ENTREPRENEURSHIP DEVELOPMENT

INTRODUCTION TO ENTREPRENEUR
Entrepreneur is a person who undertakes a business venture by combining the resources for
production of goods and services and selling them to earn a profit. Entrepreneur is a person
who has already started an enterprise or is in the process of starting an enterprise.
Entrepreneur is one who ORGANISES, MANAGES, and ASSUMES THE RISK of a
business enterprise. Entrepreneur is an action oriented highly motivated individual with a
strong desire to be the successful who take risks to achieve goal.
Entrepreneur is an individual responsible for the operation of a business including,
(i) Choice of the product
(ii) Mobilization of resources
(iii) Decision
(iv) Prices
(v) Market
(vi) Employment of labour
(vii) Extending or reducing the scope of his business.

Definition:
According to Websters An Entrepreneur is defined as an individual who forecasts
future demand for the product or services and arranges business enterprise to respond
to their demand
According to J B Say Entrepreneur is an economic agent to unities all the means of
production
According to David McClelland: An entrepreneur is a person with a high need for
achievement.

ENTREPRENEURSHIP
Entrepreneurship is the activity performed by an entrepreneur to organize and run
an enterprise (Business).

ENTREPRENEURSHIP=Entrepreneur + Enterprise
Entrepreneur is generally to be the owner, manager of an enterprise.
Entrepreneurship is the activity of an entrepreneur which includes all the activities
performed from the inception stage of an enterprise till its death.
Entrepreneurship is a person-oriented task where the entrepreneur creates a small
world of his own and becomes the master of his own business universe.
Entrepreneurship is a creative activity. It is the ability to create and build
something from practically nothing. It is a knack of sensing opportunity where
others see chaos, contradiction and confusion. Entrepreneurship is the attitude of
mind to seek opportunities, take calculated risks and derive benefits by setting up
a venture. It comprises of numerous activities involved in conception, creation and
running an enterprise.

Definition.
According to J.A Schumpeter ,
Entrepreneurship is a creative activity, the entrepreneur being an innovator who introduces
something new into the economy , a new method of production not yet tested by experience
in the branch of manufacture concerned ,a product with which customers are not familiar , a
new source of raw materials and other similar innovation .
According to Peter Drucker
Entrepreneurship is defined as a systematic innovation, which consists in the purposeful
and organized search for changes, and it is the systematic analysis of the opportunities such
changes might offer for economic and social innovation.
According to A.H Cole
Entrepreneurship is the purposeful activity of an individual or a group of associated
individuals, undertaken to initiate, maintain or organize a profit oriented business unit for the
production for distribution of economic goods and services.

ENTREPRENUER VS ENTREPRENEURSHIP
Entrepreneur Entrepreneurship
Refers to a person Refers to a process
Visualizer Vision
Organizer Organization
Innovator Innovation
Technician Technology
Initiator Initiative
Decision Maker Decision
Planner Planning
Leader Leadership
Motivator Motivation
Programmer Action
Communicator Communication
Administrator Administration





7 key Qualities of Entrepreneur
Inner Drive to succeed
Entrepreneurs are driven to succeed and expand their business. They see the bigger picture
and are often very ambitious. Entrepreneurs set massive goals for themselves and stay
committed to achieving them regardless of the obstacles that get in the way.
Strong Belief in themselves
Successful entrepreneurs have a healthy opinion of them-selves and have often have a strong
and assertive personality. They are focused and determined to achieve them.
Search for New Ideas and innovation
All entrepreneurs have a passionate desire to do things better and to improve their products or
service .They are constantly looking for ways to improve .They are creative, innovative and
resourceful.
Openness to change
Entrepreneurs know the importance of keeping on top of their industry and the only to being
a number one is to evolve and change with the times. They are up to date with the latest
technology or service technique and are always ready to change if they see a new opportunity
arise.
Competitive by Nature
Successful entrepreneurs thrive on competition .The only way to reach their goals and live up
to their self-imposed high standards is to compete with other successful businesses.
Highly Motivated and Energetic
Entrepreneurs are always on the move, full of energy and highly motivated. They are driven
to succeed and have an abundance of self-motivation. The high standard and ambition of
many entrepreneurs demand that they have to be motivated!
Accepting of constructive criticism and rejection
Innovative entrepreneurs are often at the forefront of their industry. They readjust their path if
the criticism is constructive and useful to their overall plan. Also the best entrepreneurs know
that the rejection and obstacles are a part of any leading business and they deal with them
appropriately.


SOME MORE CHARACTERISTICS / QUALITY OF AN ENTREPRENEUR
1. Desire to Excel: The entrepreneur should always engage in competitions with self-imposed
standards with himself to beat his last best performance. According to Mc Clelland, this high
achievement motive strengthened him to overcome the obstacles, suppress anxieties and
repair misfortunes. The entrepreneur must have a strong desire to be a winner.
2. Hard Work: Entrepreneurs who successfully build new enterprises possess an intense level
of strong determination and willingness to work hard. They possess a capacity to work for
long hours and in spurts of several days with less than normal amount of sleep.
3. Self Confidence: Entrepreneurs must have confidence and belief in themselves to achieve
their desired objectives. They strongly believe that they can beat anyone in the field.
4. Initiative: An entrepreneur must have initiative seeking personal responsibility for actions
and use the available resources for optimisation of objectives. They take full credit for the
success and assume full responsibility for the failure of the enterprise.
5. Moderate Risk-Taker: An entrepreneur must be a moderate risk taker and learn from
failures. The successful entrepreneurs are neither high risk takers, nor gamblers. They work
in between the two extremes. They take moderate challenging risk to attain moderate returns
which are influenced within their abilities and decisions.
6. Motivation: An entrepreneur should have a strong motivation towards the achievement of a
task and must be able to get things done by others. He should be a person who likes working
with people and has skills in dealing with them.
7. Optimistic: Entrepreneurs do not believe that the success or failure of a new business
venture depends mostly upon luck or fate or external uncontrollable factors. They are highly
optimistic about the success of the enterprises. They use positive knowledge to support their
thinking. They always look at the brighter side of the situation.
8. Analytical Ability: Entrepreneur must be realistic in their approach. They should not be
affected by the personal likes and dislikes. At the time of crisis, they must select experts
rather than their friends and relatives to solve the problems. They must analyse the problem
in detail before taking any decisions.
9. Mental Ability: Mental ability refers to the inner strength of an entrepreneur which helps
him to reach his goal. It is that ability which helps him to quickly respond to difficult
situation. It consists of intelligence and creative thinking of an entrepreneur.
10. Communication Ability: An entrepreneur must be good with the art of communication. It
is that skill through which both the sender and receiver understand each other and are being
understood. Entrepreneurs are required in many situations to influence customers, employees,
suppliers, creditors, and government and make them think in his way and act accordingly. An
entrepreneur who can effectively communicate and convince the above people will be more
likely to succeed than the entrepreneur who does not.
11. Flexibility: Entrepreneurs should be flexible in their decisions in the sense that they
should not be very rigid in the decision making process. If the situation demands a change in
the decision that will be beneficial to the enterprise, then after analysing the pros and cons of
the decision, the entrepreneur should revise or modify or change the decisions.
12. Independence: Successful entrepreneurs do not like to be guided by others. They prefer to
work in an environment free from interference. They like to be independent in the matters of
decision making of their own business.
13. Leadership: An entrepreneur must have an ability to lead so that he can induce the people
to work with confidence and zeal. It is an aid to authority and helps in better utilization of
manpower.
14. Good Human Relations Ability: Entrepreneurs must have the abilities to maintain and
establish good relations with customers, employees, suppliers, financiers and other people
related with the business to run it effectively and efficiently. An entrepreneur who maintains
good human relations is much more likely to succeed in his business than the individual who
does not practice such relations.

FUNCTIONS OF ENTREPRENEUR
i. Entrepreneurial functions consisting of organization building, risk taking and
innovation.
ii. Promotional functions consisting of discovery of idea, detailed investigation;
assembling of requirements and financing the proposition.
iii. Managerial functions consisting of planning, organizing staffing, directing,
coordinating and controlling.
iv. Commercial functions representing production, finance marketing, accounting and
personnel.


Enterprise
Entrepreneur is a person who starts an enterprise. The process of creation is called
Entrepreneurship. The entrepreneur is the actor and entrepreneurship is the act. The outcome
of the actor and the act is called the enterprise. An enterprise is the Business organization that
is formed and which provides goods and services, Creates jobs, contributes to national
income, exports and overall economic Development.
Difference between Entrepreneur and Manager
An entrepreneur could be a manager but a manager cannot be an entrepreneur. An
entrepreneur is intensely dedicated to develop business through constant innovation. He may
employ a manager in order to perform some of his functions such as setting objectives,
policies, rules etc. A manager cannot replace an entrepreneur in spite of performing the
allotted duties because a manager has to work as per the guidelines laid down by the
entrepreneur.

Entrepreneur Manager
An entrepreneur is involved with the start-up
process
A manager with running the business over a
long period of time
An entrepreneur assumes financial, material
and psychological risks
A manager does not have to bear risks
An entrepreneur is driven by perception of
opportunity
A manager by the resources he currently
possesses
An entrepreneur initiates change A manager follows rules & procedures
An entrepreneur is his own boss A manager is a hired employee
An entrepreneur gets uncertain rewards A manager gets fixed rewards and Salary

ROLE OF ENTREPRENEURSHIP IN DEVELOPMENT OF ECONOMY
Entrepreneurship is one of the most important inputs in the economic development of a
country. Entrepreneur plays a pivotal role not only in the development of industrial sector of
a country but also in the development of farm and service sector. The major roles played by
an entrepreneur in the economic development of an economy are discussed as follows.

(1) Promotes 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.
(2) Creates Large-Scale Employment Opportunities:
Entrepreneurs provide immediate large-scale employment to the unemployed which is a
chronic problem of underdeveloped nations. 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 which in turn clears the path towards economic
development of the nation.
(3) 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 leads to more development of backward regions and thereby
promotes balanced regional development.
(4) Reduces Concentration of Economic Power:
Economic power is the natural outcome of industrial and business activity. Industrial
development normally leads to concentration of economic power in the hands of a few
individuals which results in the growth of monopolies. In order to redress this problem a large
number of entrepreneurs need to be developed, which will help reduce the concentration of
economic power amongst the population.
(5) Wealth Creation and Distribution:
It stimulates equitable redistribution of wealth and income in the interest of the country to
more people and geographic areas, thus giving benefit to larger sections of the society.
Entrepreneurial activities also generate more activities and give a multiplier effect in the
economy.
(6) Increasing Gross National Product and Per Capita Income:
Entrepreneurs are always on the lookout for opportunities. They explore and exploit
opportunities, encourage effective resource mobilisation 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.
Increase in gross national product and per capita income of the people in a country, is a sign
of economic growth.
(7) Improvement in the Standard of Living:
Increase in the standard of living of the people is a characteristic feature of economic
development of the country. Entrepreneurs play a key role in increasing the standard of living
of the people by adopting latest innovations in the production of wide variety of goods and
services in large scale that too at a lower cost. This enables the people to avail better quality
goods at lower prices which results in the improvement of their standard of living.
(8) Promotes Country's Export Trade:
Entrepreneurs help in promoting a country's export-trade, which is an important ingredient of
economic development. They produce goods and services in large scale for the purpose
earning huge amount of foreign exchange from export in order to combat the import dues
requirement. Hence import substitution and export promotion ensure economic independence
and development.
(9) Induces 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.
(10) Facilitates Overall Development:
Entrepreneurs act as catalytic agent for change which results in chain reaction. Once an
enterprise is established, the process of industrialization is set in motion. This unit will
generate demand for various types of units required by it and there will be so many other
units which require the output of this unit. This leads to overall development of an area due to
increase in demand and setting up of more and more units. In this way, the entrepreneurs
multiply their entrepreneurial activities, thus creating an environment of enthusiasm and
conveying an impetus for overall development of the area

Characteristics of entrepreneurship
Entrepreneurship
1. Decision making
2. Risk taking
3. Innovation
4. Organisation
5. Skillful management
6. Making enterprise a success


FACTORS FAVOURING ENTREPRENEURSHIP/ MOTIVATIONAL FACTORS OF
ENTREPRENEURSHIP

1. Developed Infrastructure Facilities: Availability of infrastructure reduces the cost & efforts
and improves viability of projects through higher profit margins.
2. Financial Assistance: Easy availability of cheap funds is vital for promoting
entrepreneurship.
3. Protective and Promotional Policies: Most of the entrepreneurship projects start very small
and have no resilience. They are extremely vulnerable to competitors, market, money
markets, etc., for considerable time. Favorable Govt. policies shelter them from such
vagaries.
4. Growth of Education: Science, Technology & Management Growth of education is
believed to be promoting entrepreneurship. However, there are enough examples to suggest
otherwise. A very large proportion of first generation entrepreneurs are low educated. Take
the case of Microsoft Chairman Mr Bill Gates or Reliance Founder Mr Dhirubhai Ambani.
(We also have Mr Narayan Murthy and Mr Ajim Premji to balance this scale). On a wider
spectrum, Kerala, the most literate state and West Bengal, another state high on literacy front,
are least entrepreneurial states where as Punjab, with 5 rank from bottom was top on
entrepreneurial charts.
5. Risk Taking Abilities: Risk taking ability is one of the pillars of entrepreneurial spirits.
6. Hunger for Success (Capitalistic View): Fire in the belly and dreams of riches is what
drives most entrepreneurs on this risky path. Any person content with what he has would take
the easier route of salaries job.
7. Environment/Culture Impact: Entrepreneurship is contagious. Communities like Punjabis
and Marwaris are historically entrepreneurial. They are known for seeking and exploiting
business opportunities in most remote areas. It is a culture that propels them.
8. Social Security: Social security acts as a safety net against failure of enterprise. Social
security guarantees basic roti, kapada aur makan in case of failure. Entrepreneurial spirit of
United States is born partly out of this security.
9. Technical/Industrial Training Facilities: Industrial Training facilities on one hand generate
skilled manpower so vitally required for setting up enterprises while on the other hand they
are also nursery for future entrepreneurs. Among the educated entrepreneurs, a majority is
product of technical institutes from IIT to ITI (Tier I to Tier III institutes).
10. Globalization: Globalization has provided another avenue for business. Many dare devils
have taken a head along plunge into this uncharted water and have written new success
stories.

INTRA-PRENEURSHIP
Intra-preneurship is defined as entrepreneurship within an existing business set up. That is to
say Intra-preneurship is corporate entrepreneurship. When a corporation indulges in
entrepreneurial activities, like diversification into new businesses, it is called intra-
preneurship. Intra-preneur is a manager who focuses on innovation and creativity; who
brainstorms, dreams and puts ideas into profitable venture by operating within the
organisational environment. It gives managers the freedom to try new ideas by employing
firms resources in a unique way.

CHARACTERISTICS OF AN INTRAPRENEUR
An intrapreneur is not far removed from an entrepreneur. The major difference being that an
entrepreneur risks his own money where as an intrapreneur works with his employers
money. Thus, the risk level of an intrapreneur is considerably reduced.
1. Vision It is the basis for successful venture. An Intra-preneur has ability to visualize from
idea to implementation.
2. Motivation Intra-preneur is generally self-motivated, but expect corporation reward and
recognition.
3. Orientation Intra-preneur is achievement oriented.
4. Risk Appetite Intra-preneurs are moderate risk takers since risk acceptance depends on
their skills. Wild risk takers are not affordable to corporate.

INTRODUCTION TO SMALL SCALE INDUSTRIES
The Small Scale Sector is the natural habitat of entrepreneurs. Most entrepreneurs start
small and then nurture their units into large industries. The SSI Sector provides an
opportunity for them to hone their skills and talents, to experiment, to innovate and transform
their ideas into goods and services needed by the society.
In most of the developing countries like India, Small Scale Industries (SSI) constitutes an
important and crucial segment of the industrial sector. They play an important role in
employment creation, resource utilisation and income generation and helping to promote
changes in a gradual and phased manner.
They have been given an important place in the framework of Indian planning since
beginning both for economic and ideological reasons.
Small scale enterprises are generally more labour intensive than larger organisations. As a
matter of fact, small scale sector has now emerged as a dynamic and vibrant sector for the
Indian economy in recent years. It has attracted so much attention not only from industrial
planners and economists but also from sociologists, administrators and politicians.

Industries can be classified into seven categories depending on their size
INDUSTRY
1. Tiny Industry
2. Small Scale
3. Ancillary Scale
4. Medium Scale
5. Large Scale
6. Cottage
7. Khadhi & village Industry
The definition for small-scale industrial undertakings has changed over time. Initially they
were classified into two categories- those using power with less than 50 employees and those
not using power with the employee strength being more than 50 but less than 100. However,
the capital resources invested on plant and machinery buildings have been the primary
criteria to differentiate the small-scale industries from the large and medium scale industries.
An industrial unit can be categorized as a small- scale unit if it fulfills the capital investment
limit fixed by the Government of India for the small-scale sector.

Definition
Investment in fixed assets like plants and equipments either held on ownership terms on
lease or on hire purchase should not be more than Rs 10 million.

The different small-scale industries existing in the Faridkot District during 1992-93 are
mentioned below:
(1) Food Products There were 1,160 units engaged in the production of food products. Out
of these a large number of units were flour mills/atta chakies (703) and rice shellers (170).
These units gave employment to 5,823 persons and produced goods worth Rs 8,953.30 lakhs.
The fixed investment of these units was Rs 2,068.92 lakhs.
(2) Beverages There were 18 units engaged in the production beverages i.e. soda water.
These units gave employment to 55 persons and produced goods worth Rs 8.30 lakhs. The
fixed investment of these units was Rs 10.84 lakhs.
(3) Textile and Dyeing There were 20 units engaged in cotton textile, cotton carding and
dyeing in the district. These were set up with capital investment of Rs 2,211 lakhs. These
units gave employment to 70 persons and produced goods worth Rs 45.10 lakhs.
(4) Hosiery This is a pre-partition industry established at Moga in 1936. There were 245
units in the district engaged in this industry. These units produce hosiery goods like knitted
woolen products, woolen pullovers, nylon strips, surgical bandages, etc. these units gave
employment to 414 persons and produced goods worth Rs 131.20 lakhs. The fixed
investment of these units was 86.67 lakhs.
(5) Wood Products There was 667 units engaged in the production of wooden furniture,
boxes and pawas. Set up with a fixed investment of Rs 403.68 lakhs, these units gave
employment to 1,874 persons and produced goods worth Rs 389.60 lakhs.


OBJECTIVES OF SMALL SCALE INDUSTRIES
The small scale sector can stimulate economic activity and is entrusted with the
responsibility of realising the following objectives:-
1. To create more employment opportunities with less investment.
2. To remove economic backwardness of rural and less developed regions of the economy.
3. To reduce regional imbalances.
4. To mobilise and ensure optimum utilisation of unexploited resources of the country.
5. To improve standard of living of people.
6. To ensure equitable distribution of income and wealth.
7. To solve unemployment problem.
8. To attain self-reliance.
9. To adopt latest technology aimed at producing better quality products at lower costs.
Characteristics of small scale industries
Small-scale industries have certain unique features, which distinguish it from the Large-scale
sector. Some of the salient characteristics of small-scale businesses are given below.
1. Personal Character: In most small businesses the owners themselves are Managers and so
they can operate independently. They can give customized Service to their clients, which in
many cases is their USP.
2. Flexibility: Since most small businesses are a one-man show they do not have to go
through a hierarchy to get permissions to make changes. Small business can respond quickly
to environmental trends.
3. Labour Intensive: Small businesses have tremendous capacity for Employment generation
through their labour intensive techniques. Small businesses actually create more jobs than big
businesses. This feature of a small-scale unit is of great significance in a country like India
where the number of unemployed people is more.
4. Local Area of Operation: Small businesses are largely local in operation; however the
market for its products may be local, regional or even international.
5. Short Gestation Period: The capital investment in the small sector is generally low and the
time taken for production to commence is also less. As a result of short gestation period the
units give quick returns and consequently the pace of economic development quickens.
6. Registration: small scale industries are registered under the local DIC (Direct Industries
Centre) as per the rules of the state government where the SSI is located. No large number of
formalities are required to start a SSI.
7. Size: There is limited amount of money and the volume of production is less, the size of a
SSI is usually small.
8. Capital: The capital requirement is not much and is supplied by the owners but a large
portion of capital is brought from banks and financial institution on term loan.
Types of Small scale industries
a. Resources based SSI
b. Demand Based SSI
c. Ancillary Based SSI
d. Subsidiary SSI (Sub control type)
e. Linkage Based SSI
f. Export oriented SSI
g. Technology Based SSI
h. Preference Based SSI
i. Policy Based SSI
j. Competence based SSI

Resources Based SSI:
A large number of SSI are started because raw material are available in plenty, cheaply and
easily. Entrepreneurs get tempted to start SSI to take advantage of the raw material and other
resources available. Resources like natural resources, mineral resources, marine resources,
human resources, agricultural resources, forest resources, industrial waste resources etc. A
large number of such quantities of such material is lying scattered here and entrepreneurs
collect these surplus resources and start industries based on that. Entrepreneurs are
encouraged to start small scale industry to take advantage of the cheap locally available
resources with the expectation of earning good profits.

Demand Based SSI
Whenever there is a good demand of a product, many entrepreneurs get tempted to start
manufacturing of such or similar products by establishing industry, so that they can easily
establish themselves in the market and earn good profits. SSI can be started to meet the
growing demand of a product or to fill up the existing demand supply gap. Entrepreneurs do
not come forward to start SSI because of the difficulties in selling the product but in demand
based, it is advantageous for any entrepreneur as production is easier than marketing.
Industries which have been started with the aim of taking advantage of the demand are
known as demand based SSI. They do not create demand but take advantage and when they
see that there is a good demand of a product in comparison to supply; they make entry into
the field. They need not to search buyers for the product as they are easily accepted by the
consumers. This type of situation does not continue for a long time but by the time such
situation arises the entrepreneur might have established them firmly in the market and
developed the capabilities to withstand the demand fluctuation.
ANCILLARY BASED
A large number of SSIs do not produce usable completed products but produce components,
parts, assembling, sub-assembling, tooling or intermediate goods which are supplied to other
industries for manufacturing of other useful articles. It may not be possible for an
organization to produce all of its required components, parts, accessories, tools etc. so they
have to depend on other source of supply from other industries and this can be met by the
ancillary industries. When there is a scope to supply components, parts, etc. to another
industry, a small scale entrepreneur may start a small scale industry to manufacture such
items as per the specifications & design of the other industries .Such ancillary industries are
independent units and largely depend on other industries for supply of their goods and
services. A small percentage of their percentage may be sold in the open market directly to
the consumers, but their main aim is to supply to other industries to manufacture other useful
products. For e.g. Investment Ceilings for Small Scale Industries (2006)
Type of SSI unit Investment limit (1 million=
10 Lakhs)
Remarks
Small Scale Industry Rs 10 million Historical cost of plant &
machinery
Ancillary Rs 10 million At least 50% of its output
should go to other industrial
undertaking
Tiny Enterprise Rs 2.5 million No location limits
Service & Business
Enterprise
Rs 0.5 million No location limits
Women Enterprise Rs. 10 million 51% equity holding by
women
Export Oriented Rs. 10 million Obligation to export 30% of
production


SUBSIDIARDY TYPE or SUB CONTROL TYPE SSI
Many large scale manufacturer start SSI under the full control to manufacture small items or
some of their products .All of their products are taken by the large industry and sold under
their brand name. The SSI is created and managed directly or indirectly by the bigger
industry but a different name .They are owned and controlled by the same management .They
take advantage of the benefits, concessions and incentives available from the government due
to the status of small scale industry. This type of SSIs is usually owned, controlled, financed
and managed by some other industry or the control and management of such units may be
vested in the hands of their family members or relatives. The entire production of the small
industry may be sold to the bigger industry and for this there may be a tie up .This type of
franchise may also be started to cater to the need of a large area or population, to produce
goods at a lower cost and to take advantage of the liberal SSI policies.
LINKAGE BASED SSI
Small scale industry is started by an entrepreneur to procure the finished products of a large
industry and use it as a raw material for production of further commodities. Eg. Many small
scale industry established near to large scale industry (steel plant) in order to use the finished
products of the plant to produce other products like stainless steel utensils, steel pipes, iron
rods, different iron castings,fabrication items etc. Similarly the waste or scrap products of a
bigger industry can be taken by a small entrepreneur to manufacture some useful articles. E.g.
the molasses of sugar factory may be collected by another industry to produce liquor or the
fly ash of thermal power plant may be used to manufacture etc.
Export oriented based SSI
Some products have very high demand in other countries and they can be manufactured
locally. Government gives many concessions, incentives and benefits to such units.
Government also provides services like collecting, orders and supplying goods to those
countries by collecting from the manufacturers. Due to these encouragements many persons
get tempted to start export oriented SSI. Exports of products from the country to other
country are responsible for earning huge amount of foreign exchange.
Import substitute based SSI
There are a large number of items being imported by the country from other countries. It is a
cause of botheration for the government because ,it wants to reduce the dependence on other
countries. There is lot of foreign currency outgo due to such imports. If such a product can be
produced within the country they get special status by the govt. and a lot of incentives and
concessions are allowed to such industries .
Technology based SSI
Changes in technology are very rapid as a result of which there is the development of new
products, new processes, etc. Due to that better product, cost effective products and other
innovative products are developed. An entrepreneur may start a SSI to take the advantage of
the change in technology or development of new technology for production of any goods or
services. Such entrepreneur starts SSI only to provide the new products which have emerged
out of new technologies. They do not see the demand or resources. The demand is
automatically created when such new products come to the market.
Preference based SSI
Entrepreneur starts some type of industry only because of their likeness, affinity or
preferences. They may not have knowledge, skill, talent and competence yet they want to
start SSI to satisfy their want by starting such industries. They do not put much emphasis to
the demand, resources etc. but aim to establish SSI on the products preferred .Most of the
times the selection of SSI by an entrepreneur depends on the likeness, dislikeness,
preferences, capabilities, skill, talent, etc. of the entrepreneur.
Policies Based SSI
Some entrepreneurs start SSI to take the advantage of the liberal governmental policies. Govt.
also tries to promote certain categories of industries due to various reasons. So the policies of
the government towards particular industry or industries at a particular place may be the main
reason due to which many prospective entrepreneurs come up to start the SSI and as a result
of that a large number of industries start.


Competence Base SSI
Some of the entrepreneurs have competence, skill, knowledge, and experience in a particular
business. Whenever they get chance, they prefer to start such an industry on which they are
capable. Competence of the entrepreneur is the only force behind the starting of such an
industry. Because of their workmanship and quality consciousness, they thrive and even grow
high if right opportunity is available.

STEPS TO START A SSI
1. Preliminary stage
Decision to become an entrepreneur and start an enterprise.
Developing entrepreneurial characteristics
Studying business environment
Meeting entrepreneurs, people, experts and others
Searching the opportunity.
2. Decision making Stage
Selecting business opportunities.
Consulting DIC, SISI, consultants, banks, licensing authorities.
Deciding the size, type, technology of the project
Deciding the location and survey site
Selection of exact site
Preparation of the project report
Studying the project from technical, financial, managerial and operational point of
view.
Deciding the product

3. Planning stage
Application for acquisition of land or exact site.
Application for provisional registration
Application for No-objection certificate, assurance from bankers for finance.
Application for licenses, permission, clearances from state government, central
government and from the local authorities.
Application for loans and arrangement of capital
Enquiry for plant and machineries etc.
Preparing plans of the factory buildings
Preparing plans for acquiring plants and machineries, tools and equipments, furniture
and fittings etc.
Prepare the detailed project report

4. Implementation stage
Acquisition of land
Development of site
Construction of buildings and other infrastructure like road, affluent disposed etc.
Placing orders for plants and machineries, tools and equipment, furniture and fixtures
etc. Arranging electricity, water connection
Installation of plants and machineries and test running
Recruitment, selection, training and placement of manpower
Procurement of raw material and other materials
Finalise the marketing channel, distribution policy, percentage of margin and
commission to the middleman etc.
Carry on trial production and test marketing

5. Managerial stage
Evaluate the field performance of product and examine the consumers response
Appoint dealer, wholesalers, agents, and arrange showrooms etc.
Carry on commercial production
Carry on advertising and marketing activities.
Distribution and selling
Managing the enterprise
Creation of external economies
Consolidating the marketing and selling network
Ensure growth and generate profits
Repayment of loan and interest.
Keep pace with the change in technology, change in taste, fashion of consumers,
competition, and development of new product, new substitute or alternatives.
Carry on modernization, expansion, and diversification etc.

ROLE OF SMALL SCALE INDUSTRIES IN DEVELOPMENT OF ECONOMY
OR
ROLE OF SSI IN NATIONAL ECONOMY
1. Employment generation: The basic problem that is confronting the Indian economy is
increasing pressure of population on the land and the need to create massive
employment opportunities. This problem is solved to larger extent by small-scale
industries because small- scale industries are labour intensive in character. They
generate huge number of employment opportunities. It is a powerful tool of job
creation.
2. Mobilization of resources and entrepreneurial skill: Small-scale industries can
mobilize a good amount of savings and entrepreneurial skill from rural and semi-
urban areas by investing in small-scale units. Thus, a huge amount of latent resources
are being mobilized by the small-scale sector for the development of the economy.
3. Regional dispersal of industries: There has been massive concentration of industries
in a few large cities of different states of Indian union. People migrate from rural and
semi urban areas to these highly developed centers in search of employment and
sometimes to earn a better living which ultimately leads to many evil consequences of
over-crowding, pollution, creation of slums, etc. This problem of Indian economy is
better solved by small- scale industries which utilize local resources and brings about
dispersion of industries in the various parts of the country thus promotes balanced
regional development.
4. Provides opportunities for development of technology: Small-scale industries have
tremendous capacity to generate or absorb innovations. They provide ample
opportunities for the development of technology and technology in return, creates an
environment conducive to the development of small units. The entrepreneurs of small
units play a strategic role in commercializing new inventions and products.
5. Promotes exports: Small-scale industries have registered a phenomenal growth in
export over the years. They help in increasing the country's foreign exchange reserves
there by reduces the pressure on country's balance of payment.
6. Supports the growth of large industries: The small-scale industries play an important
role in assisting bigger industries and projects so that the planned activity of
development work is timely attended. They support the growth of large industries by
providing- components, accessories and semi-finished goods required by them
7. Better industrial relations: Better industrial relations between the employer and
employees help in increasing the efficiency of employees and reducing the frequency
of industrial disputes. There is hardly any strikes and lock out in these industries due
to good employee- employer relationship.

GOVERNMENT POLICIES FOR SSI
Government policies are flexible and changes from time to time, place to place and
product to product. Different policies are applicable for different states as per the
suitability of the states.
The central government also announces various schemes for the benefit of the SSIs and
aimed at achieving industrial growth. So the central and state government have their
industrial policies for the promotion of small scale industries. Some industries are
classified as priorities industries and Governments allow special subsidies on those SSIs.
Other facilities include:
(i) Sales tax exemptions.
(ii) Sales tax concessions.
(iii) Water tax concessions.
(iv) Electricity duty exemption concession.
(v) Marketing assistance.
(vi) Price preference while supplying products to government organisation.
(vii) Subsidy on expenses made on research and development .
(viii) Subsidy on acquiring quality certificate like ISI marks, AG mark, ISO 9000 series,
ISO 14000 series.
(ix) Single window system of clearance.
Policy Initiatives on SSI Sector
(i) 75 products are reserved for exclusive manufacture in the SSI sector consisting of
chemicals and their products, leather and leather products, laboratory reagents etc.
(ii) Selective enhancement of investment in plant and machinery from Rs 1 crore to
Rs 5 crore carried out in respect of 13 items in stationery sector and 10 items in
the drugs and pharmaceutical sector .
(iii) The Union budget 200304 announced that banks would provide credit to the SSI
sector within an interest rate band of 2 per cent above and below Prime Lending
Rated (PLR). All public sector banks have adopted this norm.
(iv) The composite loan limit for SSI units was enhanced from Rs 25 lakh to Rs 50
lakh.
(v) The RBI announced that banks may enhance the limit of dispensation of collateral
requirements for loans from the existing Rs 15 lakh to Rs 25 lakh on the basis of
good track record and financial position of the units.
(vi) The lower limit of Rs 5 lakh on loans covered under the Credit Guarantee Scheme
has been removed. All loans up to Rs 25 lakh made eligible for guarantee cover
under the Credit Guarantee Scheme.
(vii) 417 SSI specialized bank branches made operational throughout the country.
(viii) The final results of third All India Census of Small-scale Industries were released
on January 17, 2004.
(ix) In the first phase, 60 clusters were identified (July, 2003) for focused
development, by including their credit requirements in the respective State Credit
Plans.
(x) Setting up of a Small and Medium Enterprises Fund (SMEF) of Rs 10,000 crore
under SIDBI, to inter alia, address the problems of inadequacy of financial
resources at highly competitive rates for small-scale sector.
(xi) Laghu Uddyami Credit Card scheme liberalized with enhanced credit limit of Rs
10 lakh (up from Rs 2 lakh) for borrowers with satisfactory track records.

Problems Faced by Small-scale Industries
(i) Difficulty in obtaining credit from commercial banks because of their general
inability to provide security.
(ii) Absence of management expertise. Often managed by one person who performs a
number of functions usually with no formal training.
(iii) Difficulty in competing with imported products due to high production costs.
(iv) Difficulty in obtaining industrial land in towns and cities. The shortage of
industrial land is giving rise to more and more backward operations.
(v) Under capitalisation.
(vi) Difficulty in identifying appropriate technology and technical assistance.
(vii) Surveys of material and human resources of the countries are not available to
identify the regions or areas for the development of small-scale and medium-scale
industrial enterprises.
(viii) Difficulty in identification of industrial projects for development.
(ix) Poor Project preparation and evaluation.
(x) Lack of Financial or credit support and investment promotion.
(xi) Lack of consultancy and counselling services.
(xii) Technology development and applications such as the designing of prototype
machines for products identified according to country resources and requirements.
(xiii) Inadequate Industrial training and skill formation.
(xiv) Quality control and testing facilities.
(xv) Inadequate Market promotion, both domestic and export.
(xvi) Difficulties in Procurement of raw materials and equipment.

ROLE OF NATIONAL AND STATE AGENCIES PROVIDING ASSISTANCE TO SSI

Refer Book ENTREPRENEURSHIP DEVELOPMENT PROGRAMME Author B. Badhai
PAGE NO. 2.17, 2.18 &2.19

LARGE SCALE INDUSTRIES
Industries with a fixed asset of more than one hundred million rupees are called large scale
industries. These could be manufacturing units or others which use both indigenous and
imported technologies. They cater to both the local and foreign markets. Examples of large
scale industries :- include fertilizer, cement, natural gas, coal, metal extraction, metal
processing, petroleum, natural gas, mining, electrical, petrochemical, food processing units,
tourism, banking, sugar, construction, automobile, communication equipment, cement,
chemicals, earth movers, consumer durables (like television, refrigerators, etc), engineering
products, vehicle assembly, beverages, gas and water; other fuels, agricultural processing,
insurance and finance. With the opening up of the market and globalization, the effects on
such industries has been mixed, some have gained by attracting foreign customers, foreign
trade and technology, tie-ups, while others have lost out due to their inability to cope up with
the open market competition.