund assessed i.e. over expenditure nor required to be justified.
Performance to be rewarded to encourage & motivate team members because entrepreneurial venture is a part of large org. and not an independent one, so this reward systems becomes sometime difficult to handle as it may be understood as an disparity trading process.
Set up an evaluating system for elimination of unsuccessful members & rewarding the successful ones. Org. expansion should in parlance with mission statement.
Q Describe the concept of Venture Capital with specific reference to the to Entrapreneur. Give the methodology to get venture capital from Venture Capital providing firms.
Venture capital plays a vital role in financing SSI where growth potential and the risks are high. This investment could be needed at any stage from start up to commercial production. Venture capital provider service the business from development, approval of project/ideas, financial assistance and management expertise.
· It is long term source of investment generally 5 to 10 years
· Venture capital firms opt for equity participation through shares or convertible securities
· Venture capitalist ensure participation in management of business
· Venture capitalist provide service in terms of mktg, technological mgmt, developing orgn structure
· It is easier assess to funds than conventional source
· Venture capitalist is not averse to risk only growth potential should be high
· Flow of funds is in phases of production or in initial stages as debts
· Venture capitalist are not permanent equity holders
· Venture capitalist will exit at appropriate time ensuring that entrepreuer’s interest is not getting disturbed.
Stages of process:
1) Delivery of business plan from an entrepreneur to venture capital provider. This plan should have mission, objective, mkt analysis, and financial statement. While evaluating business plan venture capitalist ascertains whether the proposal fits his long-term policies and short term needs, appropriateness of his knowledge in the project, ROI. He also ascertains the capability and credential of entrepreneur.
2) Due diligence: this is an agreement stage between entrepreneur and venture capitalist prior to commitment in terms of money and efforts. After thorough study of business plan, resume of promoters and key managers, financial background of promoters and risk of business are analyzed in this stage.
3) Negotiation: after viability study of project, negotiation takes place in terms of funds required vis a vis funds made available by the venture capitalist along with interest rate on loans, securities, equity, right to control the mgmt of business, buy back arrangement and exit policy.
4) Contract and MOU: considering the above terms agreement is signed with the consideration of regulatory law.
5) Flow of funds: begins as per MOU, higher degree flexibility is desired from both parties and periodic review is done at each stage.
6) Exit: since venture capitalists are not permanent equity holders so they may exit at appropriate time by adopting equity bye back, IPO (initial public offering), mergers and acquisitions and smooth transition as exit strategy.
Entrepreuership should take care of:
1) Select venture capitalist carefully
2) Don’t hesitate to get all facts about venture capitalist and his previous activities and background.
3) Always involve an intermediary for better deal
4) Avoid lawyer, accountant or advisers at initial stage
5) Be careful about projected and promise facts and data’s
6) Disclose your strength and weakness for better relationship
7) Be flexible and patient, always remember performance builds trust.
Q. Compare Franchising, Ancillarising and Acquisitioning as a start up for an Entrepreuer:
Also represents an opportunity for an entrepreneur to expand the business with a franchisee, the entrepreneur will be trained and supported in mktg by the franchiser and will be using a name that has some established image
It is an alternative for an entrepreuer to expand his or her business by having others pay for the use of name, process, product, service and so on.
“An arrangement where by the manufacturer or sole distributor of a trade mark product or service gives exclusive right of local distribution to independent retailers in return for their payments of royalties and conformance to standardize operating procedures.”
The person offering the franchise know as franchiser.
The franchisee is a person who purchase the franchise and is given the opportunity to enter a new business with better chance to succeed than if he or she where to start a new business.
There are three types of franchising available:
1) Product franchising: selling of the finished goods with just mere displayed of goods, which facilitates easy accessibility a product to customer and achieve sale transaction without any value addition.
2) Process franchising: outlets are granted to use the brand name and process of the franchiser. The process and recipe are generally patented by the parent company.
3) Business format franchising: name, sale and method of doing business are transferred with knowledge of conducting the outlet with affective follow up mechanism by the franchiser.
The most common type of franchising is the type that offers a name, image and method of doing business such as mcdonalds, subway, KFC, midal, dulkin, donuts, holiday in.
a) of franchising to the franchisee:
1) Product acceptance: the franchisee usually enters into a business that has an accepted name, product or service. The franchisee does not have to spend resources trying to establish the credibility of the business.
2) Mgmt expertise: mgmt assistance provided by the franchiser. Each new franchise is often required to take a training program on all aspects of operating the franchise. This training could include classes in accounting, personnel mgmt, mktg and production.
3) Capital requirement: a new venture can be costly both in terms of time and money. The franchise offers an opportunity to start a new venture with upfront support that could save the entreprenuer significant time and possibly less capital. In some cases the franchiser will also finance the initial investment to start the franchise operation. The initial capital required to purchase the franchise generally reflects a fees for the franchise, construction cost and purchase of equip.. the layout of the facility, control of stock, inventory and the potential buying power of the entire franchise operation can save the entreprenuers significant funds.
4) Knowledge of the mkt: any establish franchise business offers the entreprenuer years of experience in the business and knowledge of the mkt. This knowledge is usually reflected in a planned offer to the franchise that details the profile of the target customer and the strategies that should be implemented once the operation has begun. Most franchiser will be constantly evaluating mkt conditions and determining the most effective strategies to be communicated to the franchisees.
5) Operating and structural control: two problems that many entreprenures have in starting a new venture are maintaining quality controls of the product and services and establishing effective managerial controls. Administrative controls usually involve financial decisions revolving to cost, inventory, cash flow and personal issues such as criteria for hiring/firing, scheduling and training to ensure consistent service to the customer. These controls will usually the outline in a manual supplied to the franchisee upon competition of the franchisee deal.
b) of franchising to franchiser:
1) Expansion risk: the most obvious advt of franchising for the entreprenuer is that u can expand a venture quickly with little capital. A franchiser can expand a business nationally and even internationally by authorising and selling franchise in selected locations. The capital necessary for this expansion is much less than it should be without franchising. Operating a franchised business requires fewer employees than a non-franchised one. Head quarters and regional offices can be slightly **** to primarily support the needs of the franchises.
2) Cost advt: the franchiser can purchase supplies in large quantities that achieving economic of scale that would not have been possible otherwise many franchise business product parts, accessories, packaging and raw material in large quantities and then in turn sell these to the franchisees.
Disadvantages of franchising
1) the disadvantages to franchise usually centre on the inability of the franchiser to provide service, advertising & location. When promises made in the franchise agreement are not kept, the franchisee may be left without any support in important areas.
2) The franchisee may also face a problem when a franchiser fails or is brought out by another company. In some case also the franchiser finds it difficult to find quality franchisee. Poor mgmt can cause individual franchise failure.
Legal aspect of Franchise
Franchising involve many risks to entrepreneur since business such as hiring, scheduling, buying, accounting and so on are still franchisee’s responsibility. As per the federal trade commission’s franchise rule, every franchiser has to submit a statement that provides information about 20 aspects of franchise offering. He must evaluate franchise alternative from information provided to decide which one is important. Information disclosed is as follows :
1. identification of franchiser & its affiliates & their business experience
2. Business experience of franchise officers, directors & mgmt personnel responsible for franchise training, service & other aspects.
3. Lawsuit in which the franchiser and its officers, directors & mgmt personnel are being involved.
4. Any previous bankruptcy in which the franchiser and its officers, directors and mgmt personnel are being involved.
5. The initial franchisee fee & other initial payments those are required to obtain the franchise.
6. Continual payments the franchises are required to make after the franchise offer.
7. Any restriction on the quality of goods
FOR MORE POINTS REFER TO PROF. SABOO’s BOOK
Entrepreneur can start & expand the venture by acquiring an existing business. An acquisition is the purchase of a company or a part of it so that the acquired company is completely absorbed and no longer exists as business entity.
Advantages of acquisition :
1. Acquired firm has an established image and track record. If the firm is successful the entrepreneur needs to continue the existing strategy.
2. Entrepreneur gets a well established customer base from the acquired firm
3. Entrepreneur acquires well-established channels and sales structure, suppliers, retailers, wholesalers, manufacturers by acquiring the firm.
4. Actual cost of acquiring can be lower than methods of expansion.
5. The employees of the existing business can be an important asset & can help the business to continue its successful mode.
6. Since entrepreneur does not have to find suppliers, channel members, employees or customers more time can be spent assessing opportunities to expand the business.
Disadvantages of acquisition
1. Most ventures have an erratic, marginally successful or even unprofitable track record. It is important to review the records to assess future potentials.
2. Entrepreneur may assume he can succeed where others have failed. Self-evaluation is important before agreement. Even though the entrepreneur brings new ideas & mgmt qualities, the venture may never be successful for reasons that are not possible to correct.
3. When business changes hands key employees also leave. Loss can be devastating since value of business is often a reflection of efforts of employees.
4. It is possible that purchase price is inflated due to established customer base, channel members or suppliers. It is possible that ROI is not acceptable.
Determining the price of an Acquisition:
There are three-valuation process – asset, cash flow and earnings. The entrepreneur can use to determine the fair price of an acquisition. Key factors in evaluating firms are;
1. one person mgmt
2. poor corporate communication.
3. few mgmt tools being used
4. insufficient financial controls
5. highly leveraged – thinly capitalized
6. variations & poorly prepared financial statements
7. sales growth with no increase in bottom line
8. out dated & poorly managed inventory
9. aging accounting receivable
10. No change in products & customers.
An ancillary unit is defined as an Industrial undertakings having investment in fixed assets, in plant & machinery whether held on ownership or on hire purchase not exceeding Rs. 100 crore & engaged in: -
1. Manufacturer of parts & components, sub-assemblies, tooling or intermediates &
2. Rendering of service or proposing to supply or render not less than 50 % of his production or service to one or more other industrial undertaking for production.
Major difference between SSI & ancillary is that unit setup which can be recognised as a full fledge large company can be a part of ancillary but under SSI such unit can get transformed into medium or large scale sectors.
Major benefits of ancillarisation drive to a country is that:
1. growth of employment
2. growth of GDP
3. growth of entrepreneurship
Advantages of Ancillarisation
· Minimize investments of setting up of large units as the required production can be sourced at lower a rate with same quality through subcontracting from an ancillary unit.
· An ancillary unit JITconcept helps the large co.s to bring down the inventory level and saves a lot of money.
· Sourcing is economical from ancillary units that are normally located near the co.
· Ancillary units work with the parent co.s in the process & product development
Disadvantages of Ancillarisation
1. Delay in payments puts ancillary co.s in big trouble. If the parent co. is big then the ancillary co. finds it difficult to take any legal action
2. When parent co.s revise the specification ancillary units are some times not given the expected support for adopting the higher technology, not given suficient time to bring changes in the technology to match that of parent co.
3. Multiplication of suppliers makes the ancillary units operate below BEP (Break even point) as a result these units incur losses because of capacity initialization.
Q. Selection criteria for factory site location?
There are certain general factors that influence the selection of the location of an enterprise. The most impt. Are :
1. Availability of raw materials- the biggest advantage of availability of RM at the location of industry is that it involves less cost in terms of transportation cost.
2. Markets: If the products are fragile and highly susceptible to spoilage & if the transportation cost constitutes a substantial portion of the total cost involved the proximity to mkt conditions assumes added impt in selecting the location of the enterprise.
3. Infrastructural facility - the easy availability of infrastructutal facilities play a deciding role in the location selection of an industry. The facilities includes transport & communication, power, water , banking etc.
4. Govt. Policy - in order to promote the balance regional development the govt. offers several incentives, concession to attract entrepreneurs to setup industries in backward areas.
5. Availability of man power
6. Local laws of regulations - certain local laws prohibit the setting up of polluting industries in particular areas similarily taxation on a higher rate may discourage some industries form setting up in an area.
7. Ecological & environment factors
8. Competition - in case of some enterprises like retail stores where the revenue of a particular site depends on the degree of competition from the other competitiors in the locality, they play a crucial role in selecting the location of the stores.
Q. Comparison: Manager v /s Entrepreneur
1) primary motivespromotion & other traditional corporate rewards, such as office staff & powers2) time orientation short term meeting quotas & budgets, weekly, monthly & quarterly 3) ActivityDelegates & supervises more than direct involvement4) Risk Careful5) StatusConcerned about status symbol6) Failures & mistakesTries to avoid mistakes & surprises7) Decisionsusually agrees with those in upper mgmt. Positions8) Serviceserves others9) Family HistoryFamily members worked for large orgns.10) Relationship with othersHierarchy as basic relationship Independence, opportunity to create, & moneySurvival and achieving 5 to 10 yr growth of businessDirect involvementModerate risk takerNo concern about status symbolDeals with mistakes and failuresFollows dreams with decisionsServes self & customersEntrepreneurial small business, professional, or firm backgroundTransaction & deal making as a basic relationship
Comparison : Male & Female Entrepreneure
Male Entrepreneur Female Entrepreneur
1) MotivationAchievement - strive to make things happen Personal independence – self image as it relates to status through their role in comparison is unimportantJob satisfaction arising from the desire to be in control2) Departure pointDissatisfaction with present job sideline In college, sideline to present job, discharge or lay off, opportunity for accusation 3) Sources of fundsPersonal asset & savings, bank financing, investors, loan from friends & family 4) Occupational BackgroundExperience in the line of work, recognised specialist or one who has gained a high level of achievement in the field, competent in a variety of business function5) personality Characteristicsopinionated & persuasive, goal oriented, innovative & idealistic, high level of self confidence, Enthusiastic & energetic must be own boss 6) BackgroundAge when starting venture :25 to 35 father was self employedCollege educated – degree in business or technical areas usually Engineering First born child7) support groupsfriends,professional acquaintances, business associates, spouse 8) Types of business startedManufacturing Or construction Achievement – accomplishment of a goal Independence - to do it aloneJob frustration, interest in recognition in the area, Change in personal circumstances Personal assets & savings, personal loans Experience in the area of business, middle mgmt or administrative level experience in the field, self related occupational backgroundFlexible & tolerant, goal oriented, creative & realistic, medium level of self confidence, enthusiastic & energetic, ability to deal with social & economic environment. Age when starting venture: 35 to 45 father was self employed College educated – degree in liberal artsFirst bornClose friends, spouse, family, women professional groups, trade associationsService related – educational service, consulting or public relations
Q) What are prominent institutes imparting Training for Entrepreneurship Development. Explain their activities and method adopted
There are several organisation engaged in conducting entrepreneurship development program in India. The lead in the matter was given by the small Industrial Development Organisation through its service centres. Other organisations that have been actively conducting entrepreneurship development progammes are State Bank of India; financial institutes such as IDBI entrepreneurial motivation training centre in northern-eastern region, Xavier Institute of social services, Ranchi: industrial consultancy organizations in various states, centre for enterperneurship development, Ahmedabad state financial corporations, centre of entrepreneurship development, Hubli small industries extension training institute, Hyderabad, National science& technology enterpreneurship development Board etc.
The need for a national org. to serve as an apex body to coordinate training program for various centre’s and organisation in the country, to train trainers & motivators in entrepreneurship development, to prepare a model syllabis training for varoius target group & target areas etc. was felt, with a view to evolve & integrated national approach to this subject
The training program is designed to sub serve the following objectives:
1. To impart basic knowledge about the industry, product & production methods
2. To build the necessary skill for new entrepreneurs & workers
3. To assist the entrepreneur/ worker to function more effectively in his present position by exposing him to a least concept, technique & info.
4. To build up second line of workers & prepare them to shoulder additional responsibilities and/or switch on to the production of new products, if the is any diversification.
5. To expose the entrepreneur to latest the developments which directly or indirectly effect him.
6. To broaden the vision of entrepreneurs by providing them suitable opportunity for an inter change of experiences within and outside an industry.
7. To impart customer education
8. To impart knowledge of the mktg. Of good
Methods of Training:
1. The individual instructions : Under this method, a single individual is selected for training. This mode of training is undertaken where a complicated skill is to be thought to an individual
2. Group instructions: This mode of training is suitable for a group of individuals with a similar type of work & where general instruction are applicable to all are to be given.
3. Lecture method: Here the instructor communicates in theory the practice to be followed by the learners. Under this method, whenever there are any doubts they may be clarified on the spot.
4. Demonstration method : Where the performance of work to be shown practically by the instructor for better understanding, this method can be followed. This is more concerned with the practical then theoretical aspects.
5. Written instruction method: The medium of training is followed where a feature reference is to be made by the learners. This method is mostly followed where a standardisation production is followed.
6. Conference: conferences are frequently organised wherein experts in the field share their ideas & bring to the notice of learners new ideas & techniques to increase the production
7. Meeting: Meetings are a mode of training involving a group of people who discuss the various problems confronting them, they involve exchanging ideas & views later on coming to firm conclusion based on the various proposals & alternatives.
Q. Product/Project Identification
Product selection: one has to select the right product, it involves research, careful evaluation & sound judgement. This activity is called the product selection analysis technique.
This technique consists of following steps:
1. Idea generation
2. Search & screen
Product Idea: can be generated in a no. of ways. They are as follows:
2. Foreign publications
3. Brainstorming sessions
4. Talking to various bodies like SISI,SIDC, The national small Industries Corp. Ltd. & The national Institute for Enterpreneurship & small business development
5. Talking to large scale pvt/public co. can also generate ideas
Product Search & screening
After we come up with product ideas, we look at products presently available & products related to those products ideas. Then pose the exploratory questions:
1. Are customers satisfied with what they are getting?
2. Can we identify a better method of production?
3. Can the basic design be changed?
4. What is the present demand, future demand likely to be & so on?
5. What are the skills?
6. Can I handle the technical subjects?
7. If not can I hire people easily?
8. Do the product idea generated match my basic interest or do I have to develop new area of interest?
9. How much knowledge do I have about the markets?
10. Can I dig more info easily?
As a prospective entrepreneur one should know the bent of mind one has by asking the following questions.
1. Am I comfortable in the room full of strangers?
2. Can I deal efficiently with people in position of power?
3. Can I communicate efficiently & freely with?
If yes, mktg. Is the strong area or may be one has a head for figures an details. Then finance may be the area of strength. One could be interested in mechanical & technical matter with flair for conceptualizing & design. Then production or product design can be the areas of strength.
Production Evaluation Techniques
These are products, which have to be evaluated objectively & in depth.. This is the product evaluation. This evaluation is carried on the following factors:
4. Company position
1. Performance of mkt.
A product for which there is likely to be long lasting demand would enjoy a higher degree of market permanence than an item likely to become obsolete.
2. Breadth of mkt.
A product used by a variety of customers belonging to various mkt. Segment and covers greater no. of consumers and is rated very well.
3. Possibility of captive mkt.
A product, which provides a unique and exclusive solution to specific mkt. needs, would be a very good rating.
4. Difficult of copying.
Products that are highly technical and difficult to copy would be rated very good.
5. Stability in recession
Luxury items are rated poor because they are susceptible to drop in demand levels during economic recession. On the other and consumer goods having regular demand may be rated very good.
1. Uniqueness of product: A product that satisfies mkt. need exclusively or can replace a more costly product by material substitution or better design possess a high degree of uniqueness and may be rated very good.
2. Demand supply relationship: If demand is greater than supply, unique or not a good rating can be given.
3. Rate of technological change: Areas where rapid changes in technology are likely to occur are risky and deserve poor rating. Such products become obsolete faster.
4. Export possibilities: those products that enjoy international demand & can be exported easily demand a good rating.
1. Ease of distribution: A good rating would be given to a product, which can be transported from point of manufacture to a point of sale easily, quickly & with minimum breakage or transmission loss.
2. After sales service: products that have to be provided with after sales service, especially at customer’s location are rated poorly.
3. Average order size / per customer: greater the average order size per customer better would be the rating. It would be relatively easier & more beneficial to cater to customer to buy large volumes.
4. Freedom from numerous variations: products that have to be made available in a wide range of grade, size, shape etc. resulting avg. manuf. Economy and inventory control problem & would be rated poorly.
5. Freedom from seasonal fluctuations: products for which demand falls in off-season are rated poorly. Alternative products will have to be thought of to sustain profit during such lean periods.
Company position factors
1. Time required to get established: projects having higher gestation period are more risky for entrepreneurs as he exposes himself to a greater risk of changes in technology, competition & economic conditions.
2. Degree of value addition: Greater the value addition better the rating, hence it is better to carry out the entire manufacturing process yourself rather than sub-contracting.
3. Availability of raw material: if crucial raw material and other materials are available during varying conditions than a good rating can be assigned
4. General labour atmosphere: the project should be located in a area enjoying a good labour climate.
1. Procurement of equipment: will it be possible to get machinery & equipment easily & quickly? Are the supplies reliable & convientantly located? If your answer is yes, rating is good
2. Utilities / facilities required: Some projects are highly dependent on clean water, steam, electricity and good sewage system & if these are not available regularly then that project would be rated poorly.
3. Training of personnel: are technical people easily available? If yes, can they be quickly into the company? Is the training likely to be time consuming.
4. Freedom from difficult maintenance problem: Does a project involve a manufacturing process, which is hazardous, which could affect the well being of the work place but also the community at large? A poor rating follows.
5. Freedom from costly waste – disposal problem: both govt. & society are becoming more conscious of pollution and its dangers. If your project calls for a larger waste disposal system to neutralise the effluents than it will be a negative factor.
Conclusion – the list of factors is by no mean exhaustive and can be modified to suit specific products. A comparision of product profile would help us to decide which product to pick up.
Q Role of SIDBI in devp. Of small-scale industries.
A. modernization & technology up gradation :
For this technology up gradation & modernization of SSI units, SIDBI has a no. od schemes of assistance, the major among these are technology development & modernization fund (TDMF) scheme. In line with the announcement made by the union finance minister in union budget 95-96, SIDBI in April 95, had setup its on resources, a technology development & modernization fund with an ear mark corpus of 2 billion. The fund aims at encouraging existing industrial units in small-scale sectors to modernize their production facilities & adopt improved & updated technology so as to strengthen their export capabilities. Direct assistance by way of term loan or participation in equity or both is provided to SSI units.
The TDMF scheme has been liberalised to include:
1. Non exporting SSI/Ancillary units
2. SSI/Ancillary units which are graduating out of SSI sectors on implementation of modernisation programs as eligible units of assistance under this scheme.
Under TDMF scheme direct assistance is provided at the prime-lending rate of SIDBI with no up front fee.
B. Marketing finance:
To assist SSI in mktg. Of their products, SIDBI had created a mktg. Development assistance fund (MDAF) in 1995-96 by appropriating a sum of rupees 100 million out of net profit. The corpus of the fund has been expanded to rupees 350 million. Out of this a sum of rupees 25 million has been specially year mark for providing mktg assistance to women entrepreneurs. MDAF provides for financing innovative mktg projects through a suitable mix of instruments like loans, conditional loans, grant & equity. Under the mktg. Scheme assistance ins also available for intangibles like marketing research, R&R, product upgradation & standardisation, preparation of strategic mktg plans, advertising, branding, catalogue preparation, production of audio/visual aids, participation in trade fairs/ exhibitions, undertaking sales promotion tours, establishing distribution networks, retail outlets & warehousing facilities etc. besides this assistance is available for development for infrastructure. Working capital term loan requireents & bills discounting facilities for service providers are also covered under the scheme.
C. Development of Industrial Infrastructure:
Laying special emphasis on the development of infrastructure of the SSI sector SIDBI launched an improved scheme “of direct assistance for development of industrial infrastructure for the SSI sector”. The range of assistance covers the setting up of industrial estates /development of industrial areas, strengthening of existing industrial estates & clusters setting up of common facilities centre’s, warehousing & container services, electronic & software technology parks, permanent exhibition cum sales outlets, mktg outlets etc. wherever the beneficiaries are predominantly SSI’s. SIDBI also operates scheme for integrated infrastructural development (IID), under which financial assistance is provided for the setting up of IID centre’s .
D. Bill Discounting & Factoring Services:
In order to promote a bill culture and to mitigate the problem of delayed payment of receivables by SSIs, SIDBI operates two schemes, viz.; Direct discounting of bills (Components) and Direct Discounting of Bills (Equipment). DDS (Components) covers arising out of purchase of indigenous components parts / subassemblies / intermediates manufactures by SSI units, primarily targeted to help SSIs realize their payments quickly.
E. National Venture Fund for Software and IT Industry:
· A national level venture fund, viz; National venture fund for software and IT Industry was launched on December 10,1999 by Hon’ble Prime Minister of India.
· Main objective of the fund is to meet the total fund requirement of software and IT companies.
· The fund would also develop international networking and enable assisted units to attract co-investment from international venture capitalists in subsequent round of financing.
· NVFSIT is closed ended 10year fund with an initial corpus of Re.1 billion promoted by SIDBI.
· The fund is being managed by SIDBI Venture capital Limited a wholly subsidiary of SIDBI.
F. Credit Rating for Exporting SSI units:
SIDBI has an arrangement with Dun & Bradstreet information services (I) pvt.Ltd. (D&B) to provide credit rating and allied services to SSI units.
G. Incubating Centers:
SIDBI launched National Program on Innovation and incubation for small Industrial under which incubator facilities are provided to the project, which are at seed stage, and having high research and development content and are technology focused to reach the pre-commercial stage, has been initiated.
Q. Explain the Role of Entrepreneurship in the Role of Economic Development of a country?
The role of entrepreneurship in economic development involves more than just increasing per capita output & income; it involves initiating & constituting changes in the structure of business & society. This change is accompanied by growth & increase output, which allows more wealth to be divided by various participants. Entrepreneurship is presently the most effective method for bridging the gap between science & the mkt. place., creating new enterprises & bridging new products & service to the market. These activities significantly effect the economy of an area by building the economic base & providing jobs given its impact on bot the overall economy & the employment of an area.
Following roles are played by entrepreneurs in economic development of the country:
1. Raises productivity
2. Powerful tool for job creation
3. Transfer of technology
4. Strategic role in commercialising new invention
5. Crucial role in restructuring & transfer of economy
6. Reduce concentration of economic power
7. Support growth to organised sector
8. Make market more competitive
9. Stimulate a redistribution of wealth, income & political power
10. Improve social welfare
11. Create new market- expansion into international market
12. Is low cost strategy of economic development, job creation & technical innovation
Q. Why Entrepreneurship Mgmt is a compulsory subject for mgmt study?
The overall for a course in Entrepreneurship:
1. Understand the role of new and smaller firm in the economy
2. Understand the relative strengths and weaknesses of the different type of enterprise
3. Know the general characteristics of the entrepreneurial process
4. Assess the students own entrepreneurship process
5. Understand the entrepreneurial process and the product planning and development process
6. Known alternatives, methods for identifying and evaluating business opportunities and the fact is that support and inhabit creativity
7. It develop an ability to form, organise and work in interdisciplinary teams
8. Know the general correlates of success and failure in innovation and new venture creation
9. Know generic entry strategies for new venture creation
10. Understand the aspects of creating and presenting a new venture business plan
11. Know-how to identify, evaluate and obtain resource
12. Know the essentials of: mktg plan, financial planning, operation planning, orgn planning, venture launch planning.
13. Know how to manage and grow a new venture
14. Know the managerial challenges and demands of a new venture launch
15. Understand the role of entrepreneurship in existing orgn
Q. What is the Entrepreneurial Decision Process?
Many individuals have difficulty bringing their ideas to the mkt and creating a new venture. Yet, entrepreneurship and the actual entrepreneurial decision have resulted in several million new businesses being started throughout the world. Although no one knows the exact no., in the united states estimates indicate that 1.1 to 1.9 million new companies have been formed each year in recent years. Indeed millions of ventures are formed despite recession, inflation, high interest rate, lack of infrastructure, economic in certainty and the high probability of failure. Each of these ventures are formed to a very personal human processes that, although unique, has some characteristics common to all. Like all processes the entrepreneurial decision process initiates the movement, from nothing to something - a moment from a present life style to forming a new enterprises, as indicated.
1. Change from present life style: the decision to leave a career or life style is not an easy one. It takes a great deal of energy to change and do something new and different. Although individual tend to start business in area that are familiar, two work environments have been particular good for spawning new enterprises, r&d, individuals development, new product ideas or processes and often leave to form their own companies, when this new ideas are not accepted by their employers. Perhaps and even stronger incentive to overcome the inertia and leave a present life style to create something new come from a negative force – disruption.
A significant no. of companies and formed by people who have retired, who are reallocated due to a move by other members in a dual – career family, or who have been fired. There is probably not greater force than personal dislocation.
The decision to start a new company occurs when an individual perceives that forming a new enterprise is both desirable and possible.
Work environment, disruption:
2. Desirability of a new venture formation: the perception that starting a co. is desirable results from an individual’s culture, sub culture, family, teachers & peers. A culture that values an individual who successfully creates a new business will spawn more venture formation that one that does note. Countries with cultures that more closely emulate this attitude do not have as high a business formation rate. It will be interesting to watch which of the once – controlled economies will develop a pro-entrepreneur culture. No culture is totally for or against entrepreneurship. Many sub cultures that shape value systems operates within a cultural framework.
There are pockets of entrepreneur subculture in the United States. This sub culture supports & even promotes entrepreneurship – forming a new co. – as one of the best occupation. No wonder more individuals actively plan new enterprises in this supportive environment. There are also variations within this subculture caused by family traits. A very high percentage of the founders of co.s had fathers or mothers who valued independence. The independence achieved by co. owners, professional, artists, professors or farmers permits their entire family life, giving encouragement & value to their children’s co. – formation activity.
Encouragement to form a co. is further stimulated by teachers, who can significantly influence individuals regarding entrepreneurship as a good possible career path. Schools with exciting course in entrepreneurship & innovations tend to develop entrepreneurs & can actually drive the entrepreneur environment in an economical area. An area having a strong education base is a strong support factor for entrepreneurial activity & co. formation. Peers are very impt. In the decision to form a co. an area with an entrepreneur pool & a meeting place where entrepreneurs & potential entrepreneurs can discuss ideas, problems & solution spawns more new co.’s than an area where these are not available.
3. Possibility of new venture formation: Several factors- govt., background, mktg, role models & finances – contribute to a creation of new venture. The govt contributes by providing the infrastructure to help & support a new venture.countries that have a repressive tax rate on business or individuals can suppress company formation, since companies will not have the money to start & grow & monetary gain cannot be achieved. However the social, psychological & financial risk are still present. Formal education & previous business experience gives a potential entrepreneur the skills needed in forming & managing a new enterprise. Although education systems are important in providing the needed business knowledge, individual will tend to be more successful in forming business in fields in which they have worked. Mktg also plays a critical role in forming a new company.
In addition to the presence of market of sufficient size, there must also be a level of mktg know-how to put together the best total package of product, price, distribution & promoting needed for successful product launching. A co. is more easily formed where the driving force is from market demand than a technology push. A role model can be one of the most powerful influences in making co. formation seem possible. To see someone else succeed makes it easier to picture yourself engaged in similar activities-of course, even more successful. Finally resource must be readily available. Risk capital availability plays an initial role in the development & growth of
Q What is the Importance of International Entrepreneurship in developing a country like India? Please give your suggestion in building an Indian MNC. Mention in brief factors you consider favourable as well as barriers?
India is a developing nation that needs to utilize its natural resources in an optimal fashion in order to create wealth for the nation. As a nation our major strengths are skilled manpower, technical skills, access to modern technology & economical costs of labour. However we also have certain inherent weaknesses like poor infrastructure, lack of literacy & a great number of people living below the poverty line.
International Entrepreneurship will benefit our country in the following ways
· It will develop industrially with some infrastructure a part of India where the project will be set up.
· It will aim to generate employment amongst the local people & the functioning of this firm will benefit the community at large.
· Its products & services will add to the GNP /GDP & will be a source of tax collection for the government besides contributing to increasing the basic standard of living & per capita income.
· It will earn valuable foreign exchange will India badly needs to reduce its balance of payment position. The future commercial strength of India will depend on the ability of its entrepreneurs & other established companies to take advantage of markets outside the countries borders.
Suggestions for building Indian MNC
Before an entrepreneurship organization thinks of doing business on foreign soil it should first consolidate & have preferably leadership foothold in the domestic market. It should have encountered any of the following conditions
· Saturation in local market
· Declining market size in India ie de-growing markets for its products
· Has core competency in existing field of business with spare capacity & hence looking to expand in terms of geographical boundaries.
Under such conditions a producer of goods & services should look forward to cross boundaries into other nations to sell his goods & services. They should start off by tapping neighboring countries before expanding to further areas.
Before an Indian entrepreneur thinks of doing business abroad he must understand how international business differs from his local business. The key to his success lies in being able to understand the above & respond accordingly. International entrepreneurial decisions are more complex due to the following factors
· Economics – Creating a business strategy for a multi country area means dealing with differences with levels of Economic development, currency valuations, government regulations, banking systems as well as market /distribution systems. The extent of the quality of these factors significantly impacts the ability to successfully engage in international business.
· The countries balance of payment (BOP)- difference between imports versus exports effects the valuation of its currency & hence affects its ability to do business with developed countries.
· Political environment – The difference in political & legal environments across international markets pose different cahllenges in doing business in foreign markets. Each element of the business strategy of the international entrepreneur can be affected by political/legal environments.
· Culture – The impact of culture on Entrepreneurs is significant with respect to the strategies that they intend to employ. Each element of the business plan has to have some degree of congruence with local culture. Understanding local culture is essential to development of the entrepreneurs worldwide strategy plan, the degree of adaptation & standardization would vary in each country.
· Technology – Like culture varies significantly across countries & industry standards vary from country to country.
Hence the major steps should be
· Stage 1 – make initial movements into international business following a highly centralized decision making process. Tread carefully & start up operations through direct or indirect exports. In this stage the entrepreneur & his organisation undergo the learning & experience curve effects, which will help in the long run.
· Stage- 2 – Once the business is successful & the organisation has managed to transfer its competencies across borders into many countries, the decision making process has to get de-centralized. The firm could employ a multi country strategy by tailoring its products to suit each countries preferences & culture or go in for high degree of Integration & standardization.
· Stage 3 - Once decentralization is carried out the HQ should retain tight control over strategic decisions & tactical implementation of corporate strategy.
· Import quotas particularly imposed by developed nations on goods allowed from developing nations.
· Local tariffs / import duty in developed nation making indian goods non-competitive.
· Subsidies to local manufacturers makes imports unviable
· Trade blocks & free trade areas between developed nations & their neighbours encourages trade between them For e g EU countries, NAFTA etc. which reduces India’s chances of doing business in these sectors.
Trade barriers increase an entrepreneur’s cost of exporting products & hence such increased cost will force entrepreneur to establish the manufacturing base in those countries to surmount such barriers.
The Indian government is encouraging international entrepreneurship by offering the following initiatives.
· Tax sops on export earnings
· Setting up of export processing zones close to ports
· Waiver of import duties on essential RM meant for processing export goods
· Waiver of sale tax, octroi & other govt. levies on export goods
· Providing for cheaper land to 100 % EOUs
Q. Characteristic of a successful Entrepreneur.
Qualities Skills/ Competencies
1. Administrative - Art of getting things done by other people
ability - Strong motivation towards achievement
- Exert considerable efforts
2. Mental ability - Intelligence/analytical approach creative thinking & Anticipate changes
3. Clear Objectives - To establish the product
- make profit
- Render social service
- No charity at, Input level only at, o/p level
4. Business secrecy - No leakage of business secrets to competitors
5. Human relation ability - with customers/ employees/ suppliers/ creditors/ bureaucrats.
6. Communication ability - with customers/ employees/ suppliers/ creditors/
7. Technical knowledge - Necessary for risk taking.
8. Learning from experience - modify their goals on feedback from enviroment
- Capabilities testing when opportunities arise.
- Open to feedback
9. Need for Independence - Prefer not to be controlled
10. Hope for success - Motivation and self-confidence for success
- Attempt task than fear of failure
11. Time orientation - Works for the present
- Quote their past failure with pride
- Indicate confidence
- High goals for themselves.
12. High expectations from employees - Drive employees hard to achieve.
13. Competition - Collaborate with other when to their advantage
14. Social Change - Create jobs for others
- New products/ new mfg. Methods
15. Social Consciousness - Social implications of block mkt hoarding
16. Dignity of labour - Work himself with his hands.
Q. Describe the process of scanning the environment to start an entrepreneurial venture, please give a scheme to short- list a few good business idea?
For a new venture to be set up an initial environment analysis has to be carried out in order to identity trends, changes accruing at national and international level, gather knowledge about the government polices in terms of financial and commercial impacts of the policies, knowledge raw material ability, infrastructure and utility ability at the propose site. The major environment factors, which may affect the entrepreneurial, set up, are:
1. Economic - One should consider the trends in terms off unemployment disposable income, GNP and so on.
2. Cultural - The cultural changes has to be keenly evaluated as it may effect the business plan, because the cultural changes may have change the attitude to wards safety health and nutrition.
3. Technology - In this perdition is difficult in terms of advance due rapid developmental changes. So entrepreneur has to make short terms mkt. decision and contingency plan, since these advances affect the product and services. There is major risk like competitor’s reaction mkt. Weakness product obsolesces.
Business ideas would be short listed using various idea-generating schemes such as:
· Focus group
· Problem inventory analysis
· Check list
Q Innovation and Entrepreneurship.
An innovation is investing of resource to create new wealth or investing of wealth to cerate a new resource. Innovations are the specific function of Entrepreneurship, whether in an existing business, public service institution, or a new venture started by a lone individual in a family.
Innovation is needed for following reasons:
1. To face competition.
2. To stand out in a clutter.
3. To survive recession
4. To solve certain problems.
Installing attitude for innovation:
1. Encourage creative conflict
2. Big ideas from small teams
3. Learning happens from the desk
4. Understand the product users
5. Live in the future
6. Failure sometime produces innovation
7. Joint prototyping to brain storming for fast track innovation
Different sources of Innovation:
1. Unexpected occurrences
2. Process needs
4. Industry & market changes
Q. Creativity & its role in developing business ideas
Creativity is showing imagination & originality. It is basically an innovation generated by entrepreneur in business to solve or generate ideas to serve the market better. Creativity can decline due to age, education, idleness, perceptual, cultural, emotional & organisational factors. Creative thinking is basically a process of searching screening & connecting thoughts. Creativity can be used for development of better business ideas in terms of product, process and market development aspects.
The various creativity oriented problem solving & idea-generating techniques are as follows:
2. Reverse Brainstorming
4. Gordon method
5. Checklist method
6. Free association
7. Forced relationship
8. Collective notebook method
10. Scientific Method
11. Kemper-Tregoe Method
12. Value analysis
13. Attribute listing method
14. Morphological analysis
15. Matrix charting
16. Modification matrix
17. Inspired Approach
18. Parameter Analysis
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