Entrepreneurship Development

Unit 1 Entrepreneurship
Meaning
An Entrepreneur is an individual who, rather than working as an employee, founds and run a
small business, assuming all the risk and rewards of the venture. The entrepreneur is commonly
seen as an innovator, a source of new ideas, goods, services and business.

Entrepreneurship is both the study of how new business are created as well as the actual process
of starting a new business.

Concept
• Person leading military troops.
• Any person doing the work of daring.
• Person doing brave work in business field.
• Contractor completing the construction work of government roads, pools etc.
• People doing farming business.
• Other people taking responsibility.
• Researcher presenting new invention and ideas.
• Co-ordinator coordinating production.
• One who does new business and one who does old business in new fashion.
• Having interest in new creation.
Advantages of Entrepreneur
• They are their own boss.
• They can choose a business that interest them.
• They can be creative.
• They take all the rewards of the venture.

Disadvantages of Entrepreneur
• It is risky work.
• They face lots of uncertainties and irregular income.
• They work for long hours.
• They must make all decision by themselves.

Emergence of Entrepreneurs
Why entrepreneurship/What is their contribution?
• To improve backwardness of people.
• Economic Development of region.
• To analyse the resource utilization and proper utilization of human capital and potential.
• To create self-employment and generation of employment opportunities.
• To develop new market and find new source of supply.
• Mobilize capital resources and introduce new technologies.

Role of Entrepreneurship in Economic Development

• Capital Formation: Entrepreneurs promote capital formation by mobilizing the idle
savings of public. They employ their own as well as borrowed resources for setting up
their enterprises. Such type of entrepreneurial activities leads to value addition and
creation of wealth, which is very essential for the industrial and economic development
of the country.

• Generation of Employment: With the setting up of more and more units by

entrepreneurs, both on small and large-scale numerous job opportunities are created for
others. As time passes, these enterprises grow, providing direct and indirect employment
opportunities to many more. In this way, entrepreneurs play an effective role in reducing
the problem of unemployment in the country.

• Improvement of per capita income: Entrepreneurs are always on the lookout for
opportunities. They explore and exploit opportunities, encourage effective resource
mobilization of capital and skill, bring in new products and services and develops markets
for growth of the economy. In this way, they help increasing gross national product as
well as per capita income of the people in a country.

• Backward and forward linkages: Entrepreneurs like to work in an environment of change

and try to maximize profits by innovation. When an enterprise is established in
accordance with the changing technology, it induces backward and forward linkages
which stimulate the process of economic development in the country.

• Promotes balanced regional development: Entrepreneurs help to remove regional

disparities through setting up of industries in less developed and backward areas. The
growth of industries and business in these areas lead to a large number of public benefits
like road transport, health, education, entertainment, etc. Setting up of more industries
lead to more development of backward regions.
Factors Affecting Entrepreneurial Growth
Economic Factors
Economic environment exercises the most direct and immediate influence on entrepreneurship.
This is likely because people become entrepreneurs due to necessity when there are no other
jobs or because of opportunity. The economic factors that affect the growth of entrepreneurship
are the following:
• Capital: Capital is one of the most important factors of production for the establishment
of an enterprise. Increase in capital investment in viable projects results in increase in
profits which help in accelerating the process of capital formation. Entrepreneurship
activity too gets a boost with the easy availability of funds for investment. Availability of
capital facilitates for the entrepreneur to bring together the land of one, machine of
another and raw material to combine them to produce goods. Capital is therefore,
regarded as lubricant to the process of production.

• Labor: Easy availability of right type of workers also effect entrepreneurship. The quality
rather than quantity of labor influences the emergence and growth of entrepreneurship.
The problem of labor immobility can be solved by providing infrastructural facilities
including efficient transportation. Most less developed countries are labor rich nations
owing to a dense and even increasing population. But entrepreneurship is encouraged if
there is a mobile and flexible labor force.

• Raw Materials: The necessity of raw materials hardly needs any emphasis for establishing
any industrial activity and its influence in the emergence of entrepreneurship. In the
absence of raw materials, neither any enterprise can be established nor can an
entrepreneur be emerged. It is one of the basic ingredients required for production.
Shortage of raw material can adversely affect entrepreneurial environment. Without
adequate supply of raw materials, no industry can function properly and emergence of
entrepreneurship to is adversely affected.

• Market: The role of market and marketing is very important for the growth of
entrepreneurship. In modern competitive world, no entrepreneur can think of surviving
in the absence of latest knowledge about market and various marketing techniques. The
fact remains that the potential of the market constitutes the major determinant of
probable rewards from entrepreneurial function. Frankly speaking, if the proof of pudding
lies in eating, the proof of all production lies in consumption, i.e., marketing.
 • Infrastructure: Expansion of entrepreneurship presupposes properly developed
communication and transportation facilities. It not only helps to enlarge the market, but
expand the horizons of business too. Take for instance, the establishment of post and
telegraph system and construction of roads and highways in India. It helped considerable
entrepreneurial activities which took place in the 1850s.

Social Factors
Social factors can go a long way in encouraging entrepreneurship. In fact, it was the highly helpful
society that made the industrial revolution a glorious success in Europe. Strongly affect the
entrepreneurial behavior, which contribute to entrepreneurial growth. The social setting in which
the people grow, shapes their basic beliefs, values and norms. The main components of social
environment are as follows:
• Caste Factor: There are certain cultural practices and values in every society which
influence the actions of individuals. These practices and value have evolved over
hundreds of years. For instance, consider the caste system among the Hindus in India. It
has divided the population on the basis of caste into four division. The Brahmana, the
Kshatriya, the Vaishya and the Shudra: It has also defined limits to the social mobility of
individuals. By social mobility’ we mean the freedom to move from one caste to another.
The caste system does not permit an individual who is born a Shridra to move to a higher
caste. Thus, commercial activities were the monopoly of the Vaishyas. Members of the
three others Hindu Varnas did not become interested in trade and commerce, even when
India had extensive commercial inter-relations with many foreign countries.

• Family Background: This factor includes size of family, type of family and economic status
of family. In a study by Hadimani, it has been revealed that Zamindar family helped to
gain access to political power and exhibit higher level of entrepreneurship. Background
of a family in manufacturing provided a source of industrial entrepreneurship.
Occupational and social status of the family influenced mobility.

• Education: Education enables one to understand the outside world and equips him with
the basic knowledge and skills to deal with day-to-day problems. In any society, the
system of education has a significant role to play in inculcating entrepreneurial values. In
India, the system of education prior to the 20th century was based on religion. In this rigid
system, critical questioning attitudes towards society were discouraged. The caste system
and the resultant occupational structure were reinforced by such education. It promoted
the idea that business is not a respectable occupation.
 • Attitude of the Society: A related aspect to these is the attitude of the society towards
entrepreneurship. Certain societies encourage innovations and novelties, and thus
approve entrepreneur actions and rewards like profits. Certain others do not tolerate
changes and in such circumstances, entrepreneurship cannot take root and grow.
Similarly, some societies have an inherent dislike for any money-making activity. It is said,
that in Russia, in the nineteenth century, the upper classes did not like entrepreneurs. For
them, cultivating the land meant a good life. They believed that rand belongs to God and
the produce of the land was nothing but god’s blessing.

• Cultural Value: Motives impel men to action. Entrepreneurial growth requires proper
motives like profit-making, acquisition of prestige and attainment of social status.
Ambitious and talented men would take risks and innovate if these motives are strong.
The strength of these motives depends upon the culture of the society. If the culture is
economically or monetarily oriented, entrepreneurship would be applauded and praised;
wealth accumulation as a way of life would be appreciated. In the less developed
countries, people are not economically motivated. People have ample opportunities of
attaining social distinction by non-economic pursuits.

Psychological Factors
Many entrepreneurial theorists have propounded theories of entrepreneurship that concentrate
especially upon psychological factors. These are as follows:
• Need Achievement: The most important psychological theories of entrepreneurship were
put forward in the early 1960s by David McClelland. According to McClelland ‘need
achievement’ is social motive to excel that tends to characterise successful
entrepreneurs, especially when reinforced by cultural factors. He found that certain kinds
of people, especially those who became entrepreneurs, had this characteristic. Moreover,
some societies tend to reproduce a larger percentage of people with high ‘need
achievement’ than other societies. McClelland attributed this to sociological factors.
Differences among societies and individuals accounted for ‘need achievement’ being
greater in some societies and less in certain others.

• Withdrawal of Status Respect: There are several other researchers who have tried to
understand the psychological roots of entrepreneurship. One such individual is Everett
Hagen who stresses the-psychological consequences of social change. Hagen says, at
some point many social groups experience a radical loss of status. Hagen attributed the
withdrawal of status respect of a group to the genesis of entrepreneurship. Hagen
believes that the initial condition leading to eventual entrepreneurial behavior is the loss
 of status by a group. He postulates that four types of events can produce status
withdrawal:
❖ The group may be displaced by force;
❖ It may have its valued symbols denigrated;
❖ It may drift into a situation of status inconsistency; and

• Motives: Other psychological theories of entrepreneurship stress the motives or goals of

the entrepreneur. Cole is of the opinion that besides wealth, entrepreneurs seek power,
prestige, security and service to society. Stepanek points particularly to non-monetary
aspects such as independence, persons’ self-esteem, power and regard of the society.
Evans distinguishes motive by three kinds of entrepreneurs:
❖ Managing entrepreneurs whose chief motive is security.
❖ Innovating entrepreneurs, who are interested only in excitement.

• Others: Thomas Begley and David P. Boyd studied in detail the psychological roots of
entrepreneurship in the mid-1980s. They concluded that entrepreneurial attitudes based
on psychological considerations have five dimensions:
❖ Need-achievement
❖ Locus of control
❖ Willingness to take risks
❖ Tolerance
❖ Type A behavior (a struggle to achieve more and more in less and less of time)

Classification of Entrepreneurs
1. According to the Type of Business
• Business Entrepreneurs: Business entrepreneurs we those who conceive an idea to for a
new product or service and then create a business to convert their ideas into reality.
These entrepreneurs may be found in small business units or big enterprises. They
concentrate both on production and marketing activities. Example: A Printing Press,
bakery or a textile unit.

• Trading Entrepreneurs: Trading Entrepreneurs are those who undertake trading

activities. These entrepreneurs do not concentrate on manufacturing activities. They give
more emphasis on distribution and marketing of goods. They identify potential markets,
create demand for the product and influence people to buy the product. Example: Agents
and Wholesalers.
• Industrial Entrepreneurs: Industrial Entrepreneurs are those who concentrate in
industrial and production activities. Trey identify the needs of the customers and
manufacture a product according to their needs. They are generally a product-Oriented
entrepreneur. Example: A manufacturer of Automobile spare parts, computer
accessories.

• Corporate Entrepreneur: Corporate entrepreneurs are those who exhibit innovative skills
in organizing and managing corporate undertaking. Example: A Trust registered under the
Trust Act.

• Agricultural Entrepreneur: An agricultural entrepreneur is one who concentrates on

agricultural activities. These entrepreneurs concentrate on activities like raising
agricultural production, marketing of fertilizers etc.

• Retail Entrepreneurs: Retail entrepreneurs are those who undertake trading activities.
They have direct contact with customers and hence they are customer oriented. Example:
An entrepreneur running a departmental store

• Service Entrepreneur: A service entrepreneur is one who provides services to customers.

They make profit by rendering services. Example: An entrepreneur running a hotel or dry-
cleaning unit.

• Social Entrepreneur: A social entrepreneur is one who provides importance to the society
by serving them. He concentrates on social issues and does not aim to make profit.
Example: A person running an orphanage.

2. According to the Stages of Development

• First Generation Entrepreneur: A first generation entrepreneur is one who sets up an
enterprise by his innovative skill. He combines various factors of production and provides
marketable product or services by adopting innovative ideas. He is the first person to start
an enterprise on his own. Though such a person may have the family background of some
business, such entrepreneurs may also establish a certain business which may be
unrelated to their family business.

• Modern Entrepreneurs or Innovative Entrepreneurs: A modern entrepreneur is a

dynamic entrepreneur. He always looks for changes and responds to the changing
demand of the market. His business ventures suit the current marketing needs.
• Classical Entrepreneur: Classical entrepreneur is a stereo type entrepreneur. He aims at
maximizing profits at a consistent level. There may or may not be an element of growth.
Survival of the firm is given more importance by these entrepreneurs.

• Inherited Entrepreneurs: These entrepreneurs have inherited family business or possess

experience from their family business. These entrepreneurs may like to diversify a little
from their family business.

3. According to the Motivational Aspects

• Pure Entrepreneur: A pure entrepreneur is a person who is motivated by psychological
and economic factors. Entrepreneurial task is undertaken by them due to certain reasons.
Ability to handle risk, desire to enjoy better status, desire to get recognition in the society,
thirst for making money motivates a person to take up entrepreneurial activities.

• Induced Entrepreneur: Induced entrepreneur are those who takes up entrepreneurial

task due to the incentives and subsides granted by the government. Financial and
technical assistance provided by the government motivates a person to start new
ventures.

• Motivated Entrepreneur: They are motivated by the desire for their self-fulfillment. They
emerge because of the possibility of producing and, selling new products. They are also
motivated by economic factors.

• Spontaneous Entrepreneur: A person, turns out to be an entrepreneur, because of the

natural talent vested in him. These entrepreneurs have self-confidence and emerge as
challengers. They take up entrepreneurial activity in order to tap their talents. They have
great self confidence in their talent and are highly resourceful.

4. According to the Technological Aspects

• Technical Entrepreneur: A technical entrepreneur is one who concentrates more on
production activities. He has got sound technical knowledge. He utilizes his technical
knowledge and demonstrates his innovative capabilities. He is also known as technocrat.

• Non-Technical Entrepreneur: A non-technical entrepreneur concentrates more on

marketing activities. He tries to find out new strategies for marketing goods. He also
promotes his business by employing various marketing methods.
 • Professional Entrepreneur: Professional entrepreneur is a person who applies innovative
ideas in setting up of a business. He is interested in establishing the enterprises rather
than managing it. Once the business is established. the entrepreneur will sell the business
to someone else.

5. According to the Clarence Danhof

• Innovative Entrepreneur: An innovative entrepreneur is one who introduces new
product, new service or new market. An innovative entrepreneur is also known as modern
entrepreneur. An innovative entrepreneur can work only when a certain level of
development is reached. These entrepreneurs introduce new changes and develop the
business after a certain level of development is reached. They invent new products. Such
kind of entrepreneurs can be seen in developed countries, as large sum of money can be
diverted towards research and development purposes.

• Adaptive Entrepreneur: Adaptive entrepreneur is one who adopts the successful

innovations of innovative entrepreneur. These entrepreneurs imitate the techniques and
technologies innovated by others. These entrepreneurs can be seen both in
underdeveloped and developing countries. They also make small changes in relevance to
their market environment.

• Fabian Entrepreneur: A Fabian entrepreneur is one who responds to changes only when
he is very clear that failure to respond to changes would result in losses. Such
entrepreneurs do not introduce new changes. They also do not desire to adopt new
methods. They are very shy and stick to old customs. They are very cautious.

• Drone Entrepreneurs: These entrepreneurs do not make any changes. They refuse to
utilize the opportunities and may also suffer losses. They are very conventional. They
refuse to introduce changes. They even make losses but avoid changes. Sometimes they
may be pushed out of the market.

Entrepreneurial Competencies
It refers to the knowledge, skill and key characteristics that should be owned by the successful
entrepreneurs in order to perform entrepreneurial functions effectively.
• Initiative: The entrepreneur should be able to take actions that go beyond his job
requirements and to act faster. He is always ahead of others and able to become a leader
in the field of business.
❖ Does things before being asked or compelled by the situation.
❖ Acts to extend the business into new areas, products or services
• Sees and acts on opportunities: They always looks for and acts on opportunities they see.
Example, Sees and acts on new business opportunities Seizes unusual opportunities to
obtain financing, equipment, land, work space or assistance.

• Persistence: An entrepreneur is able to make repeated efforts or to take different actions

to overcome an obstacle that get in the way of reaching goals.
❖ Takes repeated or different actions to overcome an obstacle.
❖ Acts in the face of a significant obstacle.

• Information Seeking: An entrepreneur is able to act on how to seek information to help

achieve business objectives or clarify business problems.

• Concern for High Quality of Work: An entrepreneur acts to do things that meet certain
standards of excellence which gives him greater satisfaction. States a desire to produce
or sell a top- or better-quality product or service & Compares own work or own company's
work favorably to that of others.

• Commitment to Work Contract: An entrepreneur places the highest priority on getting a

job completed. Makes personal sacrifice or expends extraordinary effort to complete a
job. Accepts full responsibility for problems in completing a job for customers. Pitches in
with workers or works in their place to get the job done. Expresses a concern for satisfying
the customer.

• Efficiency Orientation: A successful entrepreneur always finds ways to do things faster or

with fewer resources or at a lower cost. Looks for or finds ways to do things faster or at
less cost. Uses information or business tools to improve efficiency.

• Systematic Planning: An entrepreneur develops and uses logical, step-by-step plans to

reach goals. Example, plans by breaking a large task down into sub-tasks Develops plans
that anticipate obstacles. Evaluate alternatives. Takes a logical and systematic approach
to activities.

• Problem Solving: Successful entrepreneur identifies new and potentially unique ideas to
achieve his goals. Switches to an alternative strategy to reach a goal. Generates new ideas
or innovative solutions.

• Self-Confidence: A successful entrepreneur has a strong belief in self and own abilities.
Example, Expresses confidence in own ability to complete a task or meet a challenge.
EDP Programme
Entrepreneurship Development Programme (EDP) is a programme which helps in developing the
entrepreneurial abilities. The skills that are required to run a business successfully is developed
among the people through this programme. Sometimes, people may have skills but it requires
polishing and incubation. This programme is perfect for them. This programme consists of a
structured training process to develop an individual as an entrepreneur. It helps the person to
acquire skills and necessary capabilities to play the role of an entrepreneur effectively.

Objectives of EDP
The objective of this programme is to motivate an individual to choose the entrepreneurship as
a career and to prepare the person to exploit the market opportunities for own business
successfully. These objectives can be set both in the short-term and long-term basis.
• Short-term objectives: These objectives can be achieved immediately. In the short-term,
the individuals are trained to be an entrepreneur and made competent enough to scan
existing market situation and environment. The person, who would be the future
entrepreneur, should first set the goal as an entrepreneur. The information related to the
existing rules and regulations is essential at this stage.

• Long-term objectives: The ultimate objective is that the trained individuals successfully
establish their own business and they should be equipped with all the required skills to
run their business smoothly.

Roles of EDP
An Entrepreneurship Development Programme primarily plays four roles to help an individual to
become an entrepreneur. They are:
• Stimulatory Role: It aims at influencing people in large number to be the entrepreneur.
This includes:
❖ Developing managerial, technical, financial, and marketing skill, personality traits
❖ Promotes and reforms entrepreneurial behaviour and values
❖ Identifying potential entrepreneur applying scientific methods
❖ Motivational training and building proper attitude

• Supportive Role: It helps in the following ways:

❖ Registration of the business
❖ Procurement of fund
❖ Arrangement of land, power, water, shed etc.
❖ Support in purchase of right kind of machinery and equipment
 • Sustaining Role: It aims at providing an effective safeguard to businesses to sustain
against the cut-throat market competition. This includes:
❖ Help in modernisation, expansion, and diversification
❖ Additional financing for further development
❖ Deferring interest payment
❖ Creating new marketing processes
❖ Helping access to improved services and facility centres

• Socio-economic Role: It aims at upgrading the socio-economic status of the public and
includes:
❖ Identifying entrepreneurial qualities in practicality
❖ Creating employment opportunities in micro, small, and medium industries on an
immediate basis
❖ Arresting concentration of industries by supporting regional development in a
balanced manner
❖ Focusing on the equal distribution of income and wealth of the nation

Traits/Qualities of Entrepreneurs
• Must be visionary.
• Have versatile knowledge.
• Desire to achieve.
• Independent
• Able to take calculated risk.
• Responds positively to the challenge.
• Self-Confident and Optimistic.
• Flexible and able to adapt to the changing environment.
• Able to get along with others.
• Energetic and Efficient.
• Dynamic leader.
• Respond to suggestion and the person to take initiative.
• Response to criticism in positive manner.
 Manager vs Entrepreneurs
Basis Entrepreneur Manager
Motive To start a venture by setting up To render his services in an enterprise already
enterprise. setup by someone else.
Status Owner Employee
Risk Bearing Assume risk of economic uncertainty Does not assume or share any risk involved.
involved.
Reward Profits Salary
Innovation In order to maximize profits, he applies Keeps running the enterprise on already
innovation from time to time. established lines on a routine basis.
Pre-requisites Mission, creative thinking, risk-bearing Needs distinct qualification such as knowledge of
ability. human behavior and management theory.

Entrepreneur vs Entrepreneurship
Basis Entrepreneur Entrepreneurship
Define Individual who finds and run a small Study of how new business are created as well
business, assuming all the risk and rewards of as the actual process of starting a new business.
the venture.
Creation of Job Often synonymous with founder. Ranges in scale from solo projects to major
undertakings creating many job opportunities.
Co-ordination Entrepreneur is a coordinator as he looks all It is coordination maintained by the
three elements of production i.e. land, labor entrepreneur.
and capital.
Innovation The person who innovates something new. The process of innovation.
Leading The one who leads an enterprise towards its The way in which the entrepreneur leads his
vision. manpower, motivates them for completing of
the firm’s goals.
Risk Bearing He who bear risk for the sake of making The risk bearing practice that is done by the
reasonable profit. entrepreneur.

Entrepreneur vs Administrator
Basis Entrepreneur Administrator
Beginning Start with the perception of an opportunity. Start with the resources in hand.
Biasness Bias towards action. Bias towards analysis.
Flexibility Make adjustment as they go. Resist deviations from plan.
Structure Build team and informal networks. Work in hierarchy with clear authority.
Focus Focus on results. Focus on survival and growth of the
organization.
Entrepreneur vs Intrapreneur
Basis Entrepreneur Intrapreneur
Meaning Individual who finds and run a small business, An employee of the organization who is in
assuming all the risk and rewards of the charge of undertaking innovations in
venture. product, service, process etc.
Approach Intuitive Restorative
Resources Uses own resources Use of resources provided by company
Capital Raised by him Financed by company
Enterprise Newly established An existing one
Risk Borne by entrepreneur Taken by company
Unit II Opportunity/Identification and Product Selection
Entrepreneurial Opportunity Search and Identification
Business Opportunity Identification Process
It is pertinent to know how entrepreneurs identify and decide a new business opportunity with
the best chance to succeed. The most important part of all business attempts common to most
successful start-ups is answering an unmet need in the market. Customers are always interested
in products that add value. They buy products needed only to satisfy some problems. In actual
fact, there is no substitute for indulging the unmet needs of customers. Most entrepreneurs
searching for new business ideas fundamentally consider three central issues. The main one is
the potential economic value. He first considers if the venture has the capacity to generate profit.
The second is the newness of such a venture. He/she will prefer products, services or technology
that does not previously exist in that environment. The third is the perceived desirability whether
their product has the moral or legal acceptability in that environment. He then considers if:
• His final business decision idea corrects a deficiency in the market.
• The resources and capability to carry out this business idea are available to him/her.
• The market for it are readily available and at profit sales.
• The new business idea can compete favourably with existing related competitors and
their market.

The Stages of Opportunity Identification process

Opportunity identification is the collection of three main factors, which are the entrepreneur’s
background, the business influence and the general business environment. Opportunity
identification has five stages that lead to ‘recognition’. The five stages are discussed in
relationship with the process of opportunity identification. These stages are:
• Preparation: This stage is that knowledge and experience exercised just before the
opportunity discovery process. These knowledge and experience are not often
deliberately acquired. However, preparation itself is usually a deliberate attempt to widen
capability in an area and become sensitive to concerns in a field of interest. In an
organized situation, the background of the business, the products or services or the
technological knowledge must have majorly informed the main ideas of the successful
venture. One cannot however, rule out the role of new ideas and expertise originating
from individuals in the organization that will eventually result in a new business

• Incubation: This stage is the part of the opportunity identification process that involves
the consideration of a concept or a specific problem ordinarily not subjected to conscious
or formal analysis by a businessman or his team. It is usually not consciously done and
therefore more often than not, an instinctive and unempirical approach for the
consideration of several potential alternatives.
 • Insight: This stage occurs at the moment a fundamental solution suddenly becomes
recognized unexpectedly. It is a particular moment that keeps occurring persistently right
through the process of opportunity identification. Insights have been found to be
extensive channels to the discovery of start-up businesses and sometimes reveal
additional knowledge for the development of a current process of discovery. In respect
of a business venture, insight predictably encompasses the abrupt recognition of an
opportunity in business, the answer to an adequately pondered crisis and the possession
of a concept from social networks and associates.

• Evaluation: This stage is about investigating if the recognized and developed ideas are
feasible, if the businessman has the required abilities to realize the ideas and if the idea
is sufficiently innovative for prospects. It sometime involves full feasibility analysis of the
ideas through all forms of research instruments and criticisms from relevant business
acquaintances. It is fundamental to also investigate the prospect and viability of the new
insight ideas as the spirit of entrepreneurship is to make satisfactory and sensible profits.

• Elaboration: This is that stage that exposes the opportunity/ideas to external analysis
with the tedious and time–consuming options selection, choice decision and organization
of resources. It is customarily in search of all legalities that could build confidence and
guarantee the practicability of the business. Elaboration also reduces uncertainties
by providing the detailed planning activities after the evaluation viability confirmation.
This will eventually reveal the concept areas that still need further analysis and attention.

Sources of Information
• The Library is a primary resource for information. Government agencies have a variety of
publications which may be useful. Some colleges and universities have reference libraries
which may have a circulation section available to the public. Also, research institutes and
some large corporations have libraries with sections on specific topics. Libraries are the
storehouse of information which may be useful in operating a small business.

• Internet can be used to carry out research and to find useful information and data.
Examples of these search engines are Google, Bing, ask, etc. Also, E-mail can be used to
communicate with providers of information who have websites on the internet.

• Subscribing to Trade Papers and Magazines. Desirable entrepreneurs should have time
to read articles especially in understanding new trends and developments relating to
business. It is advisable to keep a file of pertinent articles for future reference.
 • Industrial Data is helpful in comparing a business to other similar businesses. The data is
available from trade associations or government agencies and includes ratios such as;
stock turnover, cash discounts percentage mark-up etc.

• Membership-Based Organisations can provide services such as conducting research,

organizing education and training programmes, implementing new technology,
responding to members’ questions and concerns and disseminating information through
newsletters, magazines and special reports.

• Training Programmes can help entrepreneurs to develop formal plans for improving their
managerial skills and ability. Training courses and adult education programmes are
designed by many institutions, agencies and associations. Entrepreneurs should be aware
of these personal development possibilities and take full advantage of them.

• Employees. The people who work for a business can provide answers to specific problems
in a business. For example, entrepreneurs might ask employees for their advice and
assistance about stock display or customer attitudes. Employees are in a good position to
give valuable advice providing they know that their opinions and suggestions are valued.

Type of Information
• Marketing Information: Whoever engages in a business, whoever embarks on
entrepreneurial tasks will-knowingly or unknowingly engage in marketing. We can state
that whenever people engaged in business, they also engage in marketing. Some aspects
of marketing have over the years changed dramatically. Selling alone was the actual
marketing activity.

• Technical Information: In developing a business idea there is a need for potential

entrepreneur to adopt a carefully moderated and intelligent technical approach. Planning
is a process that never ends for business. It is extremely important in the early stages of
any venture when the entrepreneur will need technical information to prepare a
preliminary business plan.

• Information and Communication Technology (ICT): Information and communication

technology is very important source of information for Entrepreneurship development as
we know that the whole world is now a global village where information about a
product/service can be easily sourced. One can source through the internet and find out
the kind of hardware, software for the kind of business one wants to venture into. It may
be packages on accounting and production or databases appropriate for the business.
 • Technology Is Constantly Changing the Demands of Consumers: Businesses use new
technologies to produce new products and services. Entrepreneurs should realize’ that
new technological developments such as the internet and cell phones increase the
exchange of information and may influence the operations of their business,
Entrepreneurs may not be aware of the nature and effects of all new technologies, yet,
they must try to determine technical developments which are likely to have the greatest
impact on their business operations.

• Financial Information: Whether a business is small or large, owners and executives-must

have financial information relating to the type of business they want to establish. One of
the most often overlooked areas of information for entrepreneurship development is the
financial information.

Criteria to Select a Product/Factors to Consider in Product Selection

In selecting product for your business venture, the following factors must be taken into
consideration:
• Supply-gap: The size of the unsatisfied market demand which constitute a source of
business opportunity will dictate, to a great extent the need to select a particular product.
The product with the highest chances of success as reflected in its demand will be
selected. In essence, there must be existing obvious demand for the selected product.

• Fund: The size of the funds that can be mobilized is another important factor. Adequate
fund is needed to develop, produce, promote, sell and distribute the product selected.

• Availability of and Access to Raw Materials: Different products require different raw
materials. The source quality and quantity of the raw materials needed are factors to be
seriously considered, Are the raw materials available in sufficient quantities? Where are
the sources of raw materials located? Are they accessible? Could they be sources locally
or imported? Satisfactory answers should be provided to these and many other relevant
questions.

• Technical Implications: The production process for the product needs to be considered.
There is need to know the technical implications of the selected product on the existing
production line, available technology and even the labour force. The choice of a particular
product may require either acquisition of the machineries or refurbishing of the old ones.
The product itself must be technically satisfactory and acceptable to the user.
 • Profitability/Marketability: Most often, the product that has the highest profit potential
is often selected. However, a product may be selected on the basis of its ability to utilize
idle capacity or complement the sale of the existing products. The product must be
marketable.

• Availability of Qualified Personnel: Qualified personnel to handle the production and

marketing of the product must be available. The cost of producing the product must be
kept to the minimum by reducing wastages. This is achievable through competent hands.

• Government Policies: This is quite often an uncontrollable factor. The focuses of

government policies can significantly influence the selection of product. For instance, a
package of incentives from government for a product with 100% local input contents can
change the direction of the business’s R & D and hence the product selected.

• Government objectives: The contributions of the product to the realization of the

company’s short- and long-range objectives must be considered before selection. For
instance, the company goal maybe the achievement of sale growth, sales stability or
enhancement of the company’s social value.

Phases involved in New Product Selection

Idea Generation and Synthesis

Evaluation

Choice

Conducting feasibility Studies

A feasibility study is used to determine the viability of an idea, such as ensuring a project
is legally and technically feasible as well as economically justifiable. It tells us whether a
project is worth the investment—in some cases, a project may not be doable. There can
be many reasons for this, including requiring too many resources, which not only prevents
those resources from performing other tasks but also may cost more than an organization
would earn back by taking on a project that isn’t profitable.

Steps to Conduct a Feasibility Study

1. Conduct a Preliminary Analysis: The primary purpose of the preliminary analysis is to
screen project ideas before extensive time, effort, and money are invested. Two sets of
activities are involved.
 • Describe or outline as specifically as possible the planned services, target markets,
and unique characteristics of the services by answering these questions:
❖ Does the practice serve a currently unserved need?
❖ Does the practice serve an existing market in which demand exceeds
supply?
❖ Can the practice successfully compete with existing practices because of
an "advantageous situation," such as better design, price, location, or
availability?

• Determine whether there are any insurmountable obstacles. A "yes" response to

the following indicates that the idea has little chance for success:
❖ Are capital requirements for entry or continuing operations unavailable or
unaffordable?
❖ Do any factors prevent effective marketing to any or all referral sources?

If the information gathered so far indicates that the idea has potential, then continue with
a detailed feasibility study.

2. Prepare a Projected Income Statement: Anticipated income must cover direct and
indirect costs, considering the expected income growth curve. Working backward from
the anticipated income, the revenue necessary to generate that income can be derived in
order to build a projected income statement. Factors that determine this statement are
services provided, fees for services, volume of services, and adjustments to revenues.

3. Conduct a Market Survey: A good market survey is crucial. If the planner cannot perform
this survey, an outside firm should be hired. The primary objective of a market survey is
a realistic projection of revenues. The major steps include:
• Define the geographic influence on the market.
• Review population trends, demographic features, cultural factors, and purchasing
power in the community.
• Analyze competing services in the community to determine their major strengths
and weaknesses. Factors to consider include pricing, product lines, sources of
referral, location, promotional activities, quality of service, consumer loyalty and
satisfaction, and sales.
• Determine total volume in the market area and estimate expected market share.
• Estimate market expansion opportunities.
4. Plan Business Organization and Operations: At this point, the organization and
operations of the business should be planned in sufficient depth to determine the
technical feasibility and costs involved in start-up, fixed investment, and operations.
Extensive effort is necessary to develop detailed plans for:
• Equipment
• Merchandising methods
• Facility location and design (or layout)
• Availability and cost of personnel
• Supply availability
• Overhead (e.g., utilities, taxes, insurance)

5. Prepare an Opening Day Balance Sheet: The Opening Day Balance Sheet should reflect
the practice's assets and liabilities as accurately as possible at the time the practice
begins, before the practice generates income. Prepare a list of assets required for practice
operations. The list should include item, source, cost, and available financing methods.
Necessary assets include everything from cash necessary for working capital to buildings
and land. Although the resulting list is rather simple, the amount of effort required may
be extensive. Liabilities to be incurred and the investment required by the practice must
also be clarified. These items need to be considered:
• Whether to lease or buy land, buildings, and equipment
• How to finance asset purchases
• How to finance accounts receivable

6. Review and Analyze All Data: This review is crucial. The planner should determine if any
data or analysis performed should change any of the preceding analyses. Basically, taking
this step means "Step back and reflect one more time."
• Re-examine the Projected Income Statement and compare with the list of desired
assets and the Opening Day Balance Sheet. Given all expenses and liabilities, does
the Income Statement reflect realistic expectations?
• Analyze risk and contingencies. Consider the likelihood of significant changes in
the current market that could alter projections

7. Make "Go/No Go" Decision: All the preceding steps have been aimed at providing data
and analysis for the "go/no go" decision. If the analysis indicates that the business should
yield at least the desired minimum income and has growth potential, a "go" decision is
appropriate. Additional considerations include:
• Is there a commitment to make the necessary sacrifices in time, effort and money?
• Will the activity satisfy long-term aspirations?
 Technical Feasibility
The first element deals with technical feasibility of the proposed action plan. If your organization
is introducing a new product or a service, the technical feasibility study will determine if it’s a
technically viable action.
Technical Feasibility
• Is the product or service
that you propose to offer
technically viable?
Includes
• A description of what you propose to sell, expressed in plain terms so that
a non-technical person can understand it.
• Whether the product or service is ready for sale. If it is not, how far it has
been developed. How far away from the marketplace it is and how much
this will cost you?
• The steps you can take to protect your product or service.
• If your idea cannot be protected, what are its main strengths?
• What benefits or solutions will your customers gain by purchasing your
product or service?
• The major weaknesses in your product or service and the ways you
propose to overcome them
• The resources required to provide your product or service.
• Your capacity to acquire or gain access to such resources.
• Regulatory standards or requirements that must be satisfied and your
capacity to meet them.

Marketing Feasibility
The second element focuses on testing the market for the proposed action or idea. It examines
issues like whether the product or service can be sold at reasonable prices or if there’s a
marketplace for it.
Market Feasibility Includes
Q1. Can the product or • How you have carried out market research.
service be sold in sufficient • What market segments you intend to target.
volume at a sustainable • Why people will buy your product or service.
price? • Who your potential customers are.
• • The number of potential customers.
• Q2. Is there a market for • Where your potential customers are located.
what you are proposing to • Your potential customers' buying patterns.
offer? • Who makes the buying decision for your product or service?
• How you will sell your product or service.
• Who are your competitors, both present and potential?
• What do you know about your competitors, in terms of product range,
pricing, sales turnover, quality?
• What are the strengths and weaknesses of your most important
competitors?
• What competitive edge do your most important competitors have?
• What is your competitive business advantage?
 Finance/Commercial Feasibility
Commercial feasibility is an element of the study focused on the probability of commercial
success. It’s mainly focused on studying the new business or a new product or service, and
whether your organization can create enough profit with it.
Financial Feasibility Includes
• Is your product or service • Key success factors for your business meaning those factors you MUST
commercially viable? have so you can meet your business objectives.
• • Strengths and weaknesses of your business, and the opportunities and
• Can you sell your product threats it faces.
or service in sufficient • How long you expect to be in business before you generate your first sale.
volume to generate a • How long you can survive before your first sale
profit? • Potential sales volume.
• Estimate of fixed and variable expenses.
• How prices are determined in a business like yours.
• Your proposed pricing structures.
• How long it will take to reach break-even sales volume.
• How sensitive your break-even point is to the price you can obtain.
• How much money you need to start up.
• How much money you have available to invest in the business.
• How much money the business will require by way of working capital to
sustain operations.
• External sources of finance you intend to approach.
• The return on investment for which you are budgeting.
• Cash flow analysis and the assumptions on which it is based.

Business Plan Formulation

A business plan is a formal statement of business goals, reasons they are attainable,
and plans for reaching them. It may also contain background information about the organization
or team attempting to reach those goals. Written business plans are often required to obtain a
bank loan or other financing.

Stages involved in Formulation of Good Business Plan

Normally, micro and small-scale enterprises do not include sophisticated techniques which are
used for preparing and formulation of business plan of large-scale enterprises. Within the small-
scale enterprises too, all the information may not be homogeneous for all units. In fact, what and
how much information will be given in the business plan depends upon the size of the unit as
well as nature of the production.

Project formulation divides the process of business plan development into eight distinct and
sequential stages.
 General Information

Project Description

Market Potential

Capital Costs and Sources of Finance

Assessment of Working Capital Requirements

Other Financial Aspects

Economic and Social Variables

Project Implementation

General Information
The information of general nature given in the project report includes the following:
• Bio-data of Promoter: Name and address of entrepreneur; the qualifications, experience
and other capabilities of the entrepreneur; if these are partners, state these
characteristics of all the partners individually.
• Industry Profile: A reference of analysis of industry to which the project belongs, e.g.,
past performance, present status, its organisation, its problems, etc.
• Constitution and Organisation: The constitution and organisational structure of the
enterprise, in case of partnership firm, its registration with the Registrar of Firms;
application for getting Registration Certificate from the Directorate of Industries/District
Industry Centre, etc.
• Product Details: Product utility, product range; product design; advantages to be offered
by the product over its substitutes, if any.

Project Description
A brief description of the project covering the following aspects is given in the project report.
• Site: Location of enterprise; owned or leasehold land; industrial area; No Objection
Certificate (NOC) from the Municipal Authorities if the enterprise location falls in the
residential area.

• Physical Infrastructure: Availability of the following items of infrastructure should be

mentioned in the project report:
 ❖ Raw Material: Requirement of raw material, whether inland or imported, sources
of raw material supply.
❖ Skilled Labour: Availability of skilled labour in the area, arrangements for training
labourers in various skills.

• Utilities: These include:

❖ Power: Requirement for power, load sanctioned availability of power.
❖ Fuel: Requirement for fuel items such as coal, coke, oil or gas, state of their
availability.
❖ Water: The sources and quality of water required should be clearly stated in the
project report.

• Pollution Control: The aspects like scope of dumps, sewage system and sewage treatment
plant should be clearly stated in case of industries producing emissions.

• Communication System: Availability of communication facilities, e.g., telephone, telexes

etc. should be stated in the project report.

• Transport Facilities: Requirements for transport, mode of transport, potential means of

transport, distances to be covered, bottlenecks etc., should be stated in the business plan.

• Other Common Facilities: Availability of common facilities like machine shops, welding
shops and electrical repair shops etc. should be stated in the report.

• Production Process: A mention should be made for process involved in production and
period of conversion from raw material into finished goods.

• Machinery and Equipment: A complete list of items of machinery and equipment’s

required indicating their size, type, cost and sources of their supply should be enclosed
with the project report.

• Capacity of the Plant: The installed licensed capacity of the plant along with the shifts
should also be mentioned in the project report.

• Technology Selected: The selection of technology, arrangements made for acquiring it

should be mentioned in the business plan.
 • Research and Development: A mention should be made in the project report regarding
proposed research and development activities to be undertaken in future.

Market Potential
While preparing a project report, the following aspects relating to market potential of the
product should be stated in the report:
• Demand and Supply Position: State the total expected demand for the product and
present supply position. This should also be mentioned how much of the gap will be filled
up by the proposed unit.
• Expected Price: An expected price of the product to be realised should be mentioned in
the project report.
• Marketing Strategy: Arrangements made for selling the product should be clearly stated
in the project report.
• After-Sales Service: Depending upon the nature of the product, provisions made for after-
sales service should normally be stated in the project report.
• Transportation: Requirement for transportation means indicating whether public
transport or entrepreneur’s own transport should be mentioned in the project report.

Capital Costs and Sources of Finance

An estimate of the various components of capital items like land and buildings, plant and
machinery, installation costs, preliminary expenses, margin for working capital should be given
in the project report. The present probable sources of finance should also be stated in the project
report. The sources should indicate the owner’s funds together with funds raised from financial
institutions and banks.

Assessment of Working Capital Requirements

The requirement for working capital and its sources of supply should be carefully and clearly
mentioned in the business plan or project report. It is always better to prepare working capital
requirements in the prescribed formats designed by limits of requirement. It will minimize
objections from the banker’s side.

Other Financial Aspects

To adjudge the profitability of the project to be set up, a projected Profit and Loss Account
indicating likely sales revenue, cost of production, allied cost and profit should be prepared. A
projected Balance Sheet and Cash Flow Statement should also be prepared to indicate the
financial position and requirements at various stages of the project.
Economic and Social Variables
In view of the social responsibility of business, the abatement costs, i.e., the costs for controlling
the environmental damage should be stated in the project. Arrangements made for treating the
effluents and emissions should also be mentioned in the report.

Project Implementation
Last but no means the least, every entrepreneur should draw an implementation scheme or a
time-table for his project to ensure the timely completion of all activities involved in setting-up
an enterprise. Timely implementation is important because if there is a delay, it causes, among
other things, a project cost overrun.

Project Report Preparation

• Establish who to report to: First, work out who is going to receive this report. The
audience for any communication is important. The type of information that you include
in a report destined to be used for a strategic review of corporate projects is not the same
as the detail you would include for a project progress review. Or for an auditor. Or for
your finance department. The audience will also determine the language that you will
use: remember not to include too much project jargon if the report is going to be used by
people who are not as close to the detail and acronyms as you are.

• Define expectations: What does this audience expect to see? The easiest way to find out
what someone wants in a report is to ask them. Do you routinely ask the recipients of
project communications what they would like to see? If not, what do you think they would
say if you did ask them? OK – go ask them. Another expectation to set is the timescale for
the delivery of the report. Is it a weekly or monthly requirement, or to be produced on an
ad hoc basis? Again, let your audience define this for you – there is no point producing
paperwork if they do not want to read it.

• Agree the format of the report: Depending on what you are reporting, you might want
to create your report in a document. A presentation might be most appropriate. You can
also give verbal reports as part of a meeting, although you may want to provide the
minute-taker with a paragraph of text to ensure your points are summarized effectively.
Even an annotated copy of your plan could be appropriate formats for reporting
depending on the message you want to get across. Also consider how they will receive
the report. If they travel a lot and use a smartphone they may need to receive the report
in a format that displays well on a small screen. You could also use social media tools to
communicate with your project stakeholders. You can read more about social media for
project managers here.
• Plan what to say: This is the step where you establish what is appropriate content for the
project report. You have already worked out what level of detail is required for your
audience. At this step you want to consider what is happening on the project, so you have
an idea of what content is likely to be most appropriate. Also consider what you can and
can’t say at this point. For example, if there is a big, but confidential, change on the
horizon you could include this in a report to your manager but not to a key external
supplier.

• Prepare the report: Once you know the format you will use, prepare the report. Check
the content and make sure that you spend time proof-reading it for factual and
grammatical errors if it is a written report. You could give it to someone else to read
through if you are not confident at picking up those mistakes yourself.

• Deliver your report: Send your report to the person who needs to receive it. If you are
delivering your report in a meeting in the form of a presentation or verbal summary, this
is the step where you do that. The morning before you are due to deliver your report,
check it through again. This gives you the chance to update it with the latest facts or to
make any last-minute adjustments if the project has moved on.

• Follow up: There are 3 ways to follow up your project reports. If your report included
actions, make sure these are followed up. If you are asked to make a change or do
anything else because of delivering your report, then make sure you take a note of these
and follow up these actions. Finally, ask the people who received your project report for
feedback. Did they get everything they needed? Was their information missing that they
would have found valuable? Did you meet the expectations defined in Step 2? If your
report is something you need to produce regularly, getting this type of feedback will make
sure that you are targeting the content to the audience in the best possible way.
Unit III Enterprise Launching Facilities
Definition of Small-scale Industries as per MSMED Act, 2006
A unit engaged in manufacturing, servicing, repairing, processing & preservation of goods having
investment in plant & machinery at an original cost not exceeding 5 crores.

Classification Manufacturing Enterprise Service Enterprise

Micro 25 lakhs 10 lakhs
Small 5 crores 2 crores
Medium 10 crores 5 crores

Rationale
• The Factor Price Argument: It is commonly argued that for various institutional reasons,
labor used in large enterprise is priced well above the levels at which it is used in small-
scale industries. The SSI sector, which uses more labor and less capital per unit of output,
will have relatively lower costs as their training and development costs are quite low.
Besides, large enterprises are ready to pay more as they must attract more stable
migrants from rural areas. Cost of developing commitments among them to firm specific
is also quite high. But small units make greater use of the unstable labor with high
turnover because in their case the stability – efficiency relationship for the work force is
much weaker.

• Employment Argument: In view of India’s scarce capital resources and abundant labor,
the most important argument advanced in favor of the SSIs is that they have a potential
to create immediate large-scale employment opportunities. The increasing emphasis on
SSIs in developing countries like India stems largely from the widespread concern over
unemployment hovering in the country. There are many research findings available,
which will establish that small-scale units are more labor intensive, than large units. In
other words, small units use more of labor per unit of output than investment.

• Equality Argument: One of the main arguments put forward in favor of the small-scale
industries is that they ensure a more equitable distribution of national income and
wealth. This is accomplished because of the two major considerations: (i) compared to
the ownership of large-scale units, the ownership pattern in SSI is more widespread (ii)
their more labor–intensive nature, on the one hand, and their decentralization and
dispersal to rural and backward areas, on the other, provide more employment
opportunities to the unemployed. This results in more equitable distribution of produce
of the small-scale units.
 • Decentralization Argument: Decentralization argument impresses the necessity of
regional dispersal of industries to promote balanced regional development in the country.
Big industries are concentrated everywhere in urban areas. But, small industries can be
in rural and semi-urban areas to use local resources and to cater to the local demands.
Admittedly, it will not be possible to start small enterprises in every village, but it is quite
possible to start small enterprises in a group of villages.

• Latent Resources Argument: This argument suggests that small enterprises are capable
of mapping up latent and unutilized resources like hoarded wealth, ideas entrepreneurial
ability, etc. However, Dhar and Lydall say that the real force of latent resources argument
lies in the existence of entrepreneurial skill. They argue that there is no evidence of an
overall shortage of small entrepreneurs in India. Hence, they doubt the force of this latent
resource’s argument.

Objectives
• To create more employment opportunities with less investment.
• To remove economic backwardness of rural and less developed regions of the economy.
• To reduce regional imbalances.
• To mobilise and ensure optimum utilisation of unexploited resources of the country.
• To improve standard of living of people.
• To ensure equitable distribution of income and wealth.
• To solve unemployment problem.
• To attain self-reliance.
• To adopt latest technology aimed at producing better quality products at lower costs.
• Need for equality
• Need for Decentralization
• Need for More Entrepreneurs
• Need to improve economy of the nation

Characteristics of Small-Scale Industries

• Ownership: Ownership of small-scale unit is with one individual in sole-proprietorship or
it can be with a few individuals in partnership.

• Management and control: A small-scale unit is normally a one man show and even in case
of partnership the activities are mainly carried out by the active partner and the rest are
generally sleeping partners. These units are managed in a personalised fashion. The
owner is activity involved in all the decisions concerning business.
 • Area of operation: The area of operation of small units is generally localised catering to
the local or regional demand. The overall resources at the disposal of small-scale units are
limited and because of this, it is forced to confine its activities to the local level.

• Technology: Small industries are labour intensive with comparatively smaller capital
investment than the larger units. Therefore, these units are more suited for economics
where capital is scarce and there is abundant supply of labour.

• Gestation period: Gestation period is that period after which teething problems are over
and return on investment starts. Gestation period of small-scale unit is less as compared
to large scale unit.

• Flexibility: Small scale units as compared to large scale units are more change susceptible
and highly reactive and responsive to socio-economic conditions. They are more flexible
to adopt changes like new method of production, introduction of new products etc.

• Resources: Small scale units use local or indigenous resources and as such can be located
anywhere subject to the availability of these resources like labour and raw materials.

• Dispersal of units: Small scale units use local resources and can be dispersed over a wide
territory. The development of small-scale units in rural and backward areas promotes
more balanced regional development and can prevent the influx of job seekers from rural
areas to cities.

Scope
• Manufacturing Activities
• Construction Activities
• Public Utilities
• Service & Repairing Activities
• Financial Activities
• Retailing Activities
• Wholesale Business
Entrepreneurial Development
The process of starting a new business venture is embodied in the entrepreneurial development
process. The process can be classified into four phases.

Steps involved in Starting Enterprise

Setting of an enterprise is a complex process. Various institutions and organizations are providing
training to young people to understand the process of setting up enterprise unit. The
entrepreneur should have complete knowledge of men, material, machinery, market, and
products. Several formalities like approval and clearance from government departments are to
be completed before setting up an enterprise.
Step 1. Project Selection
After emergence of viable business opportunity, project must be conceptualised in all dimension
of 4 Ps of Project
• Product (shape, size and nature),
• Process (technology to produce the product),
• Place (Location of plant), and
• Partner (Technological or Financial Collaborator).

The factors like marketing strategy availability of raw-material, Process Technology, accessibility
to the market and incentive and support from Government are considered in making choice of a
product.

Step 2. Technology and Machinery

After selection of product, process technology is selected for production/manufacturing of
product. In selecting the process technology, following point should be keep in mind:
• Requirement of level of skills and complexity of machines.
• Requirement of large quantities of water and/or power-
• Issue related to product patent if any
• Any special pollution or environmental regulations.
• Appropriateness to the local environment and conditions.

Step 3. Arranging Finance

Monetary support is necessary to take off small enterprises. The monetary support is required as
seed capital, short, medium- and long-term loans and for mitigating risk. The important
institutions provide credits to business enterprises are commercial/Regional Rural/Co-operative
Banks, Small Industries Development Bank of India (SIDBI) and State Financial Corporations, etc.

Step 4. Unit Development

Setting up an establishment requires negotiating a favourable plot or shed purchase, organising
for proper construction of building, design of interiors and finding good deals for equipment and
machinery. Getting power connection causes delay in setting up of plant. Projections for
manpower and staffing, machinery and materials are made in the business plan. Selection of
proper manpower and procurement of right machinery and materials are very important and
critical in establishment of plant to success.
Step 5. Filing of Entrepreneur’s Memorandum
Filling of memorandum by a Micro, Small or Medium Enterprise Section 8 of the Micro, Small
and Medium Enterprises Development (MSMED) Act, 2006 is necessary. The memorandum may
be filed by all three categories of enterprises with the District Industries Centre in the jurisdiction
of which the enterprise is (or, is proposed to be) located. The File Format for
Entrepreneurs Memorandum and the detail procedure for filing it are available at
http://dcmsme.gov.in/howtosetup/getstart.

Step 6. Approvals
These include regulatory, taxation, environmental and certain product specific clearances.
Virtually, no small-scale industries require a license from the Govt. of India. The units are, of
course, subject to the location / land use and zoning restrictions in force under the local laws.

Step 7. Clearances
An entrepreneur must obtain several clearances or permissions depending upon the nature of
his unit and products manufactured. Regulatory or Taxation related, product specific and
environment & pollution related are mainly required.

Step 8. Quality Certification

Quality certification is very important in competitive markets and especially in international
markets. To avail the quality certification like ISO-9000, a significant cost must be borne. A
scheme has been launched to give financial incentive to those SSI units who acquire ISO-9000
certification, by reimbursing 75% of their costs of obtaining certification, subject to a maximum
of Rs. 0.75 lacs per unit.

SME Registration
Small business registration is the first step of initiating any type of business. However, the most
important consideration is selecting the right form of organization.
Obtain Digital Signature
c
Obtain Director Identification Number (DIN)
c
Secure Company Name
c
Craft Memorandum and Article of Association
c
File INC-29 & get the Incorporation Letter
c
 Obtain Permanent Account Number
c
Open a Current Account
c
Obtain MSME Udyog Aadhaar Registration
c
Obtain TAN Number
c
Obtain Shops & Establishments Act License
c
Obtain GST Registration
c
Obtain Professional Tax Registration
c
Register with Employee’s Provident Fund
c
Registration with Employee’s State Insurance Corporation
c
Obtain IEC Code
c
Register with Custom Duty
c
NOC from Pollution Control Board

Role of SME in Economic Development of India

• Providing employment
• Conversion of people from unemployment to employed reduces the social burden by
converting tax user to tax payer
• Quickly size the business opportunity to suit the changing economic situation
• Nationalization in term of local control rather than dependence of MNCs
• Mobilization of local resources
• Feeding large scale industries
• Promotion of Exports
• Arrest migration of youth from rural to urbans thereby reducing social frustration
pressure, economic income disparities
• As per ILO (International Labor Organization), self-employment is recognized as pride of
ownership & ability to grow out of meaningless life into a person of increased status,
improved life style & ability to control his destiny
 • Cultural preservation
• Equitable distribution of wealth
• Promoting Regional Development
• Inspiring new entrepreneurs

Project Planning and Network Techniques of PERT/CPM

A project defines a combination of interrelated activities that must be executed in a certain order
before the entire task can be completed. An activity in a project is usually viewed as a job
requiring time and resources for its completion. Project Scheduling means constructing a time
chart showing the start and the finish times for each activity as well as its relationship to other
activities in the project pinpointing the critical activities that require special attention if the
project is to be completed on time.

The network diagram represents the interdependencies and precedence relationships among
the activities of the project. An arrow is commonly used to represent an activity, with its head
indicating the direction of progress in the project. An event represents a point in time that
signifies the completion of some activities and the beginning of new ones.

Steps to construct Network Diagram

Step 1. Each activity is represented by one and only one arrow in the network;
Step 2. No two activities can be identified by the same head and tail events (a dummy activity is
introduced in such situations);
Step 3. To ensure the correct precedence relationship in the network diagram, the following
questions must be answered as every activity is added to the network:
• What activities must be completed immediately before this activity can start?
• What activities must follow this activity?
• What activities must occur concurrently with this activity?

PERT
PERT stands for Program Evaluation Review Technique. PERT charts are tools used to plan tasks
within a project – making it easier to schedule and coordinate team members accomplishing the
work. PERT charts were created in the 1950s to help manage the creation of weapons and
defense projects for the US Navy. While PERT was being introduced in the Navy, the private
sector simultaneously gave rise to a similar method called Critical Path. PERT is like critical path
in that they are both used to visualize the timeline and the work that must be done for a project.
However, with PERT, you create three different time estimates for the project: you estimate the
shortest possible amount time each task will take, the most probable amount of time, and the
longest amount of time tasks might take if things don’t go as planned. PERT is calculated
backward from a fixed end date since contractor deadlines typically cannot be moved.

As an example of using a PERT chart, consider the following simple chart showing a project with
tasks A, B, C, D and E. This diagram states that tasks A, B, C and E will take 2 days (assume D is
abbreviation for days) and task D has a planned duration of 5 days. Task D is dependent on
completion of task B, etc.

C 4
2
2
A E
d
2 2
d d
1
5

B
D
2
5
d 3 d

CPM
The critical path method (CPM) is a step-by-step project management technique for process
planning that defines critical and non-critical tasks with the goal of preventing time-frame
problems and process bottlenecks. The CPM is ideally suited to projects consisting of numerous
activities that interact in a complex manner. In applying the CPM, there are several steps that can
be summarized as follows:
• Define the required tasks and put them down in an ordered (sequenced) list.
• Create a flowchart or other diagram showing each task in relation to the others.
• Identify the critical and non-critical relationships (paths) among tasks.
• Determine the expected completion or execution time for each task.
• Locate or devise alternatives (backups) for the most critical paths.

In the example above the critical path can be described by events 1,3 and 5 or by tasks B, D. This
is because the time to reach the end event (5) on this path is longer than any other path. This
means that task B must take no longer than 2 days and task D no longer than 5 days or the end
date for event E will need to be extended. The duration of the other path is 6 days. Because the
critical path is 7 days, there is slack (or float) of one day on the other path. This means that this
path can take 1 day longer than planned. That is, any one task on this path (A, C or E) can take 1
day longer than expected. Note this slack must be shared between the tasks on this other path.
They cannot all take an extra day.
 C
2 2 4
A E
d
2 2
d d
1
5
B
D
2
5
d
3 d

Basis for
PERT CPM
Comparison

PERT is a project management CPM is a statistical technique of

Meaning technique, used to manage project management that manages
uncertain activities of a project. well defined activities of a project.

A technique of planning and

What is it? A method to control cost and time.
control of time.

Orientation Event-oriented Activity-oriented

Evolved as Research &

Evolution Evolved as Construction project
Development project

Model Probabilistic Model Deterministic Model

Focuses on Time Time-cost trade-off

Estimates Three-time estimates One-time estimate

Appropriate for High precision time estimate Reasonable time estimate

Management of Unpredictable Activities Predictable activities

Nature of jobs Non-repetitive nature Repetitive nature

Critical and Non-

No differentiation Differentiated
critical activities

Non-research projects like civil

Suitable for Research and Development Project
construction, ship building etc.
Project Appraisal
It refers to the process of assessing, in a structured way, the case for proceeding with a project
or proposal. Project appraisal is the effort of calculating a project's viability. It involves comparing
various options, using economic appraisal or some other decision analysis technique.

Methods of Project Appraisal

• Economic Analysis: Under economic analysis, the project aspects highlighted include
requirements for raw material, level of capacity utilization, anticipated sales, anticipated
expenses and the probable profits. It is said that a business should have always a volume
of profit clearly in view which will govern other economic variables like sales, purchases,
expenses and alike. It will have to be calculated how much sales would be necessary to
earn the targeted profit. Undoubtedly, demand for the product will be estimated for
anticipating sales volume. Therefore, demand for the product needs to be carefully
spelled out as it is, deciding factor of feasibility of the project concern.

• Financial Analysis: Finance is one of the most important pre-requisites to establish an

enterprise. It is finance only that facilitates an entrepreneur to bring together the labour
of one, machine of another and raw material of yet another to combine them to produce
goods. To adjudge the financial viability of the project, the following aspects need to be
carefully analyzed:
❖ Assessment of the financial requirements both – fixed capital and working capital
need to be properly made. The requirement for fixed assets/capital will vary from
enterprise to enterprise depending upon the type of operation, scale of operation
and time when the investment is made.
 ❖ In accounting, working capital means excess of current assets over current
liabilities. Generally, 2: 1 is considered as the optimum current ratio.

• Market Analysis: Before the production starts, the entrepreneur needs to anticipate the
possible market for the product. He/she must anticipate who will be the possible
customers for his product and where and when his product will be sold. There is a trite
saying in this regard: “The manufacturer of an iron nails must know who will buy his iron
nails.” This is because production has no value for the producer unless it is sold. It is said
that if the proof of pudding lies in eating, the proof of all production lies in marketing/
consumption. In fact, the potential of the market constitutes the determinant of probable
rewards from entrepreneurial career. Thus, knowing the anticipated market for the
product to be produced becomes an important element in every business plan.

• Technical Feasibility: While making project appraisal, the technical feasibility of the
project also needs to be taken into consideration. In the simplest sense, technical
feasibility implies to mean the adequacy of the proposed plant and equipment to produce
the product within the prescribed norms. Know-how denotes the availability or otherwise
of a fund of knowledge to run the proposed plants and machinery. It should be ensured
whether that know-how is available with the entrepreneur or is to be procured from
elsewhere. In the latter case, arrangement made to procure it should be clearly checked
up. If project requires any collaboration, then, the terms and conditions of the
collaboration should also be spelt out comprehensively and carefully.
Unit IV Role of Support Industries
Role of Support Industries
The success of a market also depends on the presence of suppliers and related industries within
a region. Competitive suppliers reinforce innovation and internationalization. Besides suppliers,
related organizations are of importance too. If an organization is successful, this could be
beneficial for related or supporting organizations. They can benefit from each other’s know-how
and encourage each other by producing complementary products.

The role played by such industries are:

• They help in easing the current challenges for manufacturers.
• They help by leading the company towards innovation.
• Enable sustainable prosperity.
• Helps by providing resources at right time and right place.
• Do all the petty jobs for the manufacturers.

Management of Small Business

Running a business takes copious amounts of time and effort. Small business owners are
responsible for managing all aspects of their company. Management is commonly defined as the
alignment and coordination of multiple activities in an organization. Business owners use
management skills to accomplish the goals and objectives of their company. Small business
management requires business owners to use a mix of education, knowledge and expertise to
run their company.
Small Business Management Techniques
• Styles: Autocratic, paternalistic, democratic and laissez-faire are a few common styles of
management. Autocratic management allows a business owner to be the main individual
responsible for making decisions and driving the company through the business
environment. Paternalistic management looks to create the best work environment for
every employee. Business owners use a democratic management style when they allow
employees to have input or feedback on business decisions. Laissez-faire creates the most
employee autonomy and allows decisions to be made with little business owner
oversight.

• Facts: Business owners usually represent the most visible individual in an organization.
Business owners are responsible for creating business relationships to advance their
company’s operations. Vendors, suppliers, distributors and warehouse companies are a
few external company’s business owners may work with in the business environment.
Business owners coordinate the activities involving these organizations to ensure that
their company has enough economic resources. Economic resources represent the raw
materials and supply chain needed to produce and distribute goods in the business
environment.

• Features: Small business management requires business owners to provide oversight for
several functions in the business. Purchasing, human resources, sales, customer service,
marketing and product development are a few major departments or functions business
owners must manage. Larger business organizations often have more departments or
divisions to manage. Business owners in large organizations often delegate management
responsibilities to employees.

• Tools: Business owners often use management tools to help them manage their small
business. Accounting, finance tools and performance management represent a few
universal small business management tools. Business owners use accounting to record
and report their company’s financial information. Finance tools can help business owners
forecast production output, potential sales and the amount of external financing needed
for business operations.

• Considerations: Business technology allows business owners to improve their company’s

business operations. Business owners can use technology to create a management
information system. This system transfers information electronically to the business
owner or other managers in the company. Business owners and managers can make real-
time decisions based on current information collected from business operations.
Role of Director of Industries
• To implement policies and programmed for development of industries
 Acquisition of land for development of industrial infrastructure
 To provide various incentives under Package of Incentives to industrial units in the State.
 Development and maintenance of Industrial Estates in various districts
 To maintain various statistical information per training to Industrial Development in the
State
 Organizing of Seminars, workshops and awareness campaigns for motivating the
entrepreneurs.
 Organize and participate in Exhibition and Fairs for promotion of Industrial Development
in the State.
 To provide marketing assistance
 To organize Entrepreneurship Development Programs.
 To undertake specific studies on various aspects of Industrial Development in the State.
 To interact with Industries Associations and various Agencies engaged in Industrial
 Development including Academic and Research Institutions, Financial Institutions and
Banks for providing interface to the entrepreneurs.

DIC
The 'District Industries Centre' (DICs) programme was started by the central government in 1978
with the objective of providing a focal point for promoting small, tiny, cottage and village
industries in an area and to make available to them all necessary services and facilities at one
place. The finances for setting up DICs in a state are contributed equally by the state government
and the central government. To facilitate the process of small enterprise development, DICs have
been entrusted with most of the administrative and financial powers. For purpose of allotment
of land, work sheds, raw materials etc., DICs functions under the 'Directorate of Industries'. Each
DIC is headed by a General Manager who is assisted by four functional managers and three
project managers to look after the following activities:
• Economic Investigation
• Plant and Machinery
• Research, education and training
• Raw materials
• Credit facilities
• Marketing assistance
• Cottage industries
Functions of DIC
• Registration
• Infrastructure Assistance
• Incentive Scheme
• Seminars
• Other Activities
• Self-Employment Scheme
• Co-Operative Package Scheme

DC MSME
In the case of India, also Medium establishment has for the first time been defined in terms of
separate Act, governing promotion and development of Micro, Small and Medium Enterprises
(MSME) i.e. Micro, Small and Medium Enterprises (MSME) development Act, 2006 (which has
come into force from 02nd Oct, 2006) the Office of Development Commissioner Ministry of
Micro, Small and Medium Enterprises functions as the nodal Development Agency under the
Ministry of Micro, Small and Medium Enterprises(MSME).

Office of Development Commissioner (SSI) was established in 1954 based on recommendations

of the Ford Foundation. Over the years, it has seen its role evolve into an agency for advocacy,
hand holding and facilitation for the small industries sector. It has 72 offices and 18 autonomous
bodies under its management. These autonomous bodies include Tool Rooms, Training
Institutions and Project-cum-Process Development Centres. Office of the Development
Commissioner (MSME) provides a wide spectrum of services to the Micro, Small and Medium
Industrial sector. These include facilities for testing, training for entrepreneurship development,
preparation of project and product profiles, technical and managerial consultancy, assistance for
exports, pollution and energy audits etc. Office of the Development Commissioner (MSME)
provides economic information services and advises Government in policy formulation for the
promotion and development of SSIs.

Consequent to the increased globalization of the Indian economy, MSMEs are required to face
new challenges. Office of the Development Commissioner (MSME) has recognised the changed
environment and is currently focusing on providing support in the fields of credit, marketing,
technology and infrastructure to MSMEs. Global trends and national developments have
accentuated Office of the Development Commissioner (MSME)'s role as a catalyst of growth of
MSMEs in the country.
The main services rendered by DC (MSME) office are:
• Advising the Government in policy formulation for the promotion and development of
MSMEs.
• Providing techno-economic and managerial consultancy, common facilities and extension
services to MSMEs.
• Providing facilities for technology upgradation, modernisation, quality improvement and
infrastructure.
• Developing Human Resources through training and skill upgradation.
• Providing economic information services.
• Maintaining a close liaison with the Central Ministries, Planning Commission, State
Governments, Financial Institutions and other Organisations concerned with
development of MSMEs.
• Evolving and coordinating Policies and Programmes for development of MSMEs as
ancillaries to large industries.

SIDBI
SIDBI was set up by an Act of Parliament, as an apex institution for promotion, financing and
development of industries in small scale sector and for coordinating the functions of other
institutions engaged in similar activities.

With a view to ensuring larger flow of financial and non-financial assistance to the small-scale
sector, the Government of India set up the Small Industries Development Bank of India (SIDBI)
under a special Act of the Parliament in October 1989 as wholly-owned subsidiary of the IDBI.
The bank commenced its operations from April 2, 1990 with its head office in Lucknow. The SIDBI
has taken over the outstanding portfolio of the IDBI relating to the small-scale sector. It was
incorporated initially as a wholly owned subsidiary of Industrial Development Bank of India.
Currently the ownership is held by 33 Government of India owned / controlled institutions.

The range of assistance comprising financing, extension support and promotional, are made
available through appropriate schemes of direct and indirect assistance for the following
purposes:
• Setting up of new projects.
• Expansion, diversification, modernization, technology up gradation, quality
improvement, rehabilitation of existing units.
• Strengthening of marketing capabilities of SSI units.
• Development of infrastructure for SSIs.
• Export promotion.
Indirect Assistance
• SIDBI’s financial assistance to small sector is primarily channelized through the existing
credit delivery system, which consists of state level institutions, rural and commercial
banks.
• SIDBI provides refinance to and discounts bills of Primarily Lending Institutions (PLI).
• The assistance is available for:
❖ Marketing of SSI product
❖ Setting up of new ventures
❖ Availability of working capital
❖ Expansion
❖ Modernization
❖ Human Resource Development

Direct Assistance
• The loans are available for new ventures, diversification technology up gradation,
modernization and expansion of well-run small-scale enterprises.
• Small scale sector is eligible for maximum debt-equity ratio of 3:1.
• Foreign currency loan for import of equipment are also available to export oriented small-
scale enterprises.
• SIDBI also provide venture capital assistance to the entrepreneurs for their innovative
ventures if they have a sound management team, long term competitive advantage.

Small Industries Development Corporation (SIDC)

Small Industries Development Corporation (SIDC) is a subordinate office of the Department of SSI
& Auxiliary and Rural Industry (ARI). It is an apex body and nodal agency for formulating,
coordinating and monitoring the policies and programmed for promotion and development of
small-scale industries. Development Commissioner is the head of the SIDC. He is assisted by
various directors and advisers in evolving and implementing various programmed of training and
management, consultancy, industrial investigation, possibilities for development of different
types of small-scale industries, industrial estates, etc. The main functions of the SIDC are
classified into:
1. Co-ordination
• To evolve a national policy for the development of small-scale industries.
• To co-ordinate the policies and programs of various State Governments.
• To maintain a proper liaison with the related Central Ministries, Planning
Commission, State Governments, Financial Institutions etc.
• To co-ordinate the programs for the development of industrial estates.
 2. Industrial Development
• To reserve items for production by small-scale industries.
• To collect data on consumer items imported and then, encourage the setting of
industrial units to produce these items by giving coordinated assistance.
• To render required support for the development of ancillary units.
• To encourage small-scale industries to actively participate in Government Stores
Purchase Program by giving them necessary guidance, market advice, and
assistance.

3. Extension
• To make provision to technical services for improving technical process,
production planning, selecting appropriate machinery, and preparing factory lay-
out and design.
• To provide consultancy and training services to strengthen the competitive ability
of small-scale industries.
• To render marketing assistance to small-scale industries to effectively sell their
products.
• To aid in economic investigation and information to small- scale industries.

These functions are performed through a national network of institutions and associated
agencies created for specific functions. At present, the SIDO functions through 27 offices, 31
Small Industries Service Institutes (SISI), 37 Extension Centers, 3 Product-cum -Process
Development Centers, and 4 Production Centers.

NSIC
National Small Industries Corporation (NSIC), is an ISO 9001-2015 certified Government of India
Enterprise under Ministry of Micro, Small and Medium Enterprises (MSME). NSIC has been
working to promote, aid and foster the growth of micro, small and medium enterprises in the
country. NSIC operates through countrywide network of offices and Technical Centers in the
Country. In addition, NSIC has set up Training cum Incubation Centre managed by professional
manpower.

Schemes of NSIC
NSIC facilitates Micro, Small and Medium Enterprises with a set of specially tailored scheme to
enhance their competitiveness. NSIC provides integrated support services under Marketing,
Technology, Finance and other Support service.
Functions of NSIC
• Provide machinery on hire-purchase scheme to small-scale industries.
• Provide equipment leasing facility.
• Help in export marketing of the products of small-scale industries.
• Participate in bulk purchase programme of the Government.
• Develop prototype of machines and equipment to pass on to small-scale industries for
commercial production.
• Distribute basic raw material among small-scale industries through raw material depots.
• Help in development and up-gradation of technology and implementation of
modernization programmes of small-scale industries.
• Impart training in various industrial trades.
• Set up small-scale industries in other developing countries on turn-key basis.
• Undertake the construction of industrial estates.

Marketing Support
Marketing has been identified as one of the most important tools for business development. It is
critical for the growth and survival of MSMEs in today's intensely competitive market. NSIC acts
as a facilitator and has devised several schemes to support enterprises in their marketing efforts,
both domestic and foreign markets. These Schemes are briefly described as under:
• Tender Marketing: Small enterprises in their individual capacity face problems to procure
and execute large orders, which inhibit and restrict their growth. NSIC accordingly adopts
Consortia approach and forms consortia of units manufacturing the same products;
thereby easing out marketing problems of SSIs. NSIC explores the market and secures
orders for bulk quantities. These orders are then distributed to small units in tune with
their production capacity.

• Single point registration for Government Purchase: NSIC operates a Single Point
Registration Scheme under the Government Purchase Programme, wherein the
registered SSI units get purchase preference in Government Purchase Programme,
exemption from payment of Earnest Money Deposit etc.

• Exhibitions and Technology Fairs: To showcase the competencies of Indian SSIs and to
capture market opportunities, NSIC participates in select International and National
Exhibitions and Trade Fairs every year. NSIC facilitates the participation of the small
enterprises by providing concessions in rental, etc. Participation in these events exposes
SSI units to international practices and enhances their business skills.
 • Buyer-Seller Meet: Bulk and departmental buyers such as the Railways, Defense,
Communication departments and large companies are invited to participate in buyer-
seller meets to enrich SSI units’ knowledge regarding terms and conditions, quality
standards, etc. required by the buyer.

• Credit Support: NSIC provides credit support to small enterprise in the following areas:
❖ Equipment Financing
❖ Tie-up with Commercial banks
❖ Financing for procurement of raw material
❖ Financing of marketing activities

• Technology Support: Technology is the key to enhancing an enterprise’s competitive

advantage in today’s dynamic information age. Small enterprises need to develop and
implement a technology strategy in addition to financial, marketing and operational
strategies and adopt the one that helps integrate their operations with their environment,
customers and suppliers.

NIESBUD
The National Institute for Entrepreneurship and Small Business Development is a society under
the Ministry of Micro, Small and Medium Enterprises engaged in Training, Consultancy, Research
and Publication, to promote entrepreneurship. The institute has been financially self-sufficient
since 2007-08.

Major Activities/Role
The major activities of the Institute include:
• Training: The different kind of training programmes being organized by the Institute inter-
alia include Trainers’ Training Programmes; Management Development Programmes;
Orientation Programmes for Head of Departments and Senior Executives;
Entrepreneurship Development Programmes; Entrepreneurship-cum-Skill Development
Programmes and specially designed sponsored activities for different target groups.

• Research/Evaluation Studies: Besides the primary/basic research, the Institute has been
undertaking review/evaluation of different government schemes/programmes, training
need assessment- Skill Gap studies, industrial potential survey etc. The broad objective of
these activities is the promotion of the MSME Sector.
• Development of Course Curriculum/Syllabi: The Institute has developed Model Syllabi
for organizing Entrepreneurship Development Programmes. It also assists in
Standardization of Common Training programmes.

• Publications and Training Aids: The Institute has been bringing out different Publications
on entrepreneurship and allied subjects. The Institute has also assembled an
Entrepreneurship Motivation Training brings out a quarterly Newsletter.

• Cluster Interventions: The Institute has been actively involved in undertaking

developmental programmes (Soft and Hard Interventions) in Clusters in different
capacities. The Institute has so far handled a total of 24 Industrial Clusters.

• Incubation Centres: The Incubator sponsored by the Ministry of MSME and functioning
at the Campus of the Institute, has been instrumental in providing hands-on training and
familiarizing the beneficiaries with the real factory/market conditions/ situations in
stitching, Mobile Repairing, Home Décor products, Beautician and Art Incubation.

• Intellectual Property Facilitation Centre: The Intellectual Property Facilitation Centre,

operational at the Campus of the Institute under the auspices of the O/o DC (MSME)
provides facilitation/assistance under one roof to the units located in its vicinity for
identification, registration, protection and management of Intellectual Property Rights,
as a business tool.

• Collaborative Activities: With different domestic and overseas/multi-lateral institutions

including Government of West Bengal, International Finance Corporation (IFC), a member
of the World Bank Group, Snapdeal etc. to promote entrepreneurial culture/provision of
support services for different target groups.

• International Activities: The Institute conducts 8-weeks’ training programmes under the
Fellowships of the Ministry of External Affairs: ITEC/SCAAP/COLOMBO Plan for the
participants from different countries. Besides, the Institute also designs and conducts
special /request training programmes for overseas agencies and has also been assisting
other countries through consultancy assignments.

• Consultancy Services: Offering consultancy services in entrepreneurship especially for

MSMEs. It Offers advice and consultancy to other Institutions engaged in entrepreneurial
training either in the Government or in the Private Sector. Advising Governments and
foreign Governments as well in entrepreneurship and MSMEs.
State Financial Corporation (SFC)
The State Finance Corporations (SFCs) are the integral part of institutional finance structure in
the country. SEC promotes small and medium industries of the states. Besides, SFCs are helpful
in ensuring balanced regional development, higher investment, more employment generation
and broad ownership of industries.

At present there are 18 state finance corporations (out of which 17 SFCs were established under
SFC Act 1951). Tamil Nadu Industrial Investment Corporation Ltd. established under Company
Act, 1949, is also working as state finance corporation.

Organization and Management

The State Finance Corporations management is vested in a Board of ten directors. The State
Government appoints the managing director generally in consultation with the Reserve Bank and
nominates three other directors. The insurance companies, scheduled banks, investment trusts,
co-operative banks and other financial institutions elect three directors. Thus, most of the
directors are nominated by the government and quasi-government institutions.

Functions of SFC
• The SFCs grant loans mainly for acquisition of fixed assets like land, building, plant and
machinery.
• The SFCs provide financial assistance to industrial units whose paid-up capital and
reserves do not exceed Rs. 3 crores (or such higher limit up to Rs. 30 crores as may be
specified by the central government).
• The SFCs underwrite new stocks, shares, debentures etc., of industrial concerns.
• The SFCs provide guarantee loans raised in the capital market by scheduled banks,
industrial concerns, and state co-operative banks to be repayable within 20 years.

Working of SFC’s
The government of India passed the State Financial Corporation Act in 1951 and made it
applicable to all the States. The authorised Capital of a State Financial Corporation is fixed by the
State government within the minimum and maximum limits of Rs. 50 lakh and Rs. 5 crore and is
divided into shares of equal value which were taken by the respective State Governments, the
Reserve Bank of India, scheduled banks, co-operative banks, other financial institutions such as
insurance companies, investment trusts and private parties. The shares are guaranteed by the
State Government. The SFCs can augment its fund through issue and sale of bonds and
debentures, which should not exceed five times the capital and reserves at Rs. 10 Lakh.
Functional Areas Application for Small Enterprise
The key functional areas of a business are the following:
• Management: The primary role of managers in business is to supervise another people’s
performance. Most management activities fall into the following categories:
❖ Planning: Managers plan by setting long-term goals for the business, as well short-
term strategies needed to execute against those goals.
❖ Organizing: Managers are responsible for organizing the operations of a business
in the most efficient way, enabling the business to use its resources effectively.
❖ Controlling: A large percentage of a manager’s time is spent controlling the
activities within the business to ensure that it’s on track to achieve its goals. When
people or processes stray from the path, managers are often the first ones to
notice and take corrective action.
❖ Leading: Managers serve as leaders for the organization, in practical as well as
symbolic ways. The manager may lead work teams or groups through a new
process or the development of a new product. The manager may also be seen as
the leader of the organization when it interacts with the community, customers,
and suppliers.

• Operations: Operations is where inputs (factors of production) are converted to outputs

(goods and services). Operations is like the heart of a business, pumping out goods and
services in a quantity and of a quality that meets the needs of the customers.
The operations manager is responsible for overseeing the day-to-day business
operations, which can encompass everything from ordering raw materials to scheduling
workers to produce tangible goods.

• Marketing: Marketing consists of all that a company does to identify customers’ needs
and design products and services that meet those needs. The marketing function also
includes promoting goods and services, determining how the goods and services will be
delivered, and developing a pricing strategy to capture market share while remaining
competitive. In day’s technology-driven business environment, marketing is also
responsible for building and overseeing a company’s Internet presence. Today, social
media marketing is one of the fastest growing sectors within the marketing function.

• Accounting
Accountants provide managers with information needed to make decisions about the
allocation of company resources. This area is ultimately responsible for accurately
representing the financial transactions of a business to internal and external parties,
government agencies, and owners/investors. Financial Accountants are primarily
 responsible for the preparation of financial statements to help entities both inside and
outside the organization assess the financial strength of the company. Managerial
accountants provide information regarding costs, budgets, asset allocation, and
performance appraisal for internal use by management for decision-making.

• Finance
Although related to accounting, the finance function involves planning for, obtaining, and
managing a company’s funds. Finance managers plan for both short- and long-term
financial capital needs and analyze the impact that borrowing will have on the financial
well-being of the business. A company’s finance department answers questions
about how funds should be raised (loans vs. stocks), the long-term cost of borrowing
funds, and the implications of financing decisions for the long-term health of the business.

Export Marketing
Export marketing is the practice by which a company sells products or services to a foreign
country. Products are produced or distributed from the company’s home country to buyers in
international locations. But there is a difference between products that are available to foreign
countries and products that are specifically marketed to foreign customers. This where the
importance of an export marketing plan comes in.

Features of Export Marketing

• Systematic Process – Export marketing is a systematic process of developing and
distributing goods and services in overseas markets. The export marketing manager needs
to undertake various marketing activities, such as marketing research, product design,
branding, packaging, pricing, promotion etc.

• Large Scale Operations – Normally, export marketing is undertaken on a large scale.

Emphasis is placed on large orders to obtain economies in large sole production and
distribution of goods.

• Dominance of Multinational Corporations – Export marketing is dominated by MNCs,

from USA, Europe and Japan. They can develop worldwide contacts through their network
and conduct business operations efficiently and economically.

• Trade barriers – Export marketing is not free like internal marketing. There are various
trade barriers because of the protective policies of different countries. Tariff and non-
tariff barriers are used by countries for restricting import.
 • Documentation – Export marketing is subject to various documentation formalities.
Exporters require various documents to submit them to various authorities like bill of
lading.

Why do we need Export Marketing?

Businesses today are often doubling or tripling products by expanding to product sales on an
international level. But you can’t assume that foreign markets will be as interested in your
product as local customers. Cultural differences, shipping costs and transit time, politics, and
international trade policies all contribute to a marketing communication barrier between
suppliers and foreign buyers.

To know the buying behaviors, interests, and needs of your foreign customers. All of this can be
addressed in an export marketing plan. An export marketing plan is created to address a specific
strategy that can be utilized to make product both available and enticing to international buyers.

Role of Export Marketing

• Earning foreign exchange – Exports bring valuable foreign exchange to the exporting
country, which is mainly required to pay for import of capital goods, raw materials, spares
and components as well as importing advance technical knowledge.

• International Relations – Almost all countries of the world want to prosper in a peaceful
environment. One way to maintain political and cultural ties and peace with other
countries is through international trade.

• Balance of payment – Large – scale exports solve BOP problem and enable countries to
have favorable BOP position. The deficit in the BOT and BOP can be removed through
large-scale exports.

• Reputation in the world – A country which is foremost in the field of exports, commands
a lot of respect, goodwill and reputation from other countries.

• Employment Opportunities – Export trade calls for more production. More production
opens the doors for more employment opportunities, not only in export sector but also
in allied sector like banking, insurance etc.
Challenges to Export Marketing
• Technological differences: The developed countries are equipped with sophisticated
technologies less developed countries, on the other hand, lack technical knowledge and
latest equipment.
• Reduction in export Incentives: Over the years, the Govt. of India has reduced export
incentives such as withdrawal of income tax benefits for majority of exporters. The
reduction in export incentives de-motivates exporters

• Several competitions in global marketing: Export marketing is highly competitive. Indian

exporters face three-faced competition while exporting.

• Problem of product standards: Developed countries insist on high product standards

from developing countries like India. The products from developing countries are subject
to product tests in the importing countries.

• Problem in preparing Documents: Export involves many documents. The exporter will
have to arrange export documents required in his country and all the documents as
mentioned in the documentary letter of credit. In India, there are as many as 25
documents.