ENTREPRENEURSHIP DEVELOPMENT

UNIT-1

• Mark Casson – “ An entrepreneur is a person who specializes in

taking judgmental decision about the coordination of scarce
resources”.

• Peter Drucker – “An entrepreneur is one who always searches for

change, responds to it & exploits it as an opportunity”.

In short, an entrepreneur is a person who has possession of a new

enterprise, venture or idea and assumes significant accountability for the
inherent risks & the outcome. They are ambitious leader who combines
land, labour and capital to often create & market new goods or services.

Importance of Entrepreneurs

• Develop new markets: Entrepreneurs are resourceful & creative.

They can create customers or buyers.

• Discover new sources of materials: Entrepreneurs are never

satisfied with existing sources of materials. Due to this, they
persist on discovering new sources of materials to improve their
enterprise.

• Mobilize Capital Resources: Entrepreneurs are the organizers and

coordinators of major factors of production i.e. land, labor & capital.
They properly mix these factors of production to create goods &
services.
 • Introduce new technologies: Apart from being innovators &
reasonable risk takers, they take advance of business opportunities
& transform into profits.

• Create Employment: The biggest employer is the private business

sector. Millions of jobs are provided by the factories, service
industries, agricultural enterprises.

Function of Entrepreneurs

Primary Function of Entrepreneurs

• Planning: It is the first step in the direction of setting up of an

enterprise. It involves following steps:
• Scanning of the best suitable idea.
• Selection of product line.
• Determination of type of business organization – individual,
partnership or corporate
• Estimation of the capital needed
• Selection of capital resources
• Selection of location
• Organization: An entrepreneur coordinates, assembles & supervises
land, labor & capital during promotion stage & at the performance
stage, for optimum utilization of the resources.

• Management: It includes future expansion & policies in the long run.

Direction of men, machine, material, money for the enterprise.

• Decision-Making: As a decision maker they takes various decisions e.g.

• Determination of the business objectives of the enterprise.

• Decision regarding procurement of machine, material, men,
money & market

• Risk bearing: S/He undertakes the responsibility for loss that may arise
due to unforeseen contingencies in future
Entrepreneurs Function

Entrepreneurs Function

• Idea Generation: Most important function, it can be possible

through vision, observation, experience, education, training &
exposure of the entrepreneur.

• Determination of objectives: To determine & lay-down the

objectives of the business.

• Raising of Funds: It is the most important function of an

entrepreneur. All the activities of a business depend upon the
finance & its proper management.

• Procurement of Raw Materials.

• Procurement of Machinery.

• Recruitment of Manpower.

• Implementation of the project.

Manager

• A Manager is the person responsible for planning and directing the

work of individuals & groups, monitoring their work, and taking
corrective action when necessary. For many people, this is their first
step into a management career.

Definition: “Whenever someone attempts to achieve a goal through the

directed efforts of others, he becomes a manager".
Role of Manager

• While working in the business, a manager has to play the following

various roles:

Interpersonal Roles of Manager

• A manager has to maintain the relations with his subordinates,

customers, union leaders, Government and other institutions. For
this he must have knowledge and the information about how to
behave with them. He has to play following three types of
interpersonal roles.

a) Head / Executive Officer:

• A manager works as a head or executive officer of a business firm.

He has to fulfill the social and legal responsibilities. In this role he
performs symbolic duties required by the status of his office.

b) Leadership: Role defines the manager’s relationship with his own

subordinates. He has to play a role of their leader. He directs them and
motivates them for work. This role is important one. He is the leader of
the organization and responsible for the work done.

c) Liaison Role:

The managers have to keep constant contact with their own subordinates,
peers and superiors. In addition to this they must maintain a network of
outside contacts. This assess the external environment of competition,
social changes or changes in governmental rules and regulations.
Informational Roles of Manager

• By virtue of his interpersonal contacts a manager becomes a source

of information in the organization. In this capacity of information
processing, a manager executes the following three roles:

a) Monitor Role:

• The managers are constantly monitoring and scanning their

environment both internal and external. They are engaged in
collecting and studying information regarding their organization and
the outside environment affecting their organization.

b) Information Disseminator Role:

• The manager has to transmit the information regarding changes in

policies and other matters to their subordinates, their peers and to
other members of the organization.

c) Spokesman Role:

• A manager has to be a spokesman for his unit. He represents his

unit in either sending relevant information to people outside his unit
or making some demands on behalf of his unit.

Decision Roles

• A manager has to make decisions and solve organizational

problems. In this respect, he plays following important roles.

a) Entrepreneur Role:

• As entrepreneurs, managers are constantly involved in improving

their units and facing the dynamic technological challenges. They
constantly look for new ideas or for product improvement or product
addition. They initiate feasibility studies, arrange for capital for new
products if necessary. They ask for suggestions from the employees
for ways to improve the organization.

b) Resource Allocation:

• The next decisional role of a manager is that of a resource allocator.

They establish priorities among various projects or programs and
make budgetary allocations to different activities of the organization
based upon these priorities.
c) Negotiator Role:

• The managers represent their units or organizations in negotiating

deals and agreements within and outside of the organization. HR
managers negotiate contracts with the unions. Sales managers may
negotiate prices with prime customers. Purchasing managers may
negotiate prices with vendors.

Responsibilities of Manager

1. Responsibility towards Customers:

• A firm's responsibility towards its customer is in terms of

ensuring that the desired quality of product at a reasonable
price is made easily available to the customers.

2. Responsibility towards Employees:

• Employees are the most important resource. The manager

has to ensure that employees are getting a fair deal in terms
of wages and salaries. The responsibility of a manager is to
ensure that all dealings with the employees are fair.

3. Responsibility towards Suppliers:

• Suppliers provide the raw materials, components and parts

necessary for the production of products. The manager's
responsibility towards suppliers, is to make timely payments
against the purchases made.

4. Responsibility towards Industry and Competition:

• A manager is responsible to register the firm as a member of

industry association and comply with all its rules and
regulations.

5. Responsibility towards Government:

• A manager should ensure that the constitution and operations

of the firm are within the legal framework as specified by the
government.
 6. Responsibility towards Society:

• The manager has responsibility towards his surroundings &

the people living in the vicinity of his factory / office. Firms
behave irresponsibly when they pollute the environment by
releasing harmful gasses, discharging toxic effluents into
nearby rivers, lakes or seas, and dumping their waste matter
in surrounding lands.

Intrapreneur

• An intrapreneur is a person who has an entrepreneur skill set, but

works within an organization or enterprise. This could be within an
organization that seeks the dynamisms of forward thinking
employees or incubation companies. Intrapreneur is the spirit of
entrepreneurship within an existing organization.
Qualities of Intrapreneur
Entrepreneurship

• Entrepreneurship has been used in various ways and in various

senses. It is an exclusive concept that cannot be defined precisely.
The concept and its theory have evolved over more than two
centuries.

Definitions of Entrepreneurship

Importance of Entrepreneurship:

1) He Bears the Reward of Uncertainty:

• An entrepreneur establishes a new enterprise for profit motive. But

there are many uncertainties about profit and also volume of profit.
He may have to wind up the enterprise due to continuous loss.

2) Establishes Stability in Society:

• Entrepreneurs do not establish enterprises in only urban areas. But

also establish enterprises in semi urban and rural areas. In rural
areas, tiny, cottage and small scale industries are established,
which lead to stability in our society.

3) Creation of Useful Goods and Services for Consumers:

• Entrepreneurs create many valuable and useful goods and services

for customers and needs of society are satisfied.
4) Increases Opportunity of Emplo yment:

• Entrepreneurs play an important role in creation of employment

opportunities. A large portion of our society gets employment in
industrial sectors. So he helps to solve the problem of
unemployment.

5)Remarkable Role in Economic & Industrial Development of a

Country:

• Entrepreneurs establish new ventures and produce variety of goods

and services. Hence modern needs of society are satisfied and lead
to a country to rapid economic and industrial development.

6) Gives Benefit of Innovation to the Society and Nation:

• Entrepreneurship and innovation are directly related. Entrepreneurs

continuously searched innovation and give its maximum benefits to
our society and nation.

7) Plays Important Role in Balanced Regional Development:

• Entrepreneurs establish industries in all areas of the nation, which

decentralize economic power and leads to balanced regional
development.

Need of Entrepreneurship

1) Motivation: It motivates one to carefully plan an activity, create a

new product or service and perform the function of distribution.

2) Availability of Means of Income:

• Entrepreneurship opens up avenues for earning livelihood. Income

is earned in the form of profits.

3) Risk Bearing:

• In every society, there is risk in certain businesses. However,

enterprising and adventurous entrepreneurs venture into such
businesses and thus, they help fulfill society’s requirements.
4) Creation of Employment:

• Some businesses which commence as self-employment activities

can later on provide employment to others as business grows. Thus,
it helps to partially resolve the unemployment problem in the
country.

5) Appropriate Investment Environment:

• Entrepreneurs contribute to the growth of economic development

and creation of appropriate investment environment. They create
confidence in investors because of their leadership qualities,
imaginative and adventurous attitude.

6) Self Reliance:

• Entrepreneurs help the economy to become self-dependent. Small

and big industrial and commercial businesses satisfy the society's
needs as regards various goods and services.

7) Research and Development:

• Skilled and experienced entrepreneurs participate in research

activities as well. Because of their enquiring attitude, goods and
services that are in short supply in a society are identi fied and made
available

Business Environment

• The term ‘business environment’ connotes external forces, factors

and institutions that are beyond the control of the business and
they affect the functioning of a business enterprise. These include
customers, competitors, suppliers, government, and the social,
political, legal and technological factors etc.

Definitions:

• “Business environment refers to those aspects of the surrounding of

business enterprise which influence its operations and determine its
effectiveness”.

• “Business environment has reference to the totality of all factors

which are external to and beyond the control of individual business
enterprise and their management”.
Importance of Business Environment

1) Determining Opportunities and T hreats:

• The interaction between the business and its environment would

identify opportunities for and threats to the business.

2) Giving Direction for Growth:

• The interaction with the environment leads to opening up new

frontiers of growth for the business firms.

3) Continuous Learning:

• Environmental analysis makes the task of managers easier in

dealing with business challenges. The managers are motivated to
continuously update their knowledge, understanding and skills to
meet the predicted changes in domain of business.

4) Image Building:

• Environmental understanding helps the business organizations in

improving their image by showing their sensitivity to the
environment within which they are working.

5) Identifying Firm’s Strength and Weakness:

• Business environment helps to identify the individual strengths and

weaknesses in view of the technological and global developments.

Unemployment
• Generally speaking one who is not gainfully employed in any
productive activity is called unemployed. It is a situation wherein
able-bodied people in the age group of 15-39, willing to work at the
prevailing wage rate are unable to get a job. Unemployment exists
when supply of labour is more than the demand for labour.
Causes of Unemployment

1) Rapid Population Growth:

• It is the leading cause of unemployment. In India, particularly in

rural areas, the population is increasing rapidly.

2) Limited Land:

• Land is the gift of nature. It is always constant and cannot expand

like population growth. Since, India’s population increasing rapidly,
therefore, the land is not sufficient for the growing population.

3) Seasonal Agriculture:

• Most of the rural people are engaged directly as well as indirectly in

agricultural operation. But, agriculture in India is basically a
seasonal affair.

4) Fragmentation of Land:

• In India, due to the heavy pressure on land of large population

results the fragmentation of land. As land is fragmented and
agricultural work is being hindered the people who depend on
agriculture remain unemployed.

5) Backward Method of Agriculture:

• The rural farmers followed the old farming methods. As a result, the
farmer cannot feed properly many people by the produce of his
farm and he is unable to provide his children with proper education
or to engage them in any profession.

6) Defective Education:

• The day-to-day education is very defective and is confirmed within

the class room only. Its main aim is to acquire certificate only. The
present educational system is not job oriented, it is degree
oriented.

7) Lack of Transport and Communication:

• In India particularly in rural areas, there are no adequate facilities

of transport and communication. Owing to this, the village people
who are not engaged in agricultural work are remained
unemployed.
 Problems of Unemployment

1) Economic Problems:

a) Unemployment Financial Costs: In many countries the

government has to pay the unemployed some benefits. The
greater the number of the unemployed or the longer they are
without work the more money the government has to shell out.

b) Spending Power: The spending power of an unemployed

person and his/her family decreases drastically and they would
rather save than spend their money, which in turn affects the
economy adversely.

c) Reduced Spending Power of the Employed: Increased

taxes and the insecurity about their own work may affect the
spending power of the working people as well and they too may
start to spend less than before thus affecting the economy.

d) Others: With the increase rates of unemployment other

economy factors are significantly affected, such as: quality of
health-care, standard of leaving and poverty.

2) Social Problems:

a) Mental Health: Mental health problems like: Low self-confidence,

feeling unworthy, depression and hopelessness. With the lost income
and the frustration involved in it, the recently unemployed may
develop negative attitudes toward common things in life and may feel
that all sense of purpose is lost.

b) Health Diseases: The unemployment overall tension can increase

dramatically general health issues of individuals.

c) Tension at Home: Quarrels and arguments at home front which

may lead to tension and increased numbers of divorces etc.

d) Political Issues: Loss of trust in administration and the

government which may lead to political instability.

e) Crime and Violence: Increase in the rate of crime.

Remedial Measures for Unemployment

1) Control on Population: Rapidly increasing population is the main

cause of the rise in unemployment in India. Therefore, controlling the
alarming growth of population will be the first remedial measure to be
taken by the Government.

2) Promote Small-Scale Industries: The cottage and small scale

industries are labour-intensive and requires less of capital investment.
Promotion of such industries will not only lead to creation of more
employment opportunities but also save capital.

3) Rural Development Programmes: The number of unemployed

and under-employed labour is very large in the rural sector particularly
in the farm sector and this demands the need to siphon off the surplus
labour from the farm sector to non-farm sector.

4) Rapid Economic Development: The pace of economic

development has been slow and failed to create adequate job
opportunities. The emphasis in future should be on the growth of
agriculture and allied sectors and rural industrialisation.

5) Education Pattern: The education pattern needs to be changed

instead of imparting general education which has little applied value;
the emphasis should be on vocational and technical education.

Wealth Creation

This is how Wikipedia defines it:

• “Wealth is an abundance of valuable material possessions or

resources”

• “Wealth creation can be narrowly defined in terms of income

generation or more broadly as the creation of assets, both in terms
of physical and human capital.” - IMF

Importance of Wealth Creation

1) It Shows ‘Wealthy’ Nature of Country or Person: An

individual, community, region or country that has an abundance of
resources or possessions is called as “wealthy".

2) Success in a Life: Wealth has many aspects. It is not only about

money. It also includes things such as career, relationships, family
life, education, physical fitness and social life.
 3) Scope for Investments: Wealth is required highly for industries.
Thus creation of wealth from the industrial point of view means
obtaining wealth from the existing sources. Thus newly obtained
money gives scope for the investment somewhere else than the
existing one and this is the main goal in the wealth creation.

• Advantages of Wealth Creation

1) Demands on Time: Most individuals would like to be able to

enjoy the company of family, hang out with friends and enjoy complete
freedom. This can be achieved only if large capital is available at
disposal.

2) Financial Freedom: Every person over the age of 16 has some

demand for financial stability and this is only attainable through
paying.

3) Investment Potential: The final advantage to benefit from with

the pursuit of wealth creation through passive income is revealed with
investment potential. Many individuals have careers they enjoy but the
income generated is just enough to cover the expenses of their family.

Entrepreneurship as career option

• Every year, thousands of graduates and postgraduates come out of

university to join a professional workforce with a view to taking up
wage employment. Some get good placements on campus, while
others slog for a long time to get a job of their choice. Still many
continue doing jobs they do not like for their livelihood. Some of the
factors that attract individuals towards entrepreneurship as a career
option are as follows:
1)High Need for Independence: There are personalities who
would like to have freedom about things such as with whom to
work, when to work and with whom to do business at what terms. It
is this instinct in them that pushes such personalities to start
something of their own.

2) To Satisfy the Dream of Having High Financial Rewards: The

fundamental difference between a job and one's own venture lies in
the degree of financial rewards for the efforts put in to achieve
organizational goals.

3) Opportunity to Deal with All Aspects of a Business: No job

can provide an opportunity to learn and deal effectively with a wide
spectrum of business activities such as idea generation,
conceptualization, design, creation, marketing, and customer response
and customer satisfaction.

4) Vision to Leave a Long-lasting Mark: Entrepreneurship creates

an opportunity to make definite contribution to society by lifting the
people in and around the venture. A continuous zeal to innovate helps
in touching the heads and hearts of people at large.
 Unit – 2
Business Opportunity Identification and Preliminary Project
Report (PPR)

Business Opportunity Identification

 A good business opportunity is that which is a techno-commercially

feasible & environmentally sustainable proposition. Moreover, one
would also need to assess the feasibility of the opportunities before
pronouncing them as business opportunities. The phenomenon of
opportunity identification is highly complex.

Opportunity Search – Divergent Thinking

The entrepreneur gets information regarding various numerable

opportunities from:

o Magazine,

o Internet,

o Financial Institution,

o Government,

o Commercial Organization,

o Friends,

o and so on.

Definitions of Opportunity:

1) “An opportunity is having the qualities of being attractive, durable,

timely and is anchored in a product or service which creates or adds value
for its buyer or end user.”

2) "Opportunity is the potential for the realization of wanted, positive

consequences of an event."

3) “Opportunity is the band of frequencies that are not being used by the
primary user of that band at a particular time in a particular geographic
area"
Divergent Thinking:

• Divergent thinking is to generate many different ideas about a topic

in a short period of time.

• It involves breaking a topic down into its various component in

order to gain insight about the various aspects of the topic.

• Basic principles of Divergent Thinking

There are four principles for supporting divergent thinking:

1) Deferring judgment (includes criticism & praise),

2) Collecting every possible idea,

3) Striving for the unusual & encouraging different perspectives,

4) Looking for combinations of ideas that might work together.

Techniques and Tools of Divergent Thinking:

1) Brainstorming: Brainstorming is a technique which involves

generating a list of ideas in a creative, unstructured manner. The goal of
brainstorming is to generate as many ideas as possible in a short period
of time.

2) Keeping a Journal: Journals are an effective way to record ideas

that one thinks of spontaneously. By carrying a journal, one can create a
collection of thoughts on various subjects that later become a source book
of ideas.
3) Free-writing: When free writing, a person will focus on one
particular topic and write non-stop about it for a short period. The idea is
to write down whatever comes to mind about the topic, without stopping
to proofread or revise the writing.

4) Mind or Subject Mapping: Mind or subject mapping involves putting

brainstormed ideas in the form of a visual map or picture that that shows
the relationships among these ideas. One starts with a central idea or
topic, and then draws branches off the main topic which represent
different parts or aspects of the main topic.

Opportunity Selection- Convergent Thinking Mode

• Convergent thinking is type of thinking that focuses on coming up

with the single, well-established answer to a problem. It is oriented
toward deriving the single best, or most often correct answer to a
question. Convergent thinking emphasizes speed, accuracy, logic
and focuses on recognizing the familiar, reapplying techniques, and
accumulating stored information.

Following are the objectives of Convergent Thinking:

 Attending to selected pieces of information while ignoring other

stimuli,

 Storing and then retrieving information.

 Bringing to the conscious mind the relative information needed for

cognitive processing.

 Arranging information so it can be used more effectively.

 Breaking down information by examining parts and relationships so

that its organizational structure may be understood.

 Making connections between related items or pieces of information.

Opportunity Selection- Convergent Thinking Mode

a) Preliminary Evaluation: As soon as entrepreneur realizes regarding

business opportunity, it has to be evaluated against specific criteria
like:

k) Compatible with the Promoter: The entrepreneur must conform

that the project undertaken should be compatible to men, material,
money market available at his disposal. Project beyond the capacity
of the entrepreneur is bound to fail.

2) Compatible with Government Regulations and Rules:

Entrepreneur should not violate government rules & regulations. R
& R includes investment, license, reservation of certain categories of
items etc.

3) Easy Availability of Raw Materials: Cost and availability factors

of raw materials should be considered carefully. Scarcit y of raw
materials will cause delay in production process.

4) Potential Market: Potential market, nature of competition,

availability of substitutes and technological developments taking
place in the industry should be assessed and evaluated by the
entrepreneur.

5) Risk Related to the Project: Such as changes in demand,

technological developments, entry of substitutes, competition, and
seasonal variations should be assessed before working on a project.

B) Selection of Product or Service: While deciding about the product

/ service following points should be considered:

 Potential demand for the product or service.

 Assess potential of existing competitor and estimate about

probable competitors.

 Infrastructural facilities - power, transport etc.

 Current status of technology and scientific development in the

field.

 Availability of raw material and required labour.

 Government policies, legislation, controls.

 Environmental factor.
  Locational advantage of the product.

3) Purpose of Market Survey:

a) Raw Material Availability: Search for leading suppliers of raw

material required for the concerned product Study local and outside
source of raw materials, its advantages and disadvantages .
Thorough analysis of credit facilities, advance payments, terms and
conditions for suppliers.

b) Equipment Availability: Identify major manufacturer available in

local market and abroad. Price structure of different brands. Repair
maintenance and after sales service facilities. Technical and skilled
staff requirement.

c) Marketing and Distribution: Selection of best channel of

distribution. Advertising and publicity for the product. Market
practices—credit facility, minimum order, incentives. Business
terms, commission, stocks, warehouse facilities.

d) Consumer Behaviour: Motivate buyers to buy new product.

Understand the preference for durability, service, and economy.
Understand consumer characteristics of different region and devise
appropriate sales message, accordingly.

4) Contractual Programmes To Collect Sufficient Information About

Proposed Venture:

• Entrepreneur often need information and guidance, during initial

Stages, on product potential, raw materials, policies, facilities,
procedures, finance formalities, incentives etc. It can be collected
through State & Central Government agencies. These agencies can
be helpful in collecting sufficient information about proposed
venture. Industrial Finance Corporation of India (IFCI) in
collaboration with Industrial Development Bank of India (IDBI)
Industrial Credit and Investment Corporation of India (ICICI), state
organisations and banks have set up a network of state level
technical consultancy agencies.
D) Market Research:

• Marketing Research is a continuous process of investigation,

recommendation and follow-up of a problems, which is conducted
by the researcher. The Entrepreneur obtains the information from
the researcher and makes sound decisions.

Definitions of Market Research:

1) “Marketing research is the systematic gathering, recording and

analyzing of data about problems relating to the marketing of goods
and services".

2) “Marketing Research is the systematic objectives and

exhaustible search for the study of facts relevant to any problem in
the field of marketing".

c) Methods of Market Research:

• The following methods can be adopted for conducting market

research:

Observation Method: This method involves gathering data by

observing and recording. This research can be conducted by
trained observers. Here the observer does not ask any question to
the person but observes the actions without letting the person know
that he is being observed.

Desk Research: This research is done by an expert with the help of

published and other written sources of information. It is called
“Desk Research" as it involves table work.

Experimentation: Under this method the experimenter deliberately

manipulates or changes one or more variable in such a way that its
effect upon one or more other variables can be measured.

Depth Interviewing: In this method an individual or a small group of

people are called to some place. A relaxed environment is provided
and general questions are asked.

Survey Technique: A survey consists of gathering data by

interviewing a limited number of people (a sample) selected from a
larger group. The researcher obtains information from the
respondents by interviewing them.
 • Importance of Market Research:

a) Economy Overview: A good market survey will have an economy

overview, which is very helpful in understanding about the current
market and where it is going. The analysis focuses on five-year
trends, which can tell if a specific industry is growing or not. This
can be important in identifying industries in the business
development that one can capitalize on.

b) Occupational Changes: The information, about changing

occupations in the particular region, will not only guide the business
as a recruiter or consultant, but it will also be valuable in educating
clients with respect to growth. The information in the report will
give a rough calculation of the change in five years.

c) Strategic Advantage: Market Research provide the company with

a detailed report. It gives a strategic advantage with information
and demographic analyses that can be used to analyze the regional
economy and workforce.

d) Analyzing the Competition: Conducting a market research

survey also helps in size up the competitors, their brands, customer
services and what makes them unique. This information can then be
used to chart a different part or create a better marketing strategy
that would bring one closer to the customers/clients.

e) Locating Obstacles and Dealing with them: Every business has

its fair share of obstacles and, the tenacity to face difficulties.
However, a well-researched analysis may show potential obstacles.
Most business owners use their business analysis to predict
probable obstacles and create contingency plans.

Limitations of Marketing Research:

 In the fast changing Market environment the data collected

becomes historic and the research finding based on them becomes
irrelevant.

 It only provides a base for predicting future events and does not
guarantee any certainty in the happening of the event.

 Some research conclusions may be of limitation as the tools and

techniques may not be suitable.
  It is merely a tool for decision making and is not a substitute for
decisions.

 It does not provide complete answer to marketing problems as the

answers may be irrelevant.

Advantage of PPR
Major Contents of a PPR

• Name of the entrepreneur, address, educational qualification, work

experience, location & name of project, type of the organization.

• Details of machineries, equipment such as specifications & price &

addresses of their suppliers.

• Details of raw materials required such as quantity, price & source.

• Major Contents of a PPR

• Type of utilities required such as Electricity, Water, Fuel etc. and

annual expenditure on these utilities.
• Type & no. of manpower requirement such as skilled / semi -skilled /
unskilled etc. and details of expenditure on their salaries.

• Details of fixed capital requirement for land / building, machinery,

furniture etc.

• Details of working capital requirement for raw material stock, semi -

finished goods stock, finished goods stock etc.

• Total cost of the project which is a summation of fixed capital,

working capital, preliminary & pre-operative expenses.

• Means of Finance such as term loan, working capital loan, own

investment, subsidy etc.

Structure of PPR
Executive Summary: This summarizes the key points of a business plan,
e.g. information on company such as:

– Name,

– Proposed legal structure,

– Details of investors and management team,

– Organizational structure,

– Brief project description,

– Amount of investment required,

– Amount and length of loan required,

– Description and justification of the product / service selected.

2) Operational Plan: In this category, the following plans may be

included:

a) Manufacturing Plan: It details about the supply chain, inputs

required for production, facility requirements, equipment
requirement and warehousing needs (if any).

b) Information and Communications Technology Plan: Details of

software requirements- off the shelf or custom made. If it plans to
have a website, include the development plan here.

c) Human Resource Development:

Define key roles of staff, compensation, list of roles and

management structure here. Similarly, training needs to be
mentioned here.

3) Financial Plan:

A financial plan is a series of steps which are carried out, or goals

that are accomplished which relate to a business financial affairs. It
may include Current Financing, Funding Plan and Financial
Forecasts.

4) Risk Analysis: It may include the following:

a) Risk Evaluation: It includes:

1) Market Risks: It may include threat of new competitors and
other market related risks. Operational Risks - risks that may arise
in the day to day running of operations.

2) Staffing Risks: Any risks related to your workforce.

3) Financing Risks: Liabilities, cash flows, working capital are some

of the financing risks that companies face.

b) Risk Management Plan: After the identification of the risks your

organization faces, talk about how you plan to mitigate these risks.
 UNIT - 3

Business Plan

Business Plan

• A business plan is the road map

– for using the resources to meet the goals &

– for operating the business and measuring its progress in a

long way.

• Business plan is a document which provides answers to questions

which are important for setting up an enterprise and then running it
well.

Objectives of Business Plan

• Some objectives of business plan is described as follows:

1) Identify Needs:

• Management relies on a business plan to gain agreement on a

business's description; its objectives; the market in which it will
operate and its strategy to achieve business objectives.

2) Evaluate Performance:

• As company begins its operations, the financial portion of the

business plan serves as a tool to compare planned with actual
operating results.

3) Measure Strategy:

• Management relies on the comparison of actual to planned results.

This evaluates the company’s business strategy and determine how
the business should proceed in the future.

4) Obtain Financing:

• The plan enables the financers to understand the owner's vision,

company's goals and methods of operation, each of which
understand the comparative financial worth of the business.
5) Business Risk:

• Many risks are involved in operating a business. Business plan is

necessary to determine which risk factors a particular business
venture is liable to.

– E.g. a business that sells products and services that market

trends indicate will soon become obsolete are very open to
market risk. Business owners who anticipate and plan for
common business risks are in a better position to overcome
potential pitfalls.

6) Marketing:

• The marketing section of a business plan not only determines the

potential of product and service, but it also allows business owners
to understand more about future customers.

• The goals of a marketing analysis involve gaining a thorough

understanding of industry including marketing trends and growth
rates.

Benefits of a Business Plan

Guidelines for Preparing a Business Plan

1) Keep Target Audience in View:

• While writing the business plan keep in mind the intended audience.

2) Strategy - Core of a Business Plan:

• Basically, the business plan should be geared towards helping

develop and support solid business strategy.

3) Think Competition Throughout:

• In the present competitive market, one would probably be facing

some serious competition sooner or later no matter how unique the
business idea is.

4) Be Realistic:

• Lots of business plans sound good on paper, but do not work in the
real world. It is difficult to attract people to a new product or service
just because it is better.

5) Usage:

• There are two types of business plans

1) It proposes as roadmaps for starting, operating and growing a

business &

2) It proposes as sales documents for raising capital.

6) Factual and Brief:

• Keep the business plan factual and brief. Do not use hyperbole or
generalizations to describe the potential of the business plan.

Outline of Business Plan

1) Mission / Objectives:

• It should be of max 25 words and ideally in 8.

2) Business Plan Summary:

• A summary of the business plan should cover the following:

• The name of the business,

• Its legal structure,

• The amount and purpose of a loan request,

• Product information;

• Current stage of business (start-up or developing);

• and anticipated financial results and other benefits.

3) The Business: It includes the following points:

a) Description of Business:

• What product or service will you provide?

b) Historical Development:

• List the name, date of formation, legal structure, subsidiaries and

degrees of ownership of your business.

c) Competition:

• Describe competing companies. Remember to include all substitute

product/service providers.

d) Location:

• Where will you locate and why? What will be your hours of
operation?

e) Marketing:

• How & what, will be your marketing tactics?

4) Management:

a) Business Format: Is your business a sole proprietorship,

partnership, limited liability company or corporation? Explain why you
chose this form of business.

b) Organizational Chart: What is the workforce structure? How many

and of which type of workforce will you need at the different stages of the
business cycle?

c) Personnel: What are the responsibilities and past experiences of

partners and employees? How will they contribute to the success of the
company?

5) Finance:

• Total estimated project cost. Explain how much money you need
and WHY.

• Breakdown of the proposed uses of project funds.

• Lending institution participation, including terms and conditions.

• Equity participation of the owners and investors.

6) Production:

a) Description:

• How will production or delivery of services be accomplished?

b) Capacities:

• What physical facilities, suppliers, patents, labor and technologies

exist or will be used?

c) Capital Equipment:

• What type and amount of machinery and durable equipment is

needed to operate the business?

d) Supplies:

• From where and how will you obtain your components and day-to-
day supplies and services?
Forms of Business Organization

• The forms of business organization are related with ownership and

ownership is a legal concept which determines the authority and
responsibility of the owners.

Sole Proprietorship:

– The most straightforward and simple type of business

organization is Sole Proprietorship.

– In this, actual owner brings in capital, his own or borrowed,

looks after the business himself and through his employed
workers and is responsible for everything in connection with
the business.

Advantage of Sole Proprietorship

1)Facility of formation: The sole proprietorship business requires no

registration except a license in some cases. No legal formalities are to be
observed.

2)Minimum Cost: Apart from license fee in certain cases it does not
require any cost for its formation.

3)Close Contact with Customers: A sole proprietor gives individual

attention to the likes and dislikes of the customer.

4) Dictator of Policies: The sole proprietor can adopt any policy he

likes. He is the dictator of his organization. His decision shall be final.

5) Maintenance of Business Secrecy: As he is under no legal

obligation with regard to publication of accounts, he can maintain utmost
secrecy in all business matters.

6) Gets Entire Profit: He enjoys the entire profit and this gives him the
incentive and stimulus to work sincerely for the betterment of the
business.

7) Free from Regulation: A sole proprietorship business is free from all

government regulations but it follows all laws from its birth to death
(formation, operation and dissolution). As it can dispense with all legal
formalities, it can easily concentrate on business activities within divided
attention.
8) Independent Way of Life: The sole proprietor gets an opportunity
to develop an independent spirit, sense of responsibility, social contact
and all other qualities pertaining to art, skill or personal likings.

9) Good training Ground: The members of the family especially

children while assisting the business gets an opportunity to train
themselves in business affairs.

Disadvantages of Sole Proprietorship

1) Limited Capacity of an Individual: The first drawback is pertaining

to difficulties of supervision. It will be difficult for him to manage the
different aspects of his organization.

2) Limited Capital and Resources: The resources and capital of a sole

proprietor are indeed limited which restricts the growth of a business unit.
This limits the scope of his business too.

3) Unlimited Risk and Liability: The decisions taken by him sometimes

may go wrong or the policy adopted by him may not be effective in
pushing up the sales.

4) No Guaranteed Continuity: There is no guarantee for the continuity

of the business since there is no legal obligation to continue the same
concern by his dependants.

Forms of Business Organization

Partnership Business: Under partnership, two or more than two people

run business on the basis of a contract and share its profit and loss.

In other words, we can say that this form of business is needed because
of the limitations and failure of sole proprietorship.

Advantages of Partnership Business

• Following are the advantages of the partnership business:

1) Easy Formation: There is no need to observe any legal formalities

for the establishment of partnership.

2) Balanced Decisions: Partnership organization is a group of people

with different qualities and whatever decisions are taken in it are based
on the consultations among all the partners. In this way every business
decision happens to be balanced.
3) More Financial Resources: Sole trade suffers due to lack of capital
but the partnership business is free from this drawback. The financial
resources pooled by many partners assume the form of enormous
capital.

4) Division of Risk: Unlike the sole trade, the entire burden in case of
loss does not fall on any single individual but gets divided among many
persons.

5) Secrecy: The accounts of partnership firms are not presented before

the public as is the case with the companies. In this way there is more
secrecy in partnership as compared to companies.

Limitations of Partnership

1) Unlimited Liability: In partnership every partner has an unlimited

liability. In other words, every partner is responsible collectively and
individually for all the liabilities of partnership.

2) Limited Resources: In the partnership business the financial

resources remain confirmed to the capital of the partners and their
capacity to raise loans. At the time of expansion of business financial
resources prove to be insufficient.

3) Lack of Harmony: The success of partnership depends on mutual

understanding, confidence and cooperation but wherever there are
more people there can be difference of opinion which leads to discord
and consequently, there is a lack of coordination.

4) Lack of Continuity: The existence of partnership is very uncertain.

In case of only two partners the partnership business ends with any of the
following reasons: -

- The death of a partner,

-Declaration of his bankruptcy.

Forms of Business Organization

Joint Hindu Family Business: When a business is run by the people

belonging to the same family and they run the business as a family
business, it is called Joint Hindu family business. In such a form of
business the authority of control is in the hands of the Karta or the Head
of the family.

Advantages of Joint Hindu Family Business

1) Easy to Start: It is easy to start joint Hindu family business because

there is no need to complete any legal formality for its establishment.

2) Secrecy: Under the joint Hindu family business all the facts remain
confined to the Head. Therefore, the competing business cannot get any
important information.

3) Direct Contact with Customers: The Head of the joint Hindu family
business comes in direct contact with his customers.

4) Prompt Decision: The Head of the joint Hindu family business is free
to take business decisions. He/She does not need to consult anybody for
this purpose.

5) Direct Relationship between efforts and Considerations: The

Head of the joint Hindu family business has the exclusive right on the
profit of the business. This gives encouragement to put in more hard
work.

6) Advantage of Inheritable Quality: The joint Hindu family business

is handed over by one generation to the other and the members of the
family continue to maintain the old ideal traditions of the family.

Limitations of joint Hindu Family Business

1) Limited Resource: The resources of the joint Hindu family business

are limited. This reduces the power of competition in business. These
factors become hindrance in development of business.

2) Limited Managerial Skill: It cannot be expected of any person,

however intelligent he may be, to know all intricacies of business. In the
joint Hindu family business all the decisions have to be taken by the
Head.
3) Unlimited Liability: The responsibility of the Head in the joint Hindu
family business is unlimited. Consequently, the decisions are
unnecessarily delayed.

4) Disadvantages from Centralisation of Power: The Joint Hindu

family business is based on the mutual cooperation. The Head has the
absolute power of taking business decisions.

5) Lack of Co-operation from Members: Generally it has been

observed that the members of the family are interested in increasing their
individual property rather than taking care of the joint Hindu family
business. This results in the lack of cooperation from other members of
the family.
Forms of Business Organization

Cooperative Organization: Cooperative organization means a voluntary

organization which is established by some persons on the basis of
cooperation and equality to safeguard their common economic interests.

Merits of Cooperative Organisation

1) Easy Formation: A cooperative society can be formed easily. Any ten

adults can establish a cooperative society by getting it registered with the
Registrar of Cooperative Societies.

2) Limited Liability: The liability of the members in this organization is

limited to their shares or the guarantee given by them.

3) Stability: Being a separate entity, a cooperative society possesses

the advantage of stability, which means that the death or bankruptcy of
members have no effect on it.

4) Democratic Management: In a cooperative organization the

representatives are elected on the basis of one member one vote. Its
coverage being limited, almost all the members attend its meetings and
give their ideas and no proxy allowed in these meetings.

5) Lesser Operating Expenses: There is no need for advertisement in

order to boost the sales of the societies and there is no loss caused by
bad debts because of almost all the sales being done in cash.

Limitations of Cooperative Organization

1) Lack of Capital: The members of cooperative societies are generally

economically poor. Hence they can invest only a limited capital in the
cooperative society.

2) Incompetent Management: The second cause of incompetent

management is that it is run by unsalaried members who become the
members of managing committee out of a religious feeling but in the
absence of any reward they take no interest in the activities of the
society.

3) Cash Trading: Cash trading is both an advantage and disadvantage of

cooperative societies. Although the cooperative society supplies goods
to members, on cheaper rates, yet the lack of credit facility pushes them
into the clutches of other businessmen.
4) Political Interference: Since the government also invests money in
the cooperative societies, it has members nominated in the managing
committee. As and when there is a change in government, the new
government desires to have its own members.

5) Lack of Motivation: Since cooperative organization is a collective

enterprise of a group of persons, no member takes personal interest in its
activities.

6) Lack of Public Confidence: Generally, it has been observed that

only some particular individuals become members of the managing
committee and they are politically motivated.

7) Mutual Disputes: It has, generally, been observed that these

societies are established with a lot of enthusiasm but enthusiasm
disappears within a short span of time. The reason is the selfish interest
of some people who take these societies as a medium to serve their
purpose but they are opposed in their move by some other members.

Forms of Business Organization

Company : Company is that form of business organization which is

willingly established by some persons for earning profit under the
Companies Act.

Many persons jointly invest capital in a company and, therefore, it is also

called Joint Stock Company.

Merits of Company Organization

1) Limited Liability: Unlike the sole trade and partnership trade, the
personal assets of the shareholders cannot be utilized to pay off the
business liabilities.

2) Share Transfer Facility: Any shareholder of a Public Company can

transfer his shares freely without the approval of ot her members. On the
contrary, in a partnership, a partner can transfer his interest with the
prior approval of the other partners.
3) Continuity: The existence of company is separate from its members.
There is no effect on its life in case of the death of the shareholders,
their bankruptcy or their madness.

4) Scope for Growth and Expansion: There is every possibility of

growth and expansion in the company business because of sufficient
capital, sufficient management capability and limited liabilities.

5) Efficient Management:

• Company can utilize the services of experts because of the

availability of financial resources in abundance and the continuity of
business.

Demerits of Company Organization

1) Difficulty in Formation: The formation of company is in itself a very

difficult and expensive activity. Many documents are to be prepared and
deposited in the office of the Registrar. The completions of these legal
formalities consume much time and money.

2) Lack of Secrecy: According to the Companies Act a Public Company

has got to publish its accounts and deposit many important documents in
the office of the Registrar. Anybody can see this document after paying
the prescribed fee.

3) Lack of Motivation: In company, ownership and management are

separate. The owners of the company hand over the management of the
company to a few shareholders who are called directors.

4)Excessive Government Control: Various government restrictions like

the observance of many legal rules, sending various types of information
to the government from time to time, having compulsory audit, publishing
annual accounts, etc., hampers the growth of the company.

5) Delay in Decisions: It takes more time to take decisions in a

company organization. It is because of the existence of various levels of
management and the calling of meetings to get a resolution passed for
taking a decision.
Business Planning Process

• The planning process is directly related to organizational

considerations, management style, maturity of the organization,
and employee professionalism.

• These factors vary among industries and even among similar

companies. Yet all management, when applying a scientific method
to planning, performs similar steps.

• The time spent on each step will vary by company. Completion of

each step, however, is prerequisite to successful planning. The main
steps in the business planning process are:

Business Planning Process

1) The Self-Audit: Management conducts a self-audit to evaluate all
factors relevant to the organization's internal workings and structure.

2) The Evaluation of Business Environment: Management surveys

the factors th at exist independently of the enterprise but which it must
consider for profitable advantage. Management also evaluates the
relationships among departments in order to coordinate their activities.

3) Setting Objectives and Establishing Goals: The setting of

objectives is a decision-making process that reflects the aims of the entire
organization.

4) Forecasting Market Conditions: Forecasting methods and levels of

sophistication vary greatly. Each indicate to assess future events or
situations that will affect either positively or negatively the business's
efforts.

5) Stating Actions and Resources Required: From the overall

strategy, managers develop a number of more specific strategies these
are described as follows:

a) Corporate Strategies: Corporate strategies address what business an

organization will conduct and how it will allocate its aggregate resources,
such as finances, personnel, and capital assets.

b) Growth Strategies: Growth strategies describe how management

plans to expand sales, product line, employees, capacity & so forth.

c) Stability Strategies: Stability strategies reflect a management

satisfied with the present course of action and determined to maintain the
status quo.

d)Defensive Strategies: Defensive strategies, or retrenchment, are

necessary to reduce overall exposure and activity.

e) Business Strategies: Business strategies focus on sales and

production schemes designed to enhance competition and increase
profits.

6) Evaluating Proposed Plans: Management undertakes a complete

review and evaluation of the proposed strategies to determine their
feasibility and desirability. Some evaluations call for the use of common
sense.
7) Assessing Alternative Strategic Plans: Because of the financial
implications inherent in the allocation of resources, management
approaches the evaluation of strategic alternatives and plans using
comprehensive profit planning and control.

8) Controlling the Plan Through the Annual Budget: Control of the

business entity is essentially a managerial and supervisory function.
Control consists of those actions necessary to assure that the company's
resources and operations are focused on attaining established objectives,
goals and plans.
 UNIT-4

Institutional Support to New Venture

Institutional Support to New Venture

 Many entrepreneurs, those in small-scale sectors have technology

related knowledge to take care of production and quality aspects.
They require lot of guidance and support in the beginning stage and
production stage of the industry in various project and business
related activities.

 The important areas for the guidance are –

 Project Report Preparation,

 Location And Layout Of Plant,

 Selection of Men and Machinery,

 Various Types of Finance Facilities and

 Government Assistance and Subsidies.

 The support functions will extend necessary guidance and provide

inputs and help industries in molding during initial stages of an
enterprise.
District Industries Center ( DIC)

• The State Directorate of industries is primary for the growth of

small scale industries in the respective states.

A) Aim of Districts Industries Center (DIC): It includes the

following aims:

1) Development of Industries:

 To develop the small Scale Industries and Cottage Industries.

 To develop the human skill needed for the above industries by

sending the youth to industries to gain experience by working in the
plant itself.

 To bring the modern techniques developed to the knowledge of

industrialists, entrepreneurs and to their representative

2) Development of Handicrafts:

 To restore the vanishing handicrafts

 To increase the number of artisan by giving training and to boost

their livelihood.

 To develop the new techniques in handicrafts.

 To enhance sale of handicraft articles.

• Development of Khadi and Village Industries: To arrange for
grant-in-aid for the development of khadi and village Industries
through Khadi and Village Industries Board.

4) Marketing and Publicity: To arrange for exhibition / publicity for

sale of products manufactured in the Union Territory / districts.
 Assistance Schemes by Districts Industries Center (DIC):

• There are numerous schemes implemented by various State

Government Departments:

– 1) Prime Minister’s Employment Generation

Programme

– 2) Seed Money Scheme (SMS)

– 3) District Industries Centre Loan Scheme

1) Prime Minister’s Employment Generation Programme (PMEGP):

• Coverage: Industry projects upto Rs. 25 lakh investment and

service projects upto Rs. 10 lakh investment are eligible under the
scheme.

• Extent of assistance : 90% loan for general group and 95% for
special group will be available from public sector banks, Regional
rural banks, IDBI.

In urban areas, 15% margin money subsidy for general group and
25% for special group will be available through KVIC. In rural areas,
the margin money subsidy will be 25% to 35% respectively. Special
group include SC / ST / OBC / minority / woman / ex-servicemen /
physically handicapped.

• Eligibility :
1. Any individual, above 18 years of age
2. For setting up of project costing above Rs.10 lakh in the
manufacturing sector and above Rs. 5 lakh in the service sector, the
beneficiaries should have at least VIII standard pass educational
qualification.
3. Self Help Groups are also eligible for assistance under PMEGP.
4. Production Co-operative Societies, and Charitable Trusts.

• Implementing Agencies :
In urban areas, the scheme will be implemented through DIC, while
in rural areas through KVIC/KVIB/DIC all three agencies.

2) Seed Money Scheme (SMS):

• Seed money is provided in the form of soft loans to encourage

unemployed persons to become entrepreneurs.
 • To be eligible for this scheme, an un-employed entrepreneur must
have plans for establishing an industry or service business with a
project cost of upto Rs.25 lakhs in the state of Maharashtra.

• In such cases, seed money assistance of 15% of project cost for all
Entrepreneurs and seed money assistance of 20% of project cost
for Entrepreneurs who are SC / ST or OBC / NT / VT / Handicapped
is provided.

3) District Industries Centre Loan Scheme:

• The District Industries Center Loan Scheme provides financial

assistance in the form of seed money for the promotion of tiny
industries in semi-urban and rural areas with a view to generate
employment opportunities including self employment.

• Under this scheme, margin money is provided for those units where
investment in plant and machinery is less than Rs.2 lakhs.

Functions of Districts Industries Center (DICs)

The important functions of DICS are discussed as follow:

1) Identification of Entrepreneurs:

• DIC’s develop new entrepreneurs by conducting entrepreneurial

motivation programmes throughout the district.

2) Provisional Registration:

• Entrepreneurs can get provisional registration with DICs which

enable them to take all necessary steps to bring the unit into
existence.

3) Permanent Registration:

• When the entrepreneur completes all formalities required to

commence the production like selection of site, power connection,
installing machinery etc they can apply to DIC for permanent
registration.

4) Purchases of Fixed Assets:

• The DIC’s recommend loan applications of the prospective

entrepreneur to various concerned financial and developmental
institutions e.g. SISI etc. for the purchase of fixed assets
5) Clearances from Various Departments:

• DIC takes the initiative to get clearances from various departments

which is essential to start a unit. It even takes follow up measures
to get speedy power connection.

6) Assistance to Village Artisans and Handicrafts:

• In spite of inherent talent and ability, village artisans are not better
off because they lack financial strength to strive in the competitive
market. DIC in support with different lead banks and nationalized
banks extends financial support to those artisans.

7) Subsidies:

• DIC helps SMEs and rural artisans to subsidies granted by

government under various schemes. This boost up the moral as well
as the financial capacity of the units to take further developmental
activities.

8) Assistance of Import and Export:

• Government is providing various types of incentives for import and

export of specific goods and services. These benefits can be availed
by any importer or exporter provided the same is routed through
the concerned DIC.

9)Fairs and Exhibitions:

• The DIC inspires and facilitates the SSI units to participate in

various fairs and exhibitions which are organized by the
Government of India and other organizations to give publicity to
industrial products.

10)Training Programmes:

• DIC organizes training programs to rural entrepreneurs and also

assists other institutions or organization imparting training to train
the small entrepreneurs.

11)Self-employment for Unemployed Educated Youth:

 • The DICs have launched a scheme to assist the educated
unemployed youth by providing them facilities for self-employment.

• The youth should be in the age group of 18 to 35 years with

minimum qualification of Matriculation with I.T.I. in engineering or
Technical Trade.

• Technocrats and women are given preference.

Role of District Industries Centre (DIC)

It plays the following role:

1) Coordination:

• District Industries Centre identifies the entrepreneurs and renders

all assistances by coordinating efforts to commission the small -
scale industrial units chosen by Entrepreneur.

2) Entrepreneurship Development Programme for Women:

Government has announced a scheme to train women in

entrepreneurial skills for self-employment.

 The Corporation for Development of Women Limited,

 Department of Industries and Commerce,

 Departments of Agriculture, and

 Rural Development are the implementing agencies of this scheme.

3) SMEs Registration:

• Small and medium enterprises Registration is one of the main

functions for recognition to obtain incentives and concessions from
Government Agencies.
Maharashtra Industrial Development Corporation ( MIDC)

• The Maharashtra Industrial Development Corporation is one of the

most widely known organizations across the state.

A) Objectives of MIDC :

 To achieve balanced industrial development of Maharashtra in

developing regions and underdeveloped regions.

 Infrastructural development of each and every district of

Maharashtra, and

 Facilitate entrepreneurs in setting up industries in various locations.

Activities of MIDC

• The MIDC has been declared as an agent of the State Government

for carrying out the activities under the framework of MIDC Act and
MIDC Rules. These activities can be divided under following 3 broad
categories.

1) Acquisition and Disposal of Land :

• The land for industrial areas is acquired by the Government of

Maharashtra under the authority of Chapter VI of the MIDC Act,
1961 and handed over to the corporation for further disposal.
Likewise, wherever available, the Government land is also handed
over to the corporation as industrial area.

2) Provision of Infrastructure Facilities :

The corporation is required to provide infrastructure facilities like

road, street lights, drainage, water supply schemes, post &
telegraph, canteen, bank, telephone etc. The corporation meets the
expenditure on such works generally from the premium lease
money received by it from the allotees.
Provisions made by MIDC

a) Power to Fix the Rates :

The power to fix the rates of premium for land for different
industrial areas rest with the corporation.

b) Balanced Development:

It is the aim of the Government and the corporation to achieve a

balanced development of the entire state, with special emphasis on
the development of backward regions of the state.

c) Assured Water Supply :

Among the various services provided by the corporation, an assured

pure water supply can be regarded as a unique specialty of the
MIDC.

d) Maintenance of Industrial Areas :

The corporation maintains the roads, street lights, fire stations etc.
during the transitory period up to handing over of the industrial
area either to the Government or any other Government Agency.

3) Other Services :

These include providing and maintaining common facility centres like post
and telegraph, bank etc.

• Small Industries Service Institute (SISI)

• The Small Industries Service Institute was established

by the Govt. of India in 1954 as a nodal agency for the
development of small industries in the country.

A) Functions of SISI: It includes the following points:

1. To serve as interface between Central and State government.

2. To render technical support services.

3. To conduct entrepreneurship development programmes.

B) Assistance of SISI: It includes the following points:

 Economic consultancy / EDP consultancy.

  Trade and market information.

 State and District industrial potential surveys.

 Modernization and in plant studies.

 Training in various trade / activities.

Micro, Small and Medium Enterprise (MSME)

• The Micro, Small and Medium Enterprise sector is

essential to India’s economy.

• There are 30 million enterprises in various industries,

employing 69 million people. Together, these account
for 45% of the industrial output and 40% of the
exports.

• Although 95% of Micro, Small and Medium Enterprise

units are informal in nature, the contribution of the
sector to India’s GDP has been growing consistently.

A) Activities of MSME: Activities of these institutions are as follows:

 Conducting Entrepreneurship, Management and Skill Development

Programmes;

 Assistance / Consultancy to prospective and existing Entrepreneurs;

 Preparation of State and District Industrial Profiles;

 Preparation of Project Profiles of Products / Industries feasible in the

MSME Sector;

 Energy Conservation, Pollution Control, Quality Control &

Technology Upgradation.

Special Schemes of Micro, Small and Medium Enterprise:

1) Entrepreneurship Development Programmes [EDPs]:

Entrepreneurship Development Programmes are being organized by the
Institute as a regular training activities to cultivate the latent qualities of
educated unemployed youth by enlightening them on various aspects that
are necessary to be considered while setting up small scale industries.
2) Management Development Programmes [MDPs]: With a view to
enhance managerial competence of the Managers and Supervisors
working in small scale industries as well as educated unemployed youth
aspiring to become managers of small scale business enterprises, the
Institute is conducting part time MDPs in various fields such as Marketing
Management etc.

3) Information Technology Training: The Institute has set up a well

equipped and fully air-condition computer laboratory for imparting
training in various subjects of Information Technology both hardware &
software.

4) Sub-Contracting Exchange : The Exchange is a store-house of data

of capacity of the small scale units in terms of products manufactured.

5) Vendor Development Programme [VDP]: The Institute is also

conducting Vendor Development Programmes-cum-Exhibition in
association with the large public/private sector industries and Govt.
Organisations in different parts of the State.

6) Technology Resource Centre [TRC]: Technology needs to be

continually upgraded so that SSI units remain competitive in the era of
globalization. The solution has now been provided by the Ministry of Small
Scale Industries, Govt. of India through Technology Resource Centres set
up in SISIs all over India.

Financial Assistance

• MSEs create vast employment opportunities and contribute

significantly to our GDP.

• Their share in the exports is also significant.

• For many would-be business owners, financing is one of the most

scary and challenging parts of the startup process.

Financial Assistance

Bank Loan:

1. Every Bank has a set of policies when it comes to processing loans

for Micro Small Enterprises.

2. Most small business loans are secured with company or personal

assets.
 3. Lenders will usually ask for personal guarantees, as well as
collateral from anyone who owns more than 20 percent of the
company.

Financial Assistance

A) Types of Bank Loan:

• Bank Loans to Micro and Small enterprises, both Manufacturing and

Service are eligible to be classified under Priority Sector advance as
per the following:

Direct Finance

a) Manufacturing Enterprises:

b) Loans for Food and Agro Processing: Loans for food and agro
processing will be provided for the units which satisfy investments
criteria prescribed for Micro and Small Enterprises.

c) Service Enterprises: Bank loans up to Rs.5 crore per unit to Micro

and Small Enterprises engaged in providing or rendering of services
under MSMED Act, 2006.

d) Export Credit: Export credit to MSE units (both manufacturing and

services) for export of goods / services produced / rendered by
them.

e) Khadi and Village Industries Sector (KVI): All loans are

sanctioned to units in the KVI sector, irrespective of their size of
operations and location and amount of original investment in plant
and machinery.

Indirect Finance

It includes the following points:

 Loans to persons involved in assisting the decentralised sector in

the supply of inputs to and marketing of outputs of artisans, village
and cottage industries.

 Loans to cooperatives of producers in the decentralised sector.

Ways to Bank Credit Granting:

1) Cash Credit: A cash credit is a short-term cash loan to a company. A

bank provides this type of funding, but only after the required security is
given to secure the loan. Once a security for repayment has been given,
the business that receives the loan can continuously draw from the bank
up to a certain specified amount.

2) Loans: A specified amount sanctioned by a bank to the customer is

called a ‘loan’. It is granted for a fixed period, say six months, or a year.
The specified amount is put on the credit of the borrower’s account. He
can withdraw this amount in lump sum or can draw cheques against this
sum for any amount.

Ways to Bank Credit Granting:

• Bank Overdraft: An overdraft is an extension of credit from a bank

when an account reaches zero. An overdraft allows the individual to
continue withdrawing money even if the account has no funds in it
or not enough to cover the withdrawal. Basically, overdraft means
that the bank allows customers to borrow a set amount of money.

Angel Funding : Business “angels” are high net worth individual

investors who seek high returns through private investments in start -
up companies. Private investors generally are a diverse and dispersed
population who made their wealth through a variety of sources. These
self-made investors share many common characteristics:

1. They search for companies with high growth potentials, strong

management teams. The solid business plans helps the angels in
assessing the company’s value.

2. They typically invest in ventures involved in industries or

technologies with which they are personally familiar.

3. They often co-invest with trusted friends and business associates.

In these situations, there is usually one influential lead investor that
judgment is trusted by the rest of the group of angels.

4. Because of their business experience, many angels invest more

than their money. They also seek active involvement in the
business, such as consulting and mentoring the entrepreneur.
 Venture Capital Funding

• Venture capital funding is valuable and powerful source of equity

financing for new ventures. Venture Capital (VC) represents Funds
made available for startup firms and small businesses that have the
potential to grow exceptionally. In addition to injecting cash into
the company, the venture capitalist is likely to add considerably to
the credibility of the company and to supply management expertise,
support and access to their contacts.

Type of Venture Capital Funding:

1) Equity Participation: Venture financing is equity participation

through direct purchase of shares, options or convertible securities.
The objective is to make capital gains by selling of the investment
once the enterprise becomes profitable.

2) Long-term Investment: Venture financing is a long-term liquid

investment in that it is not repayable on demand. It requires a long-
term investment attitude that requires VC firms to wait for a long
period, say 5 to 10 years, to make appreciable profits.

3) Participation in Management: Venture financing ensures

continued participation of the venture capitalist in the management
of the business. This helps protect and enhance the investment
through active involvement and support to the business. More than
finance, the venture capitalist gives his marketing, technology,
planning and management skills to the new firm.

4) High degree of risk: Venture capital represents financial

investment in a highly risk project with the objective of earning a
high rate of return.
Benefits of Venture Capital Funds:

1) High-risk and High-return Financing: A typical characteristic of a

venture capitalist financing is that the focus of financing is innovation and
ideas which have potential for high growth but with inherent
uncertainties. This makes it a high-risk, high return investment.

2) Focus on New Ideas: In the global venture capital industry,

investors and investee firms work together in an enabling environment.
This allows entrepreneurs to focus on value creating ideas, and venture
capitalists in order to drive the industry through ownership control in
return for the provision of capital, skills, information and complementary
resources.

3) Economic Growth: Science, technology and knowledge based ideas,

properly supported by venture capital, can be propelled into a powerful
engine of economic growth and wealth creation in a sustainable manner.

The Venture Capital Funding Process

• A startup or high growth technology companies looking for venture

capital typically can expect the following process:

1) Submit Business Plan: The venture fund reviews an entrepreneur’s

business plan, and talks to the business if it meets the fund’s investment
criteria. Most funds think on an industry, geographic area, and/or stage
of development (e.g., Start-up, Early Expansion etc.)

2) Due Diligence: If the venture fund is interested in the prospective

investment, it performs due diligence on the small business, including
looking in great detail at the company’s management team, market,
products and services, operating history, corporate governance
documents, and financial statements.

3) Investment: If at the completion of due diligence the venture fund

remains interested, an investment is made in the company in exchange
for some of its equity and/or debt.

4) Execution with VC Support: Venture funds normally do not make

their entire investment in a company at once, but in “rounds.”

5) Exit: While venture funds have longer investment horizons than

traditional financing sources, they clearly expect to “exit” the company,
which is generally how they make money.
 UNIT-5

Study of Entrepreneur’s Biographies

Sabeer Bhatia

• Born - 30 December, Chandigarh

• Occupation - Entrepreneur
• Known for - Founded Hotmail

Kiran Muzumdar Shaw

• Born - 23 March, Bangalore
• Occupation - Chairperson of Biocon
• Awards - Othmer Gold Medal (2014)
She did her schooling at Bangalore. Her father
was brew master for India-based United
Breweries. She also planned to work as brew
master. After initiation education, she went to
Melbourne, Australia for higher studies in
brewing. Upon returning to India, she was not
permitted by companies to work for brewing
job to a woman.

Later on Kiran Mazumdar Shaw, founded bio-

pharma company – Biocon, which is now
globally recognized.
 Azim Premji
• Born - 24 July, Mumbai
• Occupation- Chairman of Wipro
• Awards - Padma Bhushan, Padma Vibhushan
• Net Worth – US $ 16.1 billion

Wipro, was originally a

manufacturer of vegetable and
refined oils in Jalgaon in
Maharashtra. Azim Premji took
charge at a young age of 21 and
converted vegetable oil
manufacturing organization to
largest software company in India.

Rahul Bajaj
• Born- 10 June, Maharashtra
• Occupation- Chairman of Bajaj Group
• Awards-Padma Bhushan (2001)
• Net Worth- US $ 2.4 billion.

• When Rahul Bajaj was born the Bajaj group of companies

was into commodities trading. Mr. Bajaj is recognized as
one of the most successful business leaders of India. Bajaj
group is a leader in a variety of manufacturing products &
financial services. Some of products are 2 / 3- wheelers,
home appliances, electric lamps, wind energy, cranes,
infrastructure development, material handling equipment,
consumer finance & asset management.