Entrepreneurship development programmes, Study notes of Business Ethics

Download Entrepreneurship development programmes and more Study notes Business Ethics in PDF only on Docsity! ENTREPRENEURSHIP DEVELOPMENT Common Course For B.Com / BBA IV SEMESTER BCM4A13 / BBA4A13 2019 Admission Onwards University of Calicut School of Distance Education 19608 School of Distance Education 2 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT SCHOOL OF DISTANCE EDUCATION Study Material COMMON COURSE IV SEMESTER – B.COM/BBA 2019 Admission Onwards BCM4A13 / BBA4A13 – ENTREPRENEURSHIP DEVELOPMENT Prepared by: Dr. Sudheesh S Assistant Professor on Contract School of Distance Education University of Calicut Scrutinized by: Dr. Lakshmanan M P Assistant Professor and Head PG Department of Commerce Govt: College, Chittur UNIVERSITY OF CALICUT School of Distance Education 5 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT Meaning and Definition of an Entrepreneur An entrepreneur is ordinarily called a businessman. He is a person who combines capital and labour for the purpose of production. He organizes and manages a business unit assuming the risk for profit. He is the artist of the business world. In the words of J.B. Say, “An entrepreneur is one who brings together the factors of production and combines them into a product”. He made a clear distinction between a capitalist and an entrepreneur. Capitalist is only a financier. Entrepreneur is the coordinator and organizer of a business enterprise. Joseph A Schumpeter defines an entrepreneur as “ one who innovates, raises money, assembles inputs and sets the organization going with the ability to identify them and opportunities, which others are not able to fulfil such economic opportunities”. He further said, “An entrepreneur is an innovator playing the role of a dynamic businessman adding material growth to economic development”. Characteristics of Entrepreneur An entrepreneur is a highly achievement oriented, enthusiastic and energetic individual. He is a business leader. He has the following characteristic: 1) An entrepreneur brings about change in the society. He is a catalyst of change. 2) Entrepreneur is action-oriented, highly motivated individual who takes risk to achieve goals. 3) Entrepreneur accepts responsibilities with enthusiasm and endurance. 4) Entrepreneur is thinker and doer, planner and worker. 5) Entrepreneur can foresee the future, seize market with a salesman’s persuasiveness, manipulate funds with financial talent and smell error, frauds and deficiencies with an auditor’s precisions. 6) Entrepreneur undertakes venture not for his personal gain alone but for the benefit of consumers, government and the society as well. 7) Entrepreneur builds new enterprises. He possesses intense level of determination and a desire to overcome hurdles and solves the problem and completes the job. 8) Entrepreneur finds the resources required to exploit opportunities. 9) Entrepreneur does extraordinary things as a function of vision, hard work, and passion. He challenges assumptions and breaks rules. 10) Although many people come up with great business ideas, most of them never act on their ideas. Classification of entrepreneur- Entrepreneurs may be classified in a number of ways. A. ON THE BASIS OF TYPE OF BUSINESS Entrepreneurs are classified into different types. They are 1) Business Entrepreneur: He is an individual who discovers an idea to start a business and then builds a business to give birth to his idea. 2) Trading Entrepreneur: He is an entrepreneur who undertakes trading activity i.e., buying and selling manufactured goods. School of Distance Education 6 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT 3) Industrial Entrepreneur: He is an entrepreneur who undertakes manufacturing activities. 4) Corporate Entrepreneur: He is a person who demonstrates his innovative skill in organizing and managing a corporate undertaking. 5) Agricultural Entrepreneur: They are entrepreneurs who undertake agricultural activities such as raising and marketing of crops, fertilizers and other imputs of agriculture. They are called agripreneurs. B. ON THE BASIS OF USE OF TECHNOLOGY: Entrepreneurs are of the following types. 1) Technical Entrepreneur: They are extremely task oriented. They are of craftsman type. They develop new and improved quality goods because of their craftsmanship. They concentrate more on production than on marketing. 2) Non-Technical Entrepreneur: These entrepreneurs are not concerned with the technical aspects of the product. They develop marketing techniques and distribution strategies to promote their business. Thus they concentrate more on marketing aspects. 3) Professional Entrepreneur: He is an entrepreneur who starts a business unit but does not carry on the business for long period. He sells out the running business and starts another venture. C. ON THE BASIS OF MOTIVATION: Entrepreneurs are of the following types: 1) Pure Entrepreneur: They believe in their own performance while undertaking business activities. They undertake business ventures for their personal satisfaction, status and ego. They are guided by the motive of profit. For example, Dhirubhai Ambani of Reliance Group. 2) Induced Entrepreneur: He is induced to take up an entrepreneurial activity with a view to avail some benefits from the government. These benefits are in the form of assistance, incentives, subsidies, concessions and infrastructures. 3) Motivated Entrepreneur: These entrepreneurs are motivated by the desire to make use of their technical and professional expertise and skills. They are motivated by the desire for self-fulfillment. 4) Spontaneous Entrepreneur: They are motivated by their desire for self-employment and to achieve or prove their excellence in job performance. They are natural entrepreneurs. D. ON THE BASIS OF STAGES OF DEVELOPMENT: They may be classified into; 1) First Generation Entrepreneur: He is one who starts an industrial unit by means of his own innovative ideas and skills. He is essentially an innovator. He is also called new entrepreneur. 2) Modern Entrepreneur: He is an entrepreneur who undertakes those ventures which suit the modern marketing needs. 3) Classical Entrepreneur: He is one who develops a self supporting venture for the satisfaction of customers’ needs. He is a stereo type or traditional entrepreneur. School of Distance Education 7 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT E. CLASSIFICATION ON THE BASIS OF ENTREPRENEURIAL ACTIVITY: They are classified as follows: 1) Novice: A novice is someone who has started his/her first entrepreneurial venture. 2) Serial Entrepreneur: A serial entrepreneur is someone who is devoted to one venture at a time but ultimately starts many. He repeatedly starts businesses and grows them to a sustainable size and then sells them off. 3) Portfolio Entrepreneurs: A portfolio entrepreneur starts and runs a number of businesses at the same time. It may be a strategy of spreading risk or it may be that the entrepreneur is simultaneously excited by a variety of opportunities. F. CLASSIFICATION BY CLARENCE DANHOF: Clarence Danhof, On the basis of American agriculture, classified entrepreneurs in the following categories: 1) Innovative Entrepreneurs: They are generally aggressive on experimentation and cleverly put attractive possibilities into practice. An innovative entrepreneur, introduces new goods, inaugurates new methods of production, discovers new markets and reorganizes the enterprise. Innovative entrepreneurs bring about a transformation in lifestyle and are always interested in introducing innovations. 2) Adoptive or Imitative Entrepreneurs: Imitative entrepreneurs do not innovate the changes themselves, they only imitate techniques and technology innovated by others. They copy and learn from the innovating entrepreneurs. While innovating entrepreneurs are creative, imitative entrepreneurs are adoptive. 3) Fabian Entrepreneurs: These entrepreneurs are traditionally bounded. They would be cautious. They neither introduce new changes nor adopt new methods innovated by others entrepreneurs. They are shy and lazy. They try to follow the footsteps of their predecessors. They follow old customs, traditions, sentiments etc. They take up new projects only when it is necessary to do so. 4) Drone Entrepreneurs: Drone entrepreneurs are those who refuse to adopt and use opportunities to make changes in production. They would not change the method of production already introduced. They follow the traditional method of production. They may even suffer losses but they are not ready to make changes in their existing production methods. There is another classification of entrepreneurs. According to this, entrepreneurs may be broadly classified into commercial entrepreneurs and social entrepreneurs. Commercial Entrepreneurs: They are those entrepreneurs who start business enterprises for their personal gain. They undertake business ventures for the purpose of generating sales and profits. Most of the entrepreneurs belong to this category. Social Entrepreneurs: They are those who identify, evaluate and exploit opportunities that create social values and not personal wealth. Social values refer to the basic long standing needs of society. They focus on the disadvantaged sections of the society. They play the role of change agents in the society. In short, social entrepreneurs are those who start ventures not for making profits but for providing social welfare. School of Distance Education 10 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT 2) Managing production. 4. Technology: 1) Acquiring and overseeing assembly of the factory. 2) Industrial engineering. 3) Upgrading process and product quality. 4) Introducing new products. According to Arther H. Cole, an entrepreneur performs the following functions: 1) Determining the objectives of the enterprise and revising the objectives in the light of changed circumstances. 2) Developing an organization including efficient relations with subordinates and all employees. 3) Securing adequate finance. 4) The requisition of efficient technological equipment. 5) Developing a market for the products and devising new products to meet customers demand. 6) Maintaining good relations with public authorities and with society. Role of Entrepreneurs in the Economic Development 1. Employment opportunities: Entrepreneurs employ labour for managing their business activities and provides employment opportunities to a large number of people. They remove unemployment problem. 2. Balanced Regional Development: Government promotes decentralized development of industries as most of the incentives are granted for establishing industries in backward and rural areas. Thus, the entrepreneurs to avail the benefits establish industries in backward and rural areas They remove regional disparities and bring balanced regional development. They also help to reduce the problems of congestion, slums, sanitation and pollution in cities by providing employment and income to people living in rural areas. They help in improving the standard of living of the people residing in suburban and rural areas. 3. Mobilization of Local Resources: Entrepreneurs help to mobilize and utilize local resources like small savings and talents of relatives and friends, which might otherwise remain idle and unutilized. Thus they help in effective utilization of resources. 4. Optimization of Capital: Entrepreneurs aim to get quick return on investment. They act as a stabilizing force by providing high output capital ratio as well as high employment capital ratio. 5. Promotion of Exports: Entrepreneurs reduce the pressure on the country’s balance of payments by exporting their goods they earn valuable foreign exchange through exports. 6. Consumer Demands: Entrepreneurs produce a wide range of products required by consumers. They meet the demand of the consumers without creating a shortage for goods. 7. Social Advantage: Entrepreneurs help in the development of the society by providing employment to people and paves for independent living. They encourage democracy and self-governance. They are adept in distributing national income in more efficient and equitable manner among the various participants of the society. School of Distance Education 11 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT 8. Increase Per Capita Income: Entrepreneurs help to increase the per capita income of the country in various ways and facilitate development of backward areas and weaker sections of the society. 9. Capital formation: A country can attain economic development only when there is more amount of investment and production. Entrepreneurs help in channelizing their savings and savings of the public to productive resources by establishing enterprises. They promote capital formation by channelizing the savings of public to productive resources. 10. Growth of capital market: Entrepreneurs raises money for running their business through shares and debentures. Trading of shares and debentures by the public with the help of financial services sector leads to capital market growth. 11. Growth of infrastructure: The infrastructure development of any country determines the economic development of a country, Entrepreneurs by establishing their enterprises in rural and backward areas influence the government to develop the infrastructure of those areas. 12. Development of Trader: Entrepreneurs play an important role in the promotion of domestic trade and foreign trade. They avail assistance from various financial institutions in the form of cash credit, trade credit, overdraft, short term loans, secured loans and unsecured loans and lead to the development of the trade in the country. 13. Economic Integration: Entrepreneur reduces the concentration of power in a few hands by creating employment opportunities and through equitable distribution of income. Entrepreneurs promote economic integration in the country by adopting certain economic policies and laws framed by the government. They help in removing the disparity between the rich and the poor by adopting the rules and regulation framed by the government for the effective functioning of business in the country. 14. Inflow of Foreign Capital: Entrepreneurs help to attract funds from individuals and institutions residing in foreign countries for their businesses. Factor Affecting Entrepreneurial Growth There are various impediments in the growth of entrepreneurship development, like lack of viable concept, lack of market familiarity, lack of Technical skill, lack of business knowledge, lack of seed capital, lack of self satisfaction, and motivations, social evils, lack of jobs, pressures of time and attention towards other sides, legal obstacles, monopoly, etc., In India, various efforts have been made, after independence for entrepreneurship development, both at Government and non-government levels, which includes industrial policy, commercial policy, Licensing Policy, Globalisation, and simplification, etc., Following are the key factors affecting entrepreneurship growth in India: 1. Economic Factors: The economic factors effecting the growth of entrepreneurs in under developed countries are- i. Non-Availability of Capital: To expand the business and grow in future research and development has to be conducted. To conduct a research either equipments have to be purchased or get exported from other developed countries, for this huge capital is required. Thus the non-availability of huge capital effects the growth of entrepreneurship in the country. School of Distance Education 12 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT ii. Non-Availability of Quality Raw Materials and Finished Goods: Since there is less availability of raw materials throughout the year, they have to be purchased in large quantity and stored during the period of its availability. To purchase heavy quality raw materials, capital has to be borrowed which involves heavy rate of interest. This effects the entrepreneurial growth. iii. Lack of Adequate Basic Facilities: Certain basic facilities such as power facilities, irrigational facilities, latest technology, transport and communication etc., are required for undertaking innovative activities which help in providing increased output and reduce the cost of production. But in under developed country like ours there is in-adequate availability of these basic facilities. The entrepreneur have to get these facilities by themselves where heavy costs have to be beared. Thus again these factors causes hindrance in the growth of entrepreneurs. iv. Greater risk involved in the business: a. Due to seasonal fluctuations of demand there is instability in the market. b. Instability in domestic and foreign economic policies. c. An entrepreneur cannot make correct estimates for his proposed venture as there is lack of correct information, overhead facilities, market demand etc., Since lot of risks are involved the growth of entrepreneurship is affected. v. Non-Availability of Skilled Labours: As there are non-availability of skilled labours and no proper training facilities available, the entrepreneurs find it difficult to progress with these unskilled labours. 2. Social Factors: Some of the social factors include- i. Social System: The social system existing in the locality effect the growth of entrepreneurship in the country. If there is a joint family then one member of the family will not share his wealth with the other member of the family. Thus entrepreneurship cannot be developed. ii. Customs and Traditions: In few cases customs and traditions play a dominant role in the production decisions rather than critically assessing the facts. iii. Social Set-Up: In some societies very less importance in provided towards education, training, research etc., and more importance is given towards caste considerations. Thus no entrepreneurs can emerge from such societies who have great aptitude and skills. iv. Rationality of the Society: In under developed countries most of the societies are non- rational societies which is not suitable for the entrepreneurial growth. 3. Personality Factors: In under developed countries, the entrepreneurs are looked up as a profit makers and exploiters of the resources and people. Thus causing a problem for the growth of entrepreneurs. School of Distance Education 15 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT Independence a good deal of attention has been given to spread of literacy, increasing employment through industrial development and improving health and quality of life of women in the country. Women entrepreneurs may be defined as the woman or a group of women who initiate, organize and operate a business enterprise. Any women or group of women which innovates, initiates or adapts an economic activity may be called women entrepreneurship. Scope of Women Entrepreneurship In rural areas where agriculture is the prominent activity, agro--based industries like food preservation, bakery, dairy, poultry can be taken up by women. They have been helping men in all these activities without getting any credit or money with a little training they could do it on their own in a business like manner. In areas where forests predominate, forest preservation, collection, assortment and classification of medical plants too can be done by them. In districts where industries are located, spare parts and ancillary units can be managed by women. Apart from traditional industry, women should also be encouraged in mechanical and electrical activities. They can be trained in maintenance and repairs of all small machineries and they can be encouraged to start small workshops. Technical institutes can train girls and encourage them towards self-employment. In urban parts, apart from teaching, nursing and other traditional occupations, there are many new areas where women can start on their own. With modern technological revolution, the field is vast and open, Electronics, computer services, information and consultancy services, advertising and publicity are some of the areas that women entrepreneurs can explore. What they need is training, finance and the cooperation and encouragement from the family, the society and the governmental organisations. That will enable women entrepreneurs to enter the mainstream of the country’s economy, which in turn will speed up the economic development of our country. Recent Developments in Women Entrepreneurship (Empowerment) Women empowerment should be one of the primary goals of a society. Women should be given equality, right of decision-making and entitlements in terms of dignity. They should attain economic independence. The most important step to achieve women empowerment is to create awareness among women themselves. Development of women can be achieved through health, education and economic independence. Realizing the importance of women entrepreneurs, Govt. of India has taken a number of measures to assist them. Some of the important measures are outlined as follows: 1. TRYSEM: Training of Rural Youth for Self Employment was launched on 15th August 1979 which is still continuing. The objective of TRYSEM is to provide technical skills to rural youth between 18 and 35 years of age from families below the poverty line to enable them to take up self employment in agriculture and allied activities, industries, services and business activities. This is a sub scheme of IRDP. Training given through ITIs, Polytechnics, Krishi Vigyan Kendra, Nehru Yuva Kendras etc has helped many rural women set up their own micro entreprises with IRDP assistance. 2. BANKS: Banks particularly commercial banks have formulated several schemes to benefit women entrepreneurs. These includes Rural Entrepreneurship Development Programmes School of Distance Education 16 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT and other Training programmes, promotion of rural non-farm enterprise, women ventures etc. 3. NABARD: NABARD as an apex institution guides and assists commercial banks in paying special attention to women beneficiaries while financing. It has also been providing refinance to commercial banks so as to help the latter institutions to supplement their resources which could be deployed for the purpose of financing women beneficiaries. 4. INDUSTRIAL POLICY: The new Industrial policy of Government has specially highlighted the need for conducting special entrepreneurship programme for women. 5. INSTITUTIONS AND VOLUNTARY ASSOCIATION: Several voluntary agencies like FICCI Ladies Organization (FLO), National Alliance of Young Entrepreneurs (NAYE) and others assist women entrepreneurs. NAYE has been a leading institution engaged in the promotion and development of entrepreneurship among women. It convened a conference of women entrepreneurs in November 1975. It assists the women entrepreneurs in: (a) Getting better access to capital, infrastructure and markets. (b) Identifying investment opportunities. (c) Developing managerial and productive capabilities. (d) Attending to problems by taking up individual cases with appropriate authorities. (e) Sponsoring participation in trade fairs, exhibitions, special conference etc. 6. NATIONAL POLICY FOR THE EMPOWERMENT OF WOMEN, 2001: As to the commitments made by India during the Fourth World Conference on women held in Beijing during September, 1995, the Department of women and children has drafted a national policy for the empowerment of women. This is meant to enhance the status of women in all walks of life at par with men. Assistance to Women Entrepreneurs Entrepreneurship does not differentiate the sex. A number of facilities and assistance are offered to the entrepreneurs. However, certain additional incentives or facilities offered to women entrepreneurs are discussed as follows. 1. SMALL INDUSTRIAL DEVELOPMENT ORGANISATION (SIDO): SIDO through a network of SISIs conduct the EDPs exclusively for women entrepreneurs. The aim is to develop entrepreneurial traits and qualities among women and enable them to identify entrepreneurial opportunities etc. 2. NATIONAL SMALL INDUSTRIES CORPORATION (NSIC): The H.P. scheme of NSIC provides preferential treatment to women entrepreneurs. It also conducts Entrepreneurs and Enterprise Building programmes for women. 3. INDUSTRIAL DEVELOPMENT BANK OF INDIA (IDBI) : The schemes of IDBI for women entrepreneurs are summarized as follows: School of Distance Education 17 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT Promoter’s Contribution: The IDBI set up the Mahila Udyan Nidhi (MUN) and Mahila Vikas Nidhi (MVN) schemes to help women entrepreneurs. IDBI conduct programmes of training and extension services through designated approved agencies and association with other development agencies like EDII, TCOs, KVIC etc. 4. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA (SIDBI): SIDBI has special schemes for financial assistance to women entrepreneurs. It provides training and extension services. It gives financial assistance at concessional terms in setting up tiny and small units. 5. COMMERCIAL BANKS: The “Sthree Shakthi Package Scheme” of SBI provides a package of assistance to women entrepreneurs. The consultancy wings of SBI give guidance on project identification and project viability. The program of assistance such as repair and servicing, photo copying, dry cleaning, retail trade business enterprises, poultry farming, tailoring etc. The Bank Of India has introduced a scheme known as ‘Priyadarshini Yojana’ to help women entrepreneurs. 6. KUDUMBASREE UNITS: With the objectives of poverty eradication and women empowerment Kudumbasree has been introduced in Kerala. The poor women are organised into community- based organisations. They start and operate micro enterprise. They earn income through self-employment. Problems of Women Entrepreneurs The basic problem of a woman entrepreneur is that she is a woman. Women entrepreneurs face two sets of problems specific to women entrepreneurs. These are summarized as follows. 1) Shortage of Finance: Women and small entrepreneurs always suffer from inadequate fixed and working capital. Owing to lack of confidence in women’s ability, male members in the family do not like to risk their capital in ventures run by women. Banks have also taken negative attitude while lending to women entrepreneurs. Thus women entrepreneurs rely often on personal saving and loans from family and friends. 2) Shortage of Raw Material: Women entrepreneurs find it difficult to procure material and other necessary inputs. The prices of many raw materials are quite high. 3) Inadequate Marketing Facilities: Most of the women entrepreneurs depend on intermediaries for marketing their products. It is very difficult for the women entrepreneurs to explore the market and to make their product popular. For women, market is a ‘chakravyuh’. 4) Keen Competition: Women entrepreneurs face tough competition from male entrepreneurs and also from organized industries. They cannot afford to spend large sums of advertisement. 5) High Cost of Production: High prices of material, low productivity. Under utilisation of capacity etc. account for high cost of production. The government assistance and subsidies would not be sufficient for the survival. 6) Family Responsibilities: Management of family may be more complicated than the management of the business. Hence she cannot put her full involvement in the business. Occupational backgrounds of the family and education level of husband has a direct impact on the development of women entrepreneurship. School of Distance Education 20 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT 3. Ensure Industrialisation A country is said to be advanced if there is an existence of adequate industrial units of big and small in size. The existing entrepreneurship development programmes create a congenial atmosphere for the aspiring and young entrepreneurs to come forward to set up industrial units especially in the industrially backward regions. 4. Innovation is the gateway Innovation takes place in all fields activities. The application of computers enable businessmen and Government to expedite their business activities. Marked improvement has been taken place in the filed of communication due to the application of innovative technology. 5. Allow Global Market Entry Entrepreneurship’ development enables the manufactures to manufacture products of international quality and thereby try to enter into the global market and compete with the products of other nations. Pre-requisites for Entrepreneurship Development Development does not mean the setting up of large scale industrial units. The settings up of a small scale industrial unit also play an equivalent role in the economic development. 1. Incubator Facilities ‘Incubators’ have been used in U.S.A. to develop entrepreneurs for small scale industries. It enables them to I translate their laboratory research into commercial products and thereby help consumers to enjoy the benefits of the recently found technology. Venture capital financing firms in these days come forward to provide incubator facilities to the entrepreneurs. These firms select viable projects and extend not only their financial. Assistance’ but also their managerial and marketing experiences so as to enable them to stand on their own legs. 2. Linkage of Research and Development Entrepreneurship development depends upon a perfect linkage between the entrepreneurs and Research and Development institutions. The very objective of setting up of Science Park is to enable the entrepreneurs’ to acquaint themselves with the latest research developments. It helps them to establish suitable small: scale industries and thereby improve the economic standard. 3. Cultural Behaviours The existing cultural value is such that entrepreneurs find it: difficult to change the living style of the people. There is a wide gap between the educated and the uneducated, rural masses and urban masses, indigeneous method of production and industrial; method of production and the like. Because of these variation the: entrepreneurship development is said to be sluggish. 4. Cumbersome Formalities Entrepreneurial growth is affected by:  Strict Government’s control on prices.  Foreign competition.  Poor infrastructure.  Inadequate training facilities including education and  Cumbersome formalities to be fulfilled at the time of setting up of industrial units. School of Distance Education 21 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT Besides there is no adequate investment for training, ambiguity in the entrepreneurship development programmes and entrepreneurial information system. 5. Other Obstacles  Inadequate marketing information.  Frequent change of Government and its economic policies.  Inadequate monetary incentives that commensurate with the risks.  Absence of data bank. Phases or Process of EDP It starts from identifying the potential and right candidates, linkage suitable project with each one, training and developing the managerial and entrepreneurial capabilities, counselling and motivating the entrepreneur and providing the required follow-up support to help the entrepreneurs in establishing venture. The task of developing entrepreneurs consists of the following activities:  Identifying and carefully selecting those who could be trained as entrepreneurs.  Developing their entrepreneurial capabilities  Ensuring that each potential entrepreneur has a viable industrial project  Equipping the entrepreneurs with basic managerial understanding.  Helping them to secure necessary financial, infrastructural and other assistance so that an industrial venture materialises within the shortest possible time. Need for identification India is a vast country with abundant natural resources. Poverty and unemployment prevail in India because of underutilisation of natural and human resources. The government is aiming at full employment and faster economic growth through planned five year plans. It also wants to bring a balanced socio-economic development. The Govt. formulates new schemes and. projects on continuous basis such as Prime Ministers Rozkar Yojana etc. Which involves investments of thousands of Crores of Rupees and then go for the competent takers of the scheme? The need for a broad-based entrepreneurial class in India arises from the need to speed up. the process of activating the factors of production, leading to a higher rate of economic growth, dispersal of economic activities, development of backward and tribal areas, creation of employment opportunities, Improvement in the standard of living of the weaker sections of the society etc. Besides that, many employees in industry and commerce, workers, supervisors, merchants and salesmen and number of young engineers and graduates had latent entrepreneurial skills and a desire or capacity to be self-employed. Many lacked self-confidence to come forward for their own ventures. So, developing a programme to identify these people and give them counselling and continuous training will help to generate successful entrepreneurs in a large scale. School of Distance Education 22 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT Identification & Selection The inputs of identification and selection must be appropriately and comprehensively blended as per the requirement and needs of the locality and the objectives set by the collaborating agencies for entrepreneurial development programme. An integrated approach of entrepreneurial identification and selection involves. several functions at different stages. Stage 1  Contacts with local agencies  Defining the target area, resource and Clientile etc.,  Development of application bank and media planning. Stage 2  Written Test  Group Test  Interview Stage 3: Training design and its stratification. This multi-stage identification process helps to discriminate the potential person from the universe against the non-potential candidates at different stages. The total activities to be adopted under this integrated approach are given below: Stage 1 1. Definition of target area-who will be the potential entrepreneur? what are their background education, level of income etc? 2. Study of predominant skills - what are technical background, tradi-tional skills of people, and inherited professional occupation etc? 3. Studying Existing Resources - what kind or raw materials, institutional support and infrastructure support are available in that region? Can they really facilitate the subsequent training and follow up entrepreneurs in the particular state or region? 4. Study of potential demand – what are the consumer demands and what people really need to purchase, export or import, what is the marketability of the product within or outside the locality? Stage 2 1. Structuring application blank and releasing advertisement for the programme. 2. Developing appropriate text and media mix, leaflets, posters etc. for growing awareness and interest in the target group. 3. Exploring further linkage to foster the identification process at the local level Stage 3 1. Strengthen the linkage agencies to enable them effectively guage pre-programme operation. 2. Involve the local collaborating institution in the pre programme operation. 3. If possible, obtain their commitment on critical issues of support, viz., on finance, raw material, land etc. 4. Finalise the selection tools and techniques. School of Distance Education 25 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT 4. Business Management Guidance The small-scale entrepreneur has to be a manager since he cannot employ specialists to look after the multiple business decision of sales, finance, purchase, personnel etc. It is essential for better performance, the new (trainee) entrepreneur emerging from the ranks employees and fresh graduates usually possess familiarity and experience in only onearea, either of production, sales or supervision. The syllabus has been developed in consultation with operating entrepreneurs, trade and industry experts and past trainees. It aims at enabling the participants to look at an enterprise in totality and introduces them to the elements of planning, budgeting and control as aids to good management. Knowledge of problem-solving through group discussions, syndicate presentation, case studies and business games may be given due emphasis on the syllabus. Business inputs are given through specialists in different subjects drawn from professionals, business and industry executives, experts of State Industrial Corporations and small-scale entrepreneurs. 5. Practical Training and Work Experience Field trips to selected industrial units are arranged to expose trainees to the operational conditions. For those lacking in industrial experience, a six hours day in-plant training is arranged in relevant operating factories as long as required. A well-equipped Technical Training Workshop has to be set up by the Corporations which develops industrial skills among fresh trainees and offers product development opportunities. 6. Validation of Training Inputs Tests of comparative performance of trained entrepreneurs under the programme who set up industries versus those who were rejected in the selection tests for the training but who nevertheless set up industrial units, validated the inputs package. Follow-Up The success of any entrepreneurial development programme lies on the follow-up measures and continuous monitoring of the training institutions and agencies. Follow-up may “be taken on all the three stages, viz., Pre-training, training and post-training stages of entrepreneurship development programme. Pre-training follow-up measures consists of evaluation of training infra-structure training, syllabus and entire training schedule etc. Similarly, the post-training follow up measures have to be taken mainly for the purpose of helping the entrepreneurs to achieve technical, managerial, marketing and financial assistance from various supporting agencies without much difficulties. The follow-up process normally consists of the following activities.  Preparation of history cards for each trainee with the details of bio-data, performance on the tests and interviews, traits before and after the training a keeping in touch with each entrepreneur who have undergone EDP. -  Regular system of reporting should be developed to get feedback on the performance of entrepreneurs. School of Distance Education 26 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT  Project leaders have to contact the entrepreneurs by personal visits periodically.  Convening follow-up meeting and maintaining follow-up records-will ensure success of the entrepreneurial development programmes.  Continuous assessment of the impact of all developmental activities undertaken by the agencies based on certain criteria’s. They may be activity level of respondents, new business or activity started, Fixed Capital investment made, Total investments made, number of people employed, number of jobs created, mean increase in profits, diversification, quicker repayment of loan, improvement in the quality of products etc. School of Distance Education 27 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT Module II Institutional Support and Incentives to Entrepreneurs Introduction Entrepreneurs need some support from outside agencies supporting project preparation and evaluation. Similarly support is needed for technological upgradation of the entrepreneurial venture. Entrepreneurs need money for initial investment in their business. After doing business for few years, entrepreneurs will try to expand their business or diversify their business. Expansion or diversification needs substantial investment. Investment support facilities must be made available to them for expansion and diversification of their business. Hence, financial support system is needed to the entrepreneurs. Entrepreneurs in the normal situation do not aware of the management techniques. They need managerial support to run their business efficiently and successfully. Entrepreneurship Development Institute, Management Institute, Financial Institutions and Academic Institutions provide managerial support to the small scale industries. Marketing is the nucleus of any business enterprise. Large scale enterprises have enough money to spend for advertisement and sales promotional activities for marketing their products and to increase their market share in the days to come. They have brand value also. Whereas, SSIs are not in a position to compete with them and hence they require market support system. Thus, Financial, Marketing, Managerial and technological support are needed to SSIs not only for industrial development but also overall economic development of our country. In order to accelerate the small industries development, Government at the Central and State levels have set up a number of development agencies/ institutions. All India Financial Institutions - IDBI, IFCI, ICICI - have promoted / sponsored a number of technical Consultancy Organisations (TCOs) to assist small entrepreneurs in different ways. Recently, the small Industries Development Bank of India (SIDBI) has been established to help small scale units. In addition to these institutions there are agencies like National Science and Technology Entrepreneurship Board, Khadi and Village Industries Commission, Commercial Banks, Exim Bank and Co-operative Banks who undertake Promotional activities aiming at facilitating industrial development. A brief description about various institutions which are rendering support for promoting entrepreneurship is given below. Institutional Support To strengthen the marketing efforts of SSIs. Government has ex-tended various types of assistances such as market research survey studies, dissemination of information relating to market and various marketing aspects, sub contracts exchange, quality marketing scheme, ancillary pro-motion, publicity, exhibitions, trade fairs, displays, training programmes, seminars, open house discussions, buyer seller meets, marketing consul-tancy services, trade centres and export marketing assistance. There are some institutions (Central and States) and schemes to extend marketing support to the small scale enterprises. Marketing support is the felt need of the hour to the small scale School of Distance Education 30 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT Functions of District Industries Centre (DIC): i) Acts as the focal point of the industrialization of the district. ii) Prepares the industrial profile of the district with respect to: iii) Statistics and information about existing industrial units in the district in the large, medium, small as well as co-operative sectors. iv) Opportunity guidance to entrepreneurs. v) Compilation of information about local sources of raw materials and their availability. vi) Manpower assessment with respect to skilled, semi-skilled workers. vii) Assessment of availability of infrastructure facilities like quality testing, research and development, transport, prototype development, warehouse etc. viii) Organizes entrepreneurship development training programs. ix) Provides information about various government schemes, subsidies, grants and assistance available from the other corporations set up for promotion of industries. x) Gives SSI registration. xi) Prepares techno-economic feasibility report. xii) Advices the entrepreneurs on investments. xiii) Acts as a link between the entrepreneurs and the lead bank of the district. xiv) Implements government sponsored schemes for educated unemployed people like PMRY scheme, Jawahar Rojgar Yojana, etc. xv) Helps entrepreneurs in obtaining licenses from the Electricity Board, Water Supply Board, No Objection Certificates etc. xvi) Assist the entrepreneur to procure imported machinery and raw materials. xvii) Organizes marketing outlets in liaison with other government agencies. Small Industrial Development Corporation (SIDCO) SIDCO, a Government owned Public Sector Corporation, was established in November 1975 for the development and promotion for Small Scale Industries in Kerala. God’s own Country, Kerala, is gifted with abundant natural resources essential for establishing Industrial Units and SIDCO is taking the initiative to set up industrial units. Kerala SIDCO as a ‘Total Solution Provider’ for Small Scale Sector offers all facilities and assistance to set up Small Scale Units across Kerala. The corporation is rendering valuable assistance to the industrial sector in the State, including Consultancy Services at the beginning of the project to the Identification of Industrial Site, Commissioning of project, Providing infrastructure facilities, Distribution of essential raw materials, Marketing of the MSME Products, Undertaking civil and electrical works etc. Kerala SIDCO competently handles the necessary requisites of any project. Kerala SIDCO is now in the path of profit and is now granting basic facilities and marketing security to the industrialists and new entrepreneurs through its diversified activities and new working style. Currently, SIDCO is expanding its area of works by diversification to give new vision to MSME sector in Kerala. School of Distance Education 31 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT SIDCO is a fully owned Government Corporation with its registered office at Trivandrum. SIDCO owns and operates production units, raw materials depots, Industrial Estates/ Mini Industrial Estates/Industrial Parks, marketing cell/emporia/centres, Civil Construction Division, IT&TC Division etc. Kerala SIDCO has been distinguished as No.1 SIDCO among South Indian SIDCO’s during 2010-2011 in the wake of the achievement of an unprecedented turnover. Add to its credential, Government of Kerala recognized the IT&TC Division of Kerala SIDCO as a Total Solution Provider to Government of Kerala. SIDCO is playing a vital role for the promotion of Small Micro and Medium Industries in the State that provides more than 10000 direct employment opportunities and over 20,000 indirect employment opportunities, its activities to lift this sector is very vital from social and economic view point. Activities of Small Industrial Development Corporation (SIDCO) The major activities of SIDCO are under the following divisions.  Raw Material division: SIDCO Raw Material Division is engaged in the distribution of various industrial raw materials to the small scale industries sector in Kerala. It also distributes iron and steel materials to Public Sector Undertakings in Kerala according to their requirements.  Production division: Now 8 Production units and a Tool Room (TRTC) are functioning under Kerala SIDCO in various districts of the State. Government Departments, Public Sector Undertakings and Autonomous Bodies are free to purchase all types of furniture and other equipments produced in these units, without observing usual tender formalities.  Marketing division: Provides assistance to SSI units for marketing their products. There are opportunities for export of the products of Kerala's SSI sector, Village Industries Sector etc., The Marketing Division is now having 7 Sales Emporia and 7 Marketing Centres at various districts of Kerala. The SSI units registered with SIDCO exhibit their products in the emporia for which SIDCO is not charging any fee. The Government of Kerala appointed Kerala SIDCO as sole channelizing Agent for procurement and supply of 20 products. Details of Sales Emporia and Marketing Centres listed separately.  Construction division: The main functions of this Division is to undertake construction and maintenance work of sheds in Industrial Estates, Industrial Development Plots, providing infrastructure facilities for Industrial Growth Centres, setting up of Industrial Parks etc. In addition to these it undertakes civil works entrusted by the Industries Department, Public Sector Undertaking and Other autonomous bodies and Grama Panchayaths on centage basis.  Industrial Infrastructure division: Kerala SIDCO owns 17 Conventional Industrial Estates and 36 Mini Industrial Estates which are functioning in different Districts of Kerala. There are 920 factory sheds in which more than 750 SSI units are functioning. The above said factory sheds were allotted on Lease basis, Hire Purchase basis and Out Right Purchase basis. A very few sheds are vacant for allotment preferably on Out Right Purchase basis. In addition to these factory sheds, Industrial Plots are being allotted to the entrepreneurs in Industrial Estates, Mini Industrial Estates and Industrial Parks for constructing factory sheds of their own design to run industrial units. School of Distance Education 32 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT Considering the importance of Small Scale Industries, as part of Government Policy, the scheme for setting up of One Industrial Park in each of the 140 Assembly Constituencies of the State is being implemented by SIDCO.  Information Technology and Telecommunication Division: SIDCO IT&T Division is providing software and hardware solutions to Central and State Government departments, Central and State Public Sector Undertakings, Local Self Government Bodies, Autonomous Institutions and SSI units. The areas identified for business are a) Development & maintenance of software solutions & website development b) IT & Telecom products & Services c) Hardware products & Services d) Office Automation products & services e) Spares and other consumables Kerala SIDCO Ltd IT &T Division supplies Hardware (servers, Laptops, Desktops & computer peripherals) Software solutions, Telecom products, Office automation products Annual Maintenance contract, Third Party maintenance contract and repair and Maintenance Contract. Kerala SIDCO Ltd has empanelled accredited IT & Telecomm firms to execute projects undertaken. We are fully equipped to execute any IT & Telecom implementation as per Government Guidelines. Through our business partners we are capable of providing any solution which the clients demand and with the wide repertoire of qualified service personnel we can provide on call support for all our future clients located through the length and breadth of the State. National Small Industries Corporation (NSIC) National Small Industries Corporation (NSIC), is an ISO 9001:2015 certified Government of India Enterprise under Ministry of Micro, Small and Medium Enterprises (MSME). NSIC has been working to promote, aid and foster the growth of micro, small and medium enterprises in the country. NSIC operates through countrywide network of offices and Technical Centres in the Country. In addition, NSIC has set up Training cum Incubation Centre managed by professional manpower. Mission: “To promote and support Micro, Small & Medium Enterprises (MSMEs) Sector” by providing integrated support services encompassing Marketing, Technology, Finance and other services. Vision: “To be a premier Organization fostering the growth of Micro, Small and Medium Enterprises (MSMEs) Sector”. Functions of National Small Industries Corporation (NSIC) 1) Provide machinery on hire-purchase schemes to small scale industries. 2) Provide equipment leasing facility. 3) Help in export marketing of the products of small-scale industries. 4) Participate in bulk purchase programme of the Government. 5) Develop prototype of machines and equipments to pass on to small-scale industries for commercial production. 6) Distribute basic raw material among small-scale industries through raw material depots. School of Distance Education 35 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT Small Industries Service Institute (SISI) At the heart of all agencies dealing with development of small industry is small industries development organization, SIDO. It was originally known as central small industries organization (CSIO). Attached to the ministry, SIDO administers small industries service institute (SISI’s). The small industries service institutes (SISI’s) are set-up one in each state to provide consultancy and training to small and prospective entrepreneurs. The activities of SISs are co-ordinate by the industrial management training division of the DC, SSI office (New Delhi). In all there are 28 SISI’s and 30 Branch SISI’s set up in state capitals and other places all over the country. SISI has wide spectrum of technological, management and administrative tasks to perform. Functions of SISI 1. To assist existing and prospective entrepreneurs through technical and managerial counseling such as help in selecting the appropriate machinery and equipment, adoption of recognized standards of testing, quality performance etc., 2. Conducting EDPs all over the country; 3. To advise the Central and State governments on policy matters relating to small industry development; 4. To assist in testing of raw materials and products of SSIs, their inspection and quality control; 5. To provide market information to the SISI’s; 6. To recommend SSI’s for financial assistance from financial institutions; 7. To enlist entrepreneurs for partition in Government stores purchase programme; 8. Conduct economic and technical surveys and prepare techno-economic feasible reports for selected areas and industries. 9. Identify the potential for ancillary development through subcontract exchanges; 10. Organize seminars, Workshops and Industries Clinics for the benefit of entrepreneurs. Activities of SISI 1) The Small Industries Service Institutes have been generally organizing the following types of EDPs on specialized courses for different target groups like energy conservation, pollution control, Technology up-gradation, Quality improvement, Material handling, Management technique etc. as mentioned earlier. 2) General EDP for educated unemployed youth, ex-service personnel etc. for a duration of four weeks. 3) In these programmes, classroom lectures and discussions are held on issues such as facilities and assistance available from State and Central government agencies, banks, financial institutions and National Small Industries Corporation. 4) Apart from this, exposure is given information regarding market survey, product identification and selection, technologies involved, management of small enterprises, particularly in matters relating to financial management, marketing, packaging and exports. 5) The participants also interact with successful small scale entrepreneurs as a part of their School of Distance Education 36 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT experience sharing Information of quality; possibilities of diversification and expansion are also given. 6) The entrepreneurs are helped to prepare Project Reports based on their own observations and studies for obtaining financial assistance as may be required. 7) Such courses have benefitted many entrepreneurs to set up units of their own choice. Kerala Industrial Technical Consultancy Organisation (KITCO) KITCO, the first Technical Consultancy Organisation (TCO) in India, was established in 1972 by Industrial Development Bank of India, other national and state level financial institutions, Govt. of Kerala and 7 Public Sector Banks for rendering services to Entrepreneurs, Govt. Departments/PSUs, Local Bodies, etc. Presently, Small Industries Development Bank of India (SIDBI) is the prime shareholder with 49.77% shares of the company. Functions and services of Kerala Industrial Technical Consultancy Organisation (KITCO)  The aim of setting up of TCO, which had the blessing of Govt. of India and the Reserve Bank of India, was to provide professional technical consultancy assistance to banks by appraisal of projects for priority sector lending and to entrepreneurs in the SME Sector by way of preparation of Project Reports & Market Studies and conducting training programmes for entrepreneurship development. Subsequently similar TCOs were set up in almost all the states with one of the National Financial Institutions (IDBI, IFCI or ICICI) as the prime shareholder.  Over the years, in line with the dynamic nature of its clients’ requirements, KITCO has evolved into a multi-functional and multi-disciplinary organization offering a wide range of services to the industrial and infrastructure sector and to a wider spectrum of clientele including those outside the geographic bounds of Kerala.  The diversification enabled KITCO to offer consultancy services for implementation of projects under one roof from “Concept to Commissioning” and obtain a stamp of approval from clients in other areas like Operation & Maintenance, Energy Audits, Asset Valuation, Skill Certification, Placement Services, etc.  The major services offered by KITCO are Project Consultancy, Detailed Engineering & Project Execution, Technical Services, Environmental Engineering and HRD Consultancy. During the past 40 years, KITCO has extended consultancy services to a wide range of clientele, mainly public sector undertakings and various Departments of Govt. of India & Govt. of Kerala.  KITCO has implemented more than 600 projects of varying magnitude across sectors like Airports, Office & Commercial Buildings, Institutional Buildings, Tourism, Industrial Parks/SEZs, Roads & Bridges, Industrial Plants, Water Supply Systems, Effluent Treatment Plants, etc., and prepared more than 3500 Feasibility Reports/Bankable Project Reports/Detailed Project Reports/Study Reports.  KITCO has been successfully providing the Operation & Maintenance services for two leading SEZs in the country – Cochin Special Economic Zone at Kochi and MEPZ SEZ at Tambaram.  KITCO has trained more than 80,000 entrepreneurs through Entrepreneurship Development Programmes in various sectors. School of Distance Education 37 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT  KITCO has been accredited as the Assessing Body under Skill Development Initiative (SDI) scheme of Ministry of Labour & Employment, Govt. of India and so far assessed more than 60,000 candidates from various State and Union Territories.  KITCO has successfully implemented projects like Cochin International Airport Ltd., Titanium Sponge Project, International Marina, Cochin Special Economic Zone, etc and presently implementing a multimodal Mobility Hub at Cochin, all of which are first of its kind in the country in their own respect.  KITCO has successfully completed the Phase-1 of CIAL Golf Course & Country Club and Ghallah Wentworth Golf Course at Muscat, Sultanate of Oman, thereby establishing itself in an area, which was considered to be the forte of European Consultants.  The prestigious overseas assignments KITCO so far has completed include the technical evaluation of electrical power distribution network at King Abdul Aziz International Airport, Jeddah. KITCO has a full-fledged office facility at Cochin with more than 250 competent and highly qualified professionals in various branches of engineering and also in the fields of Finance, Economics, Management, Information Technology, etc.  Apart from the above, to meet the requirements from time to time, KITCO has a panel of Specialist Consultants in various fields. KITCO’s revenue during 2012-13 was Rs.372.02 million. The company has been paying dividend consistently since 1997-98. Science and Technology Entrepreneurship Development Project (STEDP) The Government of India, in the year 1985, set up a National Science and technology Entrepreneurship Development Board (NSTEDB) particularly to encourage entrepreneurship amongst the Science and Technology persons and that too specifically in the industrially backward areas of the country. Besides, discovering of new resources and manufacturing techniques, remedying growing unemployment and achieving better industrialization in the country, too have been its other objectives. The NSTEDB therefore took up a special project entitled ‘Science and Technology Entrepreneurship Development’ (STED). For this, 12 districts which are industrially backward and have immense untapped and under tapped natural resources had been selected under this project from all over the country from most of the states. Jodhpur district in Rajasthan was selected as one of these centres. In this district, the project was started in the year 1985-86, under the control of Director, Science and Technology, Government, of Rajasthan, Jaipur. The STED Project In the project mode, the STED project aims to bring about a socio-economic development of an area through the intervention of Science & Technology. The project envisages matching of the material and the human resources of the district to create new enterprises and employment by usage of Science & Technology processes. It involves identification of opportunities through a detailed scientific survey and exploitation of the opportunities thus identified by the entrepreneurs. The total project life is four years. Currently the STED project is being implemented in 43 districts of the country. School of Distance Education 40 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT  Formulating scientific selection procedures.  Developing training aids, manuals, and tools.  Facilitating and supporting Central/state/other agencies in executing entrepreneurship development programmes.  Conducting such programmes for promoters, trainers, and entrepreneurs who are not undertaken by other agencies.  Maximizing benefits and accelerating the process of entrepreneurship development.  Organizing all those activities that help develop entrepreneurial culture in the society.  NIESBUD also serves as the secretariat for National Entrepreneurship development Board (NEDB), the apex body which determines policy for entrepreneurship development in the country.  The institute, therefore, performs the task of processing the recommendations made by the Board. Techno Park Technopark Kerala refers to a technology park in Thiruvanathapuram (Trivandrum), India dedicated to electronics, software, and other Information Technology (IT) ventures. The technology park represents the first, and largest, in India. Launched in 1990, Technopark currently has 3.2 million square feet (310,000 square meters) of built-up space, serving as home to over 125 companies, which employ more than 17,000 professionals. They include one CMMI level 5 and PCMM level 5 company, four CMM Level 5, two CMM Level 3 and several ISO 9001 certified companies. The Government of Kerala promotes the Technopark with a mandate to nurture entrepreneurship and employment in the region. The policy of economic liberalisation initiated by the government of India in 1991 and the rapid growth of the global software industry during the 1990s has substantially contributed to the growth of Technopark. Over 70% of Kerala's IT exports come from Technopark. The Indian government's initiative to establish Technopark, Kerala, arose from an awareness that economic success in the twenty-first century depended upon becoming competitive in the international market place in Information and Knowledge Technology. The Indian government understood that the traditional course of developing heavy industries before moving to clean industries could be modified with the advent of the Knowledge and Information Age. Shortly after the establishment of India as an independent republic, the importance of the computer, communications, and biological sciences became evident. The Indian government's support for the creation of Technopark, Kerala from a campus embracing Indian and international companies to the establishment of a technology city has rightly gained the attention of the world community. Functions of Techno park 1. Opportunities aplenty for development 2. Provision and maintenance of excellent infrastructure facilities 3. Establishment of a high security zone at low cost 4. Creation and sustenance of a world class working environment School of Distance Education 41 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT 5. Augmented employability quotient of youth 6. Enormous annual supply of fresh college pass outs to the work force 7. Lowest rate of manpower attrition 8. Environment friendly campus that aims to stay green 9. Reduction of waste and enhanced water and energy efficiency 10. Perfectly harmonious work settings Incentives The term “incentive’, generally means encouraging productivity. It is a motivational force, which encourages an entrepreneur to take a right decision and act upon it. The objective of providing incentives is to motivate an entrepreneur to set up a new venture in the larger interest of the nation and the society. Government provides many types of incentives to entrepreneurs. These incentives help to increase productivity. It acts as a motivating force for the entrepreneur. These incentives are categorized as concession, subsidies and bounties. Subsidies are a one time lump sum amount given to the entrepreneur by the government. It is a financial help to cover the cost. Bounty is a financial help provided to an industry so that it can compete with other units of the country as well as any foreign industry in the same business. Importance 1. To eliminate Economic constraints: Entrepreneurs face many types of constraints. e.g. lack of adequate infrastructure, far flung locations of supporting offices for projects, lack of related knowledge by entrepreneurs viz., managerial know how, market intelligence, etc. Thus government incentives in the form of availability of power, concessional finance, capital investment subsidies, transport subsidies etc., aims at eliminating such constraints and promote entrepreneurship. 2. To bring about regional parity in development: In our country there is imbalance in the development across different regions. Some are well established and some are underdeveloped. In order to see that there is equal development of all the regions, government provides special incentives for establishing entrepreneurs in the backward regions. 3. To enhance competitive capability: In this competitive world small scale enterprises established by entrepreneurs face stiff competition from big firms. If they are not provided appropriate support from the government then they cannot survive and grow. Thus certain incentives are required. Eg: reservation policy, price preference, preferential purchase, etc., help to improve their competitive strength. Entrepreneurs in the present globalized market economies are the engine of economic development. Due to their private ownership for majority of cases, entrepreneurial spirit, their flexibility and adaptability and also their capability to react to challenges and changing environments, enterprises lead to sustainable growth and employment generation in a School of Distance Education 42 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT significant manner. Enterprises, especially small and medium enterprises are considered to have strategic importance in national economy for many reasons. Therefore government helps enterprises including small and medium ones by supporting entrepreneurs. By doing so, it is possible to create new job positions, increase gross domestic product (GDP) and rising living standard of population. Government provides support to entrepreneurs in the following ways. 4. Training: Basic training varies from product to product but will necessarily emphasise on sharpening of entrepreneurial skills. In this regard central and state government’s technical institutions provide need based technical training. Entrepreneurship development programmes are conducted by many government organizations and non government institutions. 5. Marketing assistance: Government and non government agencies provide marketing assistance to entrepreneurs. Government promotes MSME products through exhibitions. NSIC directly markets the MSME product in the national and international market, NSIC manages single point registration scheme for manufacturers for government purchases. Enterprises registered under this scheme obtain the benefit of free tender documents and exemption from earnest money deposit and performance guarantee. 6. Promotional schemes: Government provides highest preference for development of MSME by formulating and implementing conducive policies and government schemes. Government provides development land and sheds on actual cost basis with appropriate infrastructure. The government has designed the special schemes for specific purposes such as quality upgradation, common facilities, entrepreneurship development and consultancy services at minimal charges. The government provides financial support to entrepreneurs to obtain ISO 9000 certificate by providing up to 75% of actual cost with maximum ceiling of Rs 75000/-. 7. Concession of Excise duty: Government provides exemption to MSME units for a particular level of annual turnover from paying excise duty. The limit of turnover is variable. 8. Credit facility: Credit to micro, medium and small scale sector is covered under priority sector lending by banks. Small industries development bank of India (SIDBI) is mainly responsible for implementing various schemes of providing financial support to small entrepreneurs. Loans are also provided to small entrepreneurs by scheduled banks without collateral security. This limit is variable. Classification of Incentives Broadly, incentives include concessions, subsidies and bounties. Incentives may be financial or non-financial. Non financial incentives push an entrepreneur towards decision and action. Entrepreneurs in India are offered a number of incentives. These incentives normally aim at reducing some of the problems faced by small scale industrialists. School of Distance Education 45 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT Module III Micro Small and Medium Enterprises Micro, Small and Medium Enterprises (MSME) sector has emerged as a highly vibrant and dynamic sector of the Indian economy over the last five decades. MSMEs not only play crucial role in providing large employment opportunities at comparatively lower capital cost than large industries but also help in industrialization of rural & backward areas, thereby, reducing regional imbalances, assuring more equitable distribution of national income and wealth. MSMEs are complementary to large industries as ancillary units and this sector contributes enormously to the socio-economic development of the country. The Sector consisting of 36 million units, as of today, provides employment to over 80 million persons. The Sector through more than 6,000 products contributes about 8% to GDP besides 45% to the total manufacturing output and 40% to the exports from the country. The MSME sector has the potential to spread industrial growth across the country and can be a major partner in the process of inclusive growth. Ministry of Micro, Small & Medium Enterprises (M/o MSME) envisions a vibrant MSME sector by promoting growth and development of the MSME Sector, including Khadi, Village and Coir Industries, in cooperation with concerned Ministries/Departments, State Governments and other Stakeholders, through providing support to existing enterprises and encouraging creation of new enterprises. Features Following are some of the essential elements of MSMEs – 1. MSMEs work for the welfare of the workers and artisans. They help them by giving employment and by providing loans and other services. 2. MSMEs provide credit limit or funding support to banks. 3. They promote the development of entrepreneurship as well as up-gradation of skills by launching specialized training centers for the same. 4. They support the up-grading of developmental technology, infrastructure development, and the modernization of the sector as a whole 5. MSMEs are known to provide reasonable assistance for improved access to the domestic as well as export markets. 6. They also offer modern testing facilities and quality certification services. 7. Following the recent trends, MSMEs now support product development, design innovation, intervention, and packaging. Objectives Objects of the Micro, Small and Medium Enterprises Development Act, 2006 The Micro, Small and Medium Enterprises Development Act was framed with the following objects: (1) To facilitate the promotion and development of micro, small and medium scale enterprises; (2) To enhance the competitiveness of micro, small and medium enterprises; (3) To concentrate on the related matters of micro, small and medium enterprises; (4) To extend the scope of benefits from small-scale industries undertaking and ancillary industries to micro, small and medium enterprises. School of Distance Education 46 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT Importance Across the globe, MSMEs are accepted as a means of economic growth and for promoting equitable development. They are known to generate the highest rate of growth in the economy. MSMEs have driven India to new heights through requirements of low investment, flexible operations, and the capacity to develop appropriate native technology. 1. MSMEs employ around 120 million persons, becoming the second-largest employment generating sector after agriculture. 2. With approximately 45 lac units throughout the country, it contributes about 6.11% of GDP from manufacturing and 24.63% of the GDP from service activities. 3. MSME ministry targets to increase its contribution towards GDP by up to 50% by 2025 as India moves ahead to become a $5 trillion economy 4. Contributing around 45% of overall Indian exports 5. MSMEs promote all-inclusive growth by providing employment opportunities, especially to people belonging to weaker sections of the society in rural areas. 6. MSMEs in tier-2 and tier-3 cities help in creating opportunities for people to use banking services and products, which can amount to the final inclusion of the contribution of MSMEs for the economy. 7. MSMEs promote innovation by providing an opportunity to budding entrepreneurs to help them build creative products hey and thereby boost competition in business and fuel the growth. The Indian MSME sector provides silent support to the national economy and acts as a defense against global economic shock and adversities. Hence, we can say that India is propelling towards a robust global economy through a silent revolution powered by MSMEs. Role of SME in the Economic Development Since its formation, the MSME segment has proven to be a highly dynamic Indian economy sector. MSMEs produce and manufacture a variety of products for both domestic as well as international markets. They have helped promote the growth and development of khadi, village, and coir industries. They have collaborated and worked with the concerned ministries, state governments, and stakeholders towards the upbringing of rural areas. MSMEs have played an essential role in providing employment opportunities in rural areas. They have helped in the industrialization of these areas with a low capital cost compared to the large industries. Acting as a complementary unit to large sectors, the MSME sector has enormously contributed to its socio-economic development. MSMEs also contribute and play an essential role in the country’s development in different areas like the requirement of low investment, flexibility in operations, mobility through the locations, low rate of imports, and a high contribution to domestic production. With the capability and capacity to develop appropriate local technology, provide fierce competition in domestic and international markets, technology-savvy industries, a contribution School of Distance Education 47 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT towards creating defense materials, and generating new entrepreneurs by providing knowledge, training, and skill up-gradation through specialized training centers. MSME Act 2006- As per MSME Act-2006, The MSMEs are classified into two categories; 1. Manufacturing Enterprises-The enterprises engaged in the manufacture or production of goods (as per Development and Regulation) Act, 1951) or employing plant and machinery in the process of value addition to the final product having a distinct name or character or use. 2. Service Enterprises:-The enterprises engaged in providing or rendering of services and are defined in terms of investment in equipment. In the month of February 2018, the Union Cabinet chaired by the Prime Minister Shri Narendra Modi has approved a change in the definition of the MSMEs. Now MSMEs will be defined on the basis of ‘annual turnover’ instead of investment in plant & machinery/equipment. Now let us know the Old definition of the MSMEs in India; 2018 Manufacturing Sector Enterprises Micro Enterprises Annual turnover is less than Rs.5 cr. Small Enterprises Annual turnover is between Rs. 5 Cr to Rs. 75 cr. Medium Enterprises Annual turnover is between Rs. 75 Cr to Rs. 250 cr. Service Sector Enterprises Micro Enterprises Annual turnover is less than Rs.5 cr. Small Enterprises Annual turnover is between Rs. 5 Cr to Rs. 75 cr. Medium Enterprises Annual turnover is between Rs. 75 Cr to Rs. 250 cr. New Definition of MSME in 2020:- School of Distance Education 50 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT Objectives of Industrial Estates: The main objectives of the establishment of industrial estates are to: 1) Provide infrastructure and accommodation facilities to the entrepreneurs; 2) Encourage the development of small-scale industries in the country; 3) Decentralise industries to the rural and backward areas; 4) Encourage ancillarisation in surroundings of major industrial units; and 5) Develop entrepreneurship by creating a congenial climate to run the industries in these estates/area /township, etc. Classification The following are the types of industrial estates: I. On The Basis of Functions: On the basis of functions, industrial estates are broadly classified into two types: 1. General Type Industrial Estate: These are also called as conventional or composite industrial estates. These provide accommodation to a wide variety and range of industrial concerns. The Indian Industrial estates are mainly of this type: 2. Special Type Industrial Estate: This type of industrial estates is constructed for specific industrial units, which are vertically or horizontally independent. II. On the basis of Organizational set-up: On this basis, industrial estates are classified into following four types: 1. Government Industrial Estates, 2. Private Industrial Estates, 3. Co-operative Industrial Estates. 4. Municipal Industrial Estates III. On the Basis of the Other Variants: On the basis of other variants, industrial estates are classified into following three types: (a) Ancillary Industrial Estates: In such industrial estates, only those small- scale units are housed which are ancillary to a particular large industry. Examples of such units are like one attached to the HMT, Bangalore. (b) Functional Industrial Estates: Industrial units manufacturing the same product are usually housed in these industrial estates. These Industrial estates also serve as a base for expansion of small units into large units. (c) The Workshop -bay: Such types of industrial estates are constructed mainly for very small firms engaged in repair work. School of Distance Education 51 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT Benefits of Industrial Estates 1. Provision of Premises and Amenities at a Reasonable Cost Industrial estate provides premises i.e. Land and Factory Shed for the establishment of a new industrial undertaking and also other amenities such as power, water, transport etc. at a reasonable, cost. Hence the entrepreneur is able to produce goods at cheaper costs. 2. Availability of Service Centers As each and every SSI unit established in an industrial estate cannot afford to have their own service centers, the industrial estate itself provides for a repair shop, a testing laboratory etc. for the common benefit of all SSI units situated there. 3. Minimum Initial Capital Since reasonable sheds are offered to the industrialists either on hire purchase basis or on rental basis, they need not spend a huge amount initially for the construction of the factory building etc. Thus the initial capital investment is less. 4. Avoidance of Unnecessary Delays While starting an industrial unit an entrepreneur is required to comply with various rules and regulations regarding the location of factory sheds and obtaining infrastructural facilities. But if an entrepreneur obtains a ready-made premises in an industrial estate, he need not worry about all these things as they are constructed by the Government itself by taking into consideration all these formalities well in advance. Hence the unnecessary delay is avoided. 5. Cordial Relationship between the Industrialists A rapid growth of the industrial units is made possible by fostering complementary relationship among them. For instance, some units may obtain raw materials and semi-finished goods as inputs from other units in the same estate or offer a part of the production to the ancillary units in the same area Green Channel Like the Airport Green Channel, the MSME Green Channel will be an easy walkthrough to all Government sanctioned Checks. Companies that have A-Rating will pass through all Customs and GST Checkpoints without being subjected to inspection. This ease of access will in fact promote business holders to keep their records clean.  Companies with rating between 61% – 80%, will be subject to minimum inspection by any one department of the MSME Ministry.  Companies with rating between 41% – 60%, will be subject to inspection by the GST department.  Companies with rating between 21% – 40% will be subject to inspection from 2 departments.  Companies with rating below 20%, will be subject to the usual norms at inspections and checkpoints. This hypothetical scheme will reduce a lot of paperwork, the manpower and time of which can be diverted into increasing productivity. Increased productivity, means more employment School of Distance Education 52 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT opportunities and increased revenue to the Government through these Green channel approved Companies. Potential Incentives of the A-Rating system  The Government could partner with A-Rated companies for Skill Training. Grants would be given towards engagement and training of new labour, wherein the Intern’s or Trainee’s salary would be borne by the Government, for an initial period of 18-24 months.  Decrease in the EMD i.e. the Bank guarantee amount to enable MSME companies to engage in large scale government projects. A Floating amount could also be agreed upon with least value on larger project sizes, gradually increasing to 10% as project value decreases.  Strict and secure tender application process, which will be tamper proof. Selection must be based on merit, expertise and financial credibility alone.  Prime share of business under ‘Make in India’, to be generated from MSME.  Special status and subsidies for companies that promote the Indian handicraft Industry.  Creating a uniform base for online payments, gradually eliminating financial movement through cash and cheques. This will ensure all transactions are transparent and are as per the papers. Bill discounting at attractive rates, to be made available to all MSME, to add liquidity in cash flow. These are all potential benefits that can be availed when a refined rating system and a Green Channel are introduced for MSME’s. These schemes will incentivise more people to start businesses, without the anxiety of facing hurdles at all points. Bridge Capital Bridge financing is a form of temporary financing intended to cover a company’s short-term costs until the moment when regular long-term financing is secured. Thus, it is named as bridge financing since it is like a bridge that connects a company to debt capital through short-term borrowings. Bridge financing is a great way for smaller businesses to finance an acquisition or other short term need while they secure longer term financing. While traditionally used between equity rounds for startups or preparing for an IPO, more and more middle market businesses are using bridge financing to take advantage of unique opportunities to grow their businesses. Bridge financing is otherwise referred to as swing loans, interim loans, or gap financing. It is a short-term loan that you expect to repay with the proceeds of an anticipated larger transaction, allowing you to complete an opportunistic deal. For middle market companies, sometimes bridge financing can be a perfect solution, as one company we know well found out recently. Seed Capital Assistance Assistance of up to Rs.1.00 Cr. as grants in aid for the seed capital support to appropriate Incubates shall be provided. Financial assistance may be given in the form of soft loan, interest free loan, equity participation, grant or combination of these etc. School of Distance Education 55 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT stages and to initiate the process of corrective measure and revive/ rehabilitation before the sickness assumes a serious proportion. An industrial unit is considered sick when its financial position is not satisfactory and it becomes worse year after year. It incurs losses and its capital reserves may be stretched out in course of time. The increasing trend in Industrial sickness touching all types of units including Small, Medium and Large Scale Industrial Sectors, but Small Scale Industries are more prone to sickness as compared to medium and large scale industries. The sickness does not occur all of a sudden. A healthy unit shows profit and has positive values of net working capital and net worth. But when it tends towards sickness one of these may become negative. Major Causes of Sickness The small-scale industrial (SSI) sector is the worst hit. A number of Small Scale Industries are either born sick or stay sick. The earlier the detection of sickness, the earlier will be the remedy for sickness. As soon as they are detected as sick, immediate actions require curing them. The reasons for sickness are different in different units. The main reasons of sickness are management failure, non-availability of raw materials, power cuts, labour unrest, marketing problem etc. Most of the Indian authors have classified the causes of industrial sickness under two important categories as follows; Internal Causes for Sickness Internal causes are the factors which are within the control of management. This sickness arises due to internal disorder in the areas as follow; a) Lack of finance: This includes weak equity base, poor utilization of assets, inefficient working capital management, absence of costing & pricing, absence of planning and budgeting and inappropriate utilization or diversion of funds. b) Bad production policies: The another very important reason for sickness is wrong selection of site which is related to production, inappropriate Plant & Machinery, bad maintenance of Plant & Machinery, lack of quality control & lack of standard research & development. c) Marketing and sickness: This is another part which always affects the health of any sector as well as SSI. This including wrong demand forecasting, selection of inappropriate production mix, absence of product planning, wrong market research method and bad sales promotions. d) Inappropriate personnel management: The another internal reason for the sickness is inappropriate personnel management policies which include bad wages and salary administration, bad labour relations, lack of behavioral approach causes dissatisfaction among the employees and workers. e) Ineffective corporate management: Another reason of sickness is ineffective or bad corporate management which includes improper corporate planning, lack of integrity in top management, lack of co-ordination and control etc. External Causes of Sickness The external causes are those which affect industrial group as a whole and on these the industry has no direct control. School of Distance Education 56 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT Following are some external causes: a) Personnel constraints: The first and most important reason for the sickness are non availability of skilled labour or manpower, wages disparity in similar industry and general labour invested in the area. b) Marketing constraints: The second cause for the sickness is related to marketing. The sickness arrives due to liberal licensing policies, restrain of purchase by bulk purchasers, changes in global marketing scenario, excessive tax policies by government and market recession. c) Production constraints: This is another cause of sickness which comes under external cause of sickness. This arises due to shortage of raw material, shortage of power, fuel and high prices, import-export restrictions. d) Finance constrains: The another external cause for sickness is credit restrains policy, delay in disbursement of loan by government, unfavourable investments & fear of nationalization. Remedial Measures to Overcome Sickness Some of the remedial measures to curb and overcome sickness in industrial undertakings are as follows: 1. Identifying Sickness at Initial Stage Sickness in Small Scale Industries are not a sudden phenomenon but it is a gradual process taking 5 to 7 years eroding the health of a unit beyond cure. Therefore, the identification and detection of the sickness at incipient stage is the first and foremost measure to detect and reduce industrial sickness. Sickness must be identified at initial stage. 2. Financial Assistance Lending agencies need to relax their lengthy process and other norms for extending credit to the SSIs. To combat the incidence of sickness financial institutions should grant credit without delay to SSI sector. A number of initiatives can be undertaken to overcome credit problems such as:. 1. Increasing Working capital limit. 2. Enhancing the powers of bank managers of specialized bank branches in offering credit to SSI. 3. Strengthening the mechanism for discounting bills. 4. Reduced rate of interest. These measures would improve the flow of credit and keep a check on the incidence of sickness. 3. Improving Infrastructure Infrastructure facilities can be improved by setting up industrial estates. Common testing centres etc., infrastructural problems can be solved by improving the roadways, waterways, establishing telecommunication systems. 4. Technology Up-Gradation Funds may be provided by the financial institutions for adoption of advanced technology. Similarly, some sort of training may be provided for use of the latest technology to overcome School of Distance Education 57 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT technological problems. Technological up-gradation can help to overcome technological obsolescence. 5. Marketing Assistance Marketing assistance may be provided to entrepreneurs for marketing the goods produced by them. Government must help to market the goods. Government and Non Government Organizations (N.G.Os) can come forward for marketing the goods produced by the SSI sector. The problem of poor marketing of the products can be solved by coordinated efforts of entrepreneurs and promotional agencies. 6. Liquidation It is better to wind up the business when there is no possibility to revive the unit. 7. Government Interventions Interventions must be made by the government to prevent sickness. Periodic review of financial statements can help to identify and prevent sickness at initial stage. 8. Training A proper environment must be created where an entrepreneur will be educated and will have a proper knowledge, skill and experience about internal and external environment of business to compete with large-scale industries and multinational companies. 9. Rehabilitation Potentially viable sick units should be dealt well for the purpose of rehabilitation. Rehabilitation is a remedy considered for industrial units, which have already become sick and for the units that are on the verge of collapse. Under the provisions of SICA, 1985, the Government of India has established Board for Industrial and Financial Reconstruction (BIFR) in January 1987 for determining the preventive, ameliorative, remedial and other measures which are required to be taken in respect of sick industrial company and for expeditious enforcement of rehabilitation schemes. The main objective of SICA is to determine sickness and expedite the revival of potentially viable units or closure of unviable units (unit here in refers to a Sick Industrial Company). It was expected that by revival, idle investments in sick units will become productive and by closure, the locked up investments in unviable units would get released for productive use elsewhere. The measures taken by BIFR are 1. Legal 2. Financial restructuring 3. Managerial Rehabilitation Programmes Taking into consideration the many sick micro, small and medium (MSM) industries, the MSM policy has provided a separate package for rehabilitation of such industries in India. The policy proposes to set up a rehabilitation fund for sick industries, which will be managed by the Industries Commissioner and the Director of Industries and Commerce. Funds will be infused into the committee based on the recommendation of a State-Level Rehabilitation Committee (SLRC). School of Distance Education 60 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT Module IV Setting up of Industrial unit The potential entrepreneur would become an entrepreneur only when he owns an enterprise. The business enterprise to be set up can be a manufacturing venture, a trading firm or a service establishment. The manufacturing venture includes the steps required for setting up a trading firm or a service establishment also. The steps in setting up a small unit are as follows: Steps Involved 1. Decision to be Self-employed: This is the most crucial decision a person has to take shunning wage employment and opting for self-employment or entrepreneurship. He should know the advantages and risks of entrepreneurship. 2. Analysing strengths, weaknesses: The potential entrepreneur has to analyse his strength, weaknesses, while deciding to go for entrepreneur career. This analysis enables him to know what type and size of business would be the most suitable. The strengths and weaknesses will vary from person to person. 3. Availability of own money: No business can be created, with zero capital. The ‘Own Money’ concept means the funds available with an .entrepreneur from his own source or family or friends. The size of the unit depends on the availability of ‘Own Money’ in short-term and long-term. 4. Scanning of business environment: It is always essential on the part of an entrepreneur to study and understand the prevailing business environment in which they operate particularly the industrial policy, economic policy, licensing policy, legal environment, technological environment and above all the markets. In order to ensure success of his enterprise, the entrepreneur should scan the business opportunities and threats in the environment. He should study the administrative frame work, procedures, policies, rules and regulations and other formalities implemented by the government. 5. Training: The person should undergo training for developing skills for entrepreneurship and developing technical, conceptual and managerial skills. Before going to start the enterprise, the potential entrepreneur must assess his own deficiencies, which he can compensate through training. He can attend the Entrepreneurial Development Programmes (EDP) conducted by institutes like DIC, SISI, TCOs, SBI, etc., These institutes are providing tailor-made Entrepreneurship Development Programmes (EDP) and skill upgradation training programmes for the benefit of the new entrepreneur, existing entrepreneurs and for the employees of the small scale industries. 6. Product Selection: The next step and the most important step is to decide what business to venture into, the product or range of products that shall be selected for manufacture and in what quantity. The level of activity will help in determining the size of business and thus form of ownership. One could School of Distance Education 61 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT generate as many project ideas as one can through environment scanning and short list a few of them. Closely examine with the help of opportunity analysis each one of them and zero in on to the final product or products. 7. Market Survey: It is always convenient to manufacture an item but difficult to sell. So it is prudent or rational on the part of the entrepreneur to survey the market thoroughly before embarking upon production and ensure that the product chosen is in sufficient demand and is preferably in the growth phase of a product life cycle. Market survey means systematic collection of data by the entrepreneur about the product for manufacture, demand-supply lag, extent of competition, frequency of demand, pattern and design of demand, its potential share in the market, pricing, distribution policy etc. The principle is to produce what actually people demand. The entrepreneur can contact for this the concerned authorities. 8. Selection of form of ownership/organisation: A firm can be constituted as proprietorship, partnership, limited company (public or private) or co-operative society. This will depend upon the type, purpose and size of entrepreneur’s business. One may also decide on the form of ownership, on the basis of resources in hand or from the point of view of investment. 9. Location: The next step will be to decide the location where the unit is to be established. Will it be hired or owned? The size of plot, covered and open area and the exact site will have to be decided. Decision about the location of unit is very important. Location determines the success or failure of the enterprise. Location is selected after considering such factors such as nearness to market, sources of material and labour, modern infrastructural facilities etc. 10. Technology: To manufacture any item, technology is used. Information on all available technologies should be collected by the entrepreneur and the most suitable one should be identified. This will also be useful to determine the type of machinery and equipment to be installed. Many institutions of government like DIC, TCO etc. research laboratories, R & D. divisions of big industries and certain consultancy agencies provide the manufacturing know-how. 11. Machinery and equipment: Having chosen the technology, the machinery and equipment required for manufacturing, the chosen products have to be decided, suppliers have to be identified and their costs have to be estimated. One may have to plan well in advance for machinery and equipment especially if it has to be procured from outside the town, state or country. 12. Preparation of Project Report (Business Plan): After deciding the form of ownership, location, technology for manufacturing, machinery and equipment, the entrepreneur should be ready to prepare his project report or the feasibility study. The economic viability and the technical feasibility of the product selected have to be established through a project report. A project report that may now be prepared will be helpful in formulating the production, marketing, financial and management plans. It will also be School of Distance Education 62 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT useful in obtaining finance, shed, power connection, water connection, raw material quotas, etc. The entrepreneur has to consider the guidelines given by the Planning Commission in preparing the project report. The project report should indicate the vision of the promoter and short term and long term aspects of the project implementation. 13. Project appraisal: Project appraisal means the assessment of a project. It is a technique for ex-ante analysis of a scheme or project while preparing to set up an enterprise, the entrepreneur has to carefully appraise the project from the stand point of economic, financial, technical, market, social and managerial aspects to arrive at the most socially-feasible enterprise. To avail the finance from the banks and financial institutions, a comprehensive appraisal of projects carrying techno- economic feasibility aspects should be undertaken by the entrepreneur. Thus a project which is selected should be technically feasible and economically viable and then only it will be bankable. For this the following appraisals can be performed at the preliminary level; (a) Economic appraisal (b) Financial appraisal (c) Technical appraisal (d) Management appraisal (e) Organisational appraisal (f) Operational appraisal (g) Market appraisal 14. Finance: Finance is the life-blood of the enterprise. Entrepreneur has to take certain steps and follow specified norms of the financial institutions and banks to obtain money or finance. A number of financial agencies provide capital assistance and venture capital for starting an enterprise. There are some agencies which provide financial assistance on concessional rates. Under PMRY and REGP schemes, financial assistance and subsidies are being provided to the persons who want to set up their own enterprise, which obviates the need for margin money. 15. Provisional Registration: It is always worthwhile to get the unit registered with the government. The entrepreneur has to obtain the prescribed application form for provisional registration from DIC or Directorate of Industries. After having duly filled in the application form, he has to submit the application with all relevant documents in the local DIC or Directorate of Industries. This will enable the entrepreneur to avail various government facilities, assistance and incentives schemes including financial assistance from NSIC, SFCs and KVIC. 16. Technical know-how: In some cases, technical know-how may be arranged for setting up enterprises. This can be arranged through TC0s, NSIC, SSIDC, DIC, private consultants, SISI, ED-institutes, foreign collaborators, India Investment Centre and Industry etc. Facilities are also available to SSI for making variety of technical know-how arrangements including turn-key jobs. School of Distance Education 65 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT Criteria for selecting particular Project Project Ideas It is the first and foremost task of an entrepreneur to find out suitable business which is feasible and promising and which merit further examination and appraisal. Therefore, he has to first search for a sound workable business idea and give a practical shape to his idea. While doing so, the entrepreneur has to tackle the various problems from time to time to achieve the ultimate success. Since the good project ideas are elusive, a variety of sources should be tapped to stimulate the generation of project ideas. Sources of Project Ideas Project ideas could originate from the various sources viz., Success story of a friend/relatives Experience of others in manufacture/sale of product Examining the inputs and outputs of industries Plan outlays and government guidelines Suggestions of financial institutions and developmental agencies Investigation of local materials and resources Economic and social trend of the economy New technological developments Project profiles and industrial potential surveys Visits to trade fairs Unfulfilled psychological needs Possibility of reviving sick units The various sources from which the project idea can be generated are explained below: 1. Analyse the Performance of Existing Industries A study of existing industries in terms of their profitability and capacity utilisation is helpful. The analysis of profitability and break-even level of various industries indicates promising investment opportunities. Opportunities which are profitable and relatively risk free. An examination of capacity utilisation of various industries provides information about the potential for further investment. Such a study becomes more useful if it is done region wise, particularly for products which have high transportation costs. 2. Examine the Inputs and Outputs of Industries An analysis of the inputs required for various industries may throw up project ideas. Opportunities exist when i) materials purchased parts, or supplies are presently being procured from different sources with attendant time lag and transportation costs and ii) several firms produce internally some components/parts which can be supplied at a lower cost by a single manufactures who can enjoy economies of scale. A study of the output structure of existing industries may reveal opportunities for further processing of output or even processing of waste. 3. Examine Imports and Exports An analysis of import statistics for a period of five to seven years is helpful in understanding the trend of imports of various goods and the potential for import substitution. Indigenous manufacture of goods currently imported is advantageous for several reasons:  it improves the balance of payments situation  it provides market for supporting industries and services  it generates employment Likewise, an examination of export statistics is useful in learning about the export possibilities of various products. School of Distance Education 66 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT 4. Plan Outlays and Government Guidelines The government plays a very important role in our economy. Its proposed outlays in different sector provides useful pointers toward investment opportunities. They indicate the potential demand for goods and service required by different sectors. 5. Suggestions of Financial Institutions and Developmental Agencies In a bid to promote development of industries in their respective states, state financial corporations state industrial development corporations and other developmental bodies conduct studies, prepare feasibility reports and offer suggestions to potential entrepreneur. The suggestions of these bodies are helpful in identifying promising projects. 6. Investigate Local Materials and Resources A search for project ideas may begin with an investigation into local resources and skills, various ways of adding value to locally available materials may be examined. Similarly, the skills of local artisans may suggest products that may be profitably produced and marketed. 7. Analyse Economic and Social Trends A study of economic and social trends is helpful in projecting demand for various goods and services. Changing economic conditions provide new business opportunities. A great awareness of the value of time is dawning on the public. Hence the demand for time saving products like prepared food items, ovens and powered vehicles has been increasing. Another change that we are witnessing is that the desire for leisure and recreational activities has been increasing. This has caused a growth in the market for recreational products and services. 8. Identify Unfulfilled Psychological Needs For well established, multi brand product groups like bathing soaps, detergents, cosmetics and tooth pastes, the question to be asked is not whether there is an opportunity to manufacture something to satisfy an actual physical need but whether there are certain psychological needs of consumers which are presently unfulfilled. To find whether such an opportunity exists, the technique of spectrum analysis may be followed. This analysis is done somewhat as follows. Important factors influencing brand choice are identified respect of the factors identified in step gaps which exist in relation to consumer psychological needs are identified. 9. Visit to Trade Fairs Attending the National and International trade fairs provides an excellent opportunity to know about new products and new development. The above said sources of project ideas may be generated by the Government agencies, credit institutions, non-governmental organisations and also by public. The Govt. have largest resources and have the necessary information to generate project ideas and it plays a predominant role in this sphere. The government has the required facilities and manpower to conduct detailed studies which may lead to making investment decisions. Banks and other financial institutions are actively involved in sharing the social responsibility of achieving the national objectives of economic development. The co-operatives and non- governmental organisations as well as individual entrepreneurs are now actively participated in identification of projects. School of Distance Education 67 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT Generating Project Ideas After clearing some of the initial misconceptions about ideas, it's time to look at the process involved with generating ideas. Generating ideas is an innovative and creative process. Initially it seems difficult to think of many ideas and it will take some time, not only in the beginning stages of the entrepreneurial venture but also throughout the life of the business. The process of generating ideas we are going to discuss where ideas come from, ways to generate ideas and the role of structured approach, analysis and intuition. Ways to Generate Ideas The different structured approaches that might be adopted to generate ideas are: 1. Environment Scanning One of the important techniques that can be used to generate ideas is environment scanning, the screening of large amounts of information to detect emerging trends. A humongous amount of information from popular news magazines, reviews, government and consumer publications, trade publications, commercials, etc. will have to be scanned. The challenge in this method is not having too little information to scan, its having too much. It seems like a lot of effort to work but if you are serious about being a successful entrepreneur in action, it is energy well spent. 2. Creativity and Creative Problem Solving Creativity is the ability to combine ideas in a unique way or to make unusual associations between the ideas. It means cross thinking by seeing new angles, connections and approaches. The role of creativity and creative problem solving as a structured technique for generating ideas is that a number of specific creative approaches can be used. For instance - (i) attribute listing - in which entrepreneur develops a new idea by looking at the positive or negative attributes of a product or a service and so on. (ii) free association – whereby, an entrepreneur develops a new idea through a chain of word associations etc., 3. Brainstorming A group of persons sit together and generate a number of business ideas by innovating alternative ways of meeting the needs and solving problems. It is usually an unstructured discussion in which one idea leads to another. This is a very productive method for generating as many ideas as possible. 4. Focus Groups These groups of individuals provide information about proposed products or services in a structured setting. In a typical focus group a moderator focuses the group discussion or whatever issues are being examined. For instance, a focus group might look at a proposed product and answer specific answer asked by the moderators. A focus group can provide an excellent way to generate new ideas and to screen proposed ideas and concepts. 5. Market Research This is a method of gathering information about products/services that already exist in the market. A systematic and in-depth study is undertaken to obtain useful data to determine demand supply position for a particular product or service that is already available in the market. Such a research will help in getting new ideas for products and services. School of Distance Education 70 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT  Undertaking a preliminary study of technical requirements to have a quick evaluation.  If preliminary investigation indicate favourable prospects working out further details of the project. The exercise begins with engineering and technical specifications and covers the requirements of the proposed project as to quality, quantity and specification type of components of plant & machinery, accessories, raw materials, labour, fuel, power, water, effluent disposal transportation etc.  Thus, the technical feasibility analysis is an attempt to study the project basically from a technician’s angle. The main aspects to be considered under this study are: technology of the project, size of the plant, location of the project, pollution caused by the project production capacity of the project, strength of the project. Emergency or stand-by facilities required by the project sophistication such as automation, mechanical handling etc. required collaboration agreements, production inputs and implementation of the project. 3. Financial Feasibility The main objective of this feasibility study is to assess the financial viability of the project. Here, the main emphasis is in the preparation of financial statement, so that the project can be evaluated in terms of various measures of commercial profitability and the magnitude of financing required can be determined. The decision about the financial feasibility of a project should be arrived at based on the following consideration:  For existing companies, audited financial statements such as balance sheets, income statements and cash flow statements.  For projects that involve new companies, statements of total project cost, initial capital requirements, and cash flow relative to the projective time table.  Financial projections for future time periods, including income statements, cash flows and balance sheets.  Supporting schedules for financial projections stating assumptions used as to collection period of sales, inventory levels, payment period of purchases and expenses and elements of production cost, selling administrative and financial expenses.  Financial analysis showing return on investment return on equity, break-even volume and price analysis.  If necessary sensibility analysis to identify items that have a large impact on profitability or possibly a risk analysis. 4. Managerial Feasibility The success or failure of a project largely depends upon the ability of the project holder to manage the project. Project is a bundle of activities and each activity has its own role. For the success of a project, a project holder has to co-ordinate all the activities in such a way that the additive impact of different inputs can produce the desired result. The ability to manage and organise all such inter related activities come within the concept of management. If the person in-charge of the project, has the ability, has the ability to manage all such activities, the desired result can be anticipated. There are three ways to measure the managerial efficiency.  Heredity skill School of Distance Education 71 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT  Skill acquired through training.  Skill acquired in course of work. 5. Social Feasibility A project may cross all the above barriers mentioned above and found very suitable but it will lose its entire creditability, if it has no social acceptance. Though the social customs, conventions such as caste community, regional influence etc. are creating hindrance for development of a project should avoid all such social conflicts which will stand on the successful implementation of the project. (e.g) Considering the interests of the general public; projects which offer large employment potential, which channelise the income from less developed areas will stimulate small industries. In a nut shell, the feasibility report should highlight on these five testing stones before it can be declared as complete and only after judging through these indicators a project can be declared as viable and can be submitted for finance or any other assistance from any institutions. Social Cost Benefit Analysis In judging the overall worth of the project, the effect which the project will have on society as a whole is very material. While financial analysis evaluates a project from the profitability point of view, social cost benefit analysis views it from the point of view of rational viability, the cost-benefit analysis however takes into account not only the direct costs and benefits which will accrue to the project implementing body but also total costs which all entities connected with the project will have to bear and the benefits which will be enjoyed by all such entities. The idea here is to evaluate the project in terms of absolute costs and benefits rather than in terms apparent costs and benefits. Government Regulations for Project Clearance The govt. has two roles to play regulatory role and protective role. Govt. regulates as well as protects small business. It plays the regulatory role by imposing certain restriction and formalities on small business. It provides assistance and support to small business.  Industrial development significantly contributes towards economic growth. However, industrial progress brings along with it a host of environmental problems. Many of these problems could be avoided if industries are located on the basis of environmental considerations, injudicious siting of industry can seriously affect the environmental features such as air, water, land, flora, fauna, human settlements and health of people. The entrepreneur should be fully aware of these implications and he should take necessary steps while setting up the industry so as to minimise the possible adverse effects on the environmental resources and quality of life. Often, an entrepreneur finds it very costly to install pollution control equipment and other mitigative measures after the industry is already set up. As such, preventive steps are needed at the time of siting rather than going in for curative measures at a later stage.  The Industrial Policy Statement of July 1980, recognized the need for preserving ecological balance and improving living conditions in the urban centers of the country. On the basis of this Policy, indiscriminate expansion of the existing industries and setting up of new industrial undertakings within the limits of metropolitan cities and the larger towns should School of Distance Education 72 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT not be permitted. However, the Policy has not touched upon the implications of setting up an industry in sensitive areas, either ecological or otherwise, which would have an effect on the overall development process.  At present, industries are being located on the basis of raw material availability, access to the market, transport facilities and such other techno-economic considerations without adequate attention to environmental considerations are recognised as an important criterion for setting of industry.  To prevent, air, water and soil pollution arising out of industrial projects, the industrial Licensing procedure requires that the entrepreneurs before setting up the industry obtain clearance from Central/State Air and Water Pollution Control Boards. The Central State Pollution Control Boards stipulate that air (gases) and water (effluents) emanating from the industry should adhere to certain quality standards. However, these stipulations do not prevent the industry from effecting the total environment by wrong siting. Also, the cumulative effect of a number of industries at a particular place is not being studied upon, with the result that an industry or an industrial area over a period of time could cause significant damage to the surrounding environment and ecological features.  In respest of certain industrial development projects it is not only necessary to install suitable pollution control equipment but also to identify appropriate sites for their location. To give a concrete shape to this requirement, a select group of 20 industries has been notified by the Department of Industrial Development. A formalised procedure has been stipulated for site selection from environment angle with regard to these projects.  According to this procedure for the select group of industries, the letters of intent should be converted to industrial licences only after the following conditions have been fulfilled: o The State Director of Industries confirms that the site of the project has been approved from environmental angle by the competent State Authority. o The entrepreneur commits both to the State Government and Central Government that he will install the appropriate equipment and implement the prescribed measures for the prevention and control of pollution. o The concerned State Pollution Control Board has certified that the proposal meets with the environmental requirements and that the equipment installed or proposed to be installed are adequate and appropriate to the requirement.  The State Department of Environment will be the competent authority for approval of project sites from environmental angle. In those States where such Departments have not yet been set up, approval should be obtained from the nodal agency designated for looking after environmental matters. With regard to projects where support from the Central Government/International Agencies is envisaged and which come under the purview of Industrial Licensing, approval of the project site from environmental angle should be obtained from the Ministry of Environment and Forests, Government of India. The entrepreneur should provide the details of proposed project site, pollution abatement measures and such other relevant information as required for review from environmental angle.  The entrepreneur will be required to submit half-yearly progress report on installation of pollution control devices to the respective State Pollution Control Boards. Depending on the nature and location of the project, the entrepreneur will be required to submit comprehensive Environmental Impact Assessment Report, and Environment Management Plans. School of Distance Education 75 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT 4. Before starting a foreign collaboration, both entities, for example, a resident and non- resident company must always seek approval (permission) from the governmental authority of the domestic country. 5. During an ongoing process of seeking permission, the collaborating entities prepare a preliminary agreement. 6. According to this preliminary agreement, for example, the non-resident company agrees to provide finance, technology, machinery, know-how, management consultancy, technical experts, and so on. On the other hand, resident company promises to supply cheap labour, low-cost and quality raw-materials, ample land for setting factories, etc. 7. After obtaining the necessary permission, individual representative of a resident and non- resident entity sign this preliminary agreement. Signature acts as a written acceptance to each other's expectations, terms and conditions. After signatures are exchanged, a contract is executed, and foreign collaboration gets established. Contract is a legally enforceable agreement. All contracts are agreements, but all agreements need not necessarily be a contract. 8. After establishing foreign collaboration, resident and non-resident entity start business together in the domestic country. 9. Collaborating entities share their profits as per the profit-sharing ratio mentioned in their executed contract. 10. The tenure (term) of the foreign collaboration is specified in the written contract. Guidelines for Foreign Collaboration Proposals The Central Government has issued the following guidelines in connection with the formulation of proposals and agreements of foreign collaboration: i. Alternative sources: The collaborator should explore, to fullest extent possible, alternative sources of technology, evaluate them from a techno-economic point of view and furnish reasons for preferring a particular technology and the source of import. ii. Other arrangement: There should not be any restriction on the Indian Company in the matter of procurement of capital goods, components, spares, raw materials, pricing policy, selling arrangement, etc. iii. Sub-licensing: The Government expects that the technical collaboration agreement should generally not prohibit sub-licensing of the know-how, product-design or engineering design under agreement, to other Indian parties. Such sub-licensing, when it becomes necessary, is subject to terms to be mutually agreed by all parties concerned, including the foreign collaborator, and is subject to the approval of the Government. The collaboration agreements should not place any export restrictions to countries except where the collaborator has a sub-licensing agreement. iv. Minimum royalty: There should be no requirement for the payment of a minimum guaranteed royalty regardless of the quantum and value of production. v. Exports: To the fullest extent possible, there should be no restriction on free exports to all countries. School of Distance Education 76 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT vi. Brand names: There should be no provision for the use of the foreign brand names on the products for internal sale, although there is no objection to their use on products to be exported. vii. Training-Research and development: Adequate and suitable provisions should be made for the training of Indians in the fields of production and management. There should be adequate arrangement for research and development, engineering design, training of technological personnel, and other measures for the absorption and adoption and development of the imported technology. Such measures can be undertaken through in house facilities of the entrepreneur or in collaboration with recognised engineering design consultancy, research and development organisations in the public or private sectors, and recognised scientific and educational institutions where the necessary facilities exist. viii. Consultancy service: In case any consultancy is required to execute the project, it should be obtained from an Indian engineering consultancy firm. If a foreign consultancy firm is also considered necessary, an Indian consultancy firm should, nevertheless, be the prime consultant. ix. Patent laws: If the proposed item of manufacture is to be covered by a patent in India, it should be ensured that the collaboration agreement includes a clause to the effect that the payment of royalty for the use of the patent rights till the expiry of the life of the patent, and that the Indian party would have the freedom to produce the item even after the expiry of the collaboration agreement without any additional payment. x. Indian laws: Collaboration agreements will be subject to Indian laws. xi. Extensions: Government does not favour requests for extensions of the duration of collaboration proposals. All efforts should, therefore, be made to assimilate the technology within the initial duration of the agreement. Pollution Control Clearances Under the Environment (Protection) Act, 1986, 24 categories of projects and industries will require environmental clearance from the Central Government.  In addition, any project proposed to be located within 10 km of the boundary of a reserved forest or a designated ecologically sensitive area or within 25 Kms of the boundary of a national park or sanctuary will require environmental clearance from the Central Government.  For all other projects, environmental clearance need to be obtained only at the level of the State Government. Clearance is required from the environmental (for site clearance) and pollution control angle, which has to be obtained by all units other than certain specified non-polluting units in the small scale sector.  No Objection Certificate (NOC) for the site clearance usually involves clearance from the concerned State Pollution Control Board NOC is also required for adequacy of pollution control measures.  In general, the State Pollution Control Board is the concerned authority which will be the State Pollution Control Board is the concerned authority which will usually specify certain pollution control measures to be taken by the unit. School of Distance Education 77 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT  Pollution Control - State Pollution Control Board. A No Objection Certificate (NOC) should be obtained from the State Pollution Control Board before commencement of construction activity. In case the industry is of the highly polluting category, a full- fledged or rapid Environmental Impact Assessment (EIA) study has to be carried out and submitted to the State Pollution Control Board for approval, after which the construction can commence.  Industries Requiring Water and Affecting Effluent Disposal - State Pollution Control Board No Objection Certificate (NOC) should be obtained from the State Pollution Control Board before commencement of construction activity. Setting up of Micro Small and Medium Enterprises As soon as a person decides to become an entrepreneur and to start a MSME, he is required to take a number of steps and formalities one after the other. They are as follows: 1) Scanning of Business Environment: it is essential on the part of the entrepreneur to study and understand the prevailing business environment. Entrepreneur should scan the business opportunities and threats in the new environment. To study the administrative framework, procedure, rules and regulations and other formalities implemented by the government. The potential entrepreneur must assess his own deficiencies, which he can compensate through training. 2) Selection of the Product: The very success of one’s venture will depend on the rationality of his decision in this regard. The economic viability of the product can be ascertained by considering certain demand aspects such as volume of demand in the domestic market, volume of demand in the export market, volume of potential demand, a degree of substitution of an existing product etc. The prospective entrepreneur has to identify the product based on market research or market survey. 3) Selection of Form of Ownership: He has to select sole proprietorship or family ownership or partnership or private limited company as the form of the ownership. 4) Selection of Location and Site: Location is selected after considering certain factors such as nearness to market, sources of material and labour, modern infrastructure facilities etc. The entrepreneur has to choose a suitable plot for the factory. He may purchase land directly or choose from an industrial area developed by State Development Corporations like SIDCO, or Directorate of Industries. In order to stimulate industrial growth, the government of Kerala is providing infrastructural assistance by way of  Developing areas.  Development Plots.  Industrial estates, and  Mini industrial units. 5) Designing Capital Structure: Apart from the own capital, he may secure finance from friends and relatives, term loans from banks and financial institutions. 6) Acquiring Manufacturing Know-How or Technology: Many institutions of government, research laboratories, research and development divisions of big industries and certain consultancy agencies provide the manufacturing know-how. 7) Preparation of Project Report: The report usually covers important items like sources School of Distance Education 80 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT  Laws and regulations conducive for establishing a business unit  Climate condition of the area  Tax incentive available in that locality  Nearness to the market  Provision for disposal of waste  Cheap power supply Significance of Location Location selection plays a significant role in the strategic design of an enterprise, especially international one. However, it is a complex process that does not allow a business to change its location frequently. Choosing the appropriate location among a given set of alternatives is difficult work requiring the assessment of both qualitative and quantitative factors. One of the strategic decisions made by many enterprises is the location of their businesses. Render and Heizer affirmed that many companies throughout the world use the concept and techniques of location decision. Location has a considerable influence on the overall risk and profit of a business. Companies make location decisions infrequently usually because of the capacity of the facility or the changes of the labour productivity, exchange rate, cost and local attitudes. School of Distance Education 81 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT Module V Project Report The project report is a document that contains all information regarding the proposed project. It is served as a blueprint of all operations to be undertaken for attaining the desired results. The project report is basically the business plan of action and clearly describes its goals and objectives. It is one that helps in converting the business idea into a productive venture without any chaos or confusion as it defines strategies for project execution. Information from various aspects like technical, financial, economic, production and managerial are together constituted in project report for better understanding. It describes all inputs required for the accomplishment of a project so that they can be arranged accordingly at the right time. The project report is an essential tool available with management for proper monitoring of operations and helps them in recognizing any problems. Managers through project reports are able to estimate all costs of operations and possible profitability of the proposed project. Meaning & Definition A Project Report is a document which provides details on the overall picture of the proposed business. The project report gives an account of the project proposal to ascertain the prospects of the proposed plan/activity. Project Report is a written document relating to any investment. It contains data on the basis of which the project has been appraised and found feasible. It consists of information on economic, technical, financial, managerial and production aspects. It enables the entrepreneur to know the inputs and helps him to obtain loans from banks or financial Institutions. The project report contains detailed information about Land and buildings required, Manufacturing Capacity per annum, Manufacturing Process, Machinery & equipment along with their prices and specifications, Requirements of raw materials, Requirements of Power & Water, Manpower needs, Marketing Cost of the project, production, financial analyses and economic viability of the project. Characteristics of Project Report 1. Scope: The project report gives a clear picture of what is to be done or to be achieved. It describes the goals of the proposed project and activities to be undertaken for achieving these goals. 2. Resource: It shows the means or resources required to meet the desired scope. Project report serves as the roadmap which tells the direction in which business should go for attaining its goals. 3. Time: The project report denotes the standard time required for the completion of each and every task of the proposed project. 4. Quality: The project report explains the desired standards to be achieved by the completion of all tasks. Limit of deviations that can be accepted from these defined standards are also contained in this report. School of Distance Education 82 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT 5. Risk: Risk is an unavoidable factor associated with every business and needs to monitored properly. The project report considers all risk factors that may arrive at the completion of the proposed project and also tells the ways for recovering from these factors. Need/Objectives/Purpose of Project Report 1. Selecting Best Investment Proposal: Project report is an efficient tool for analyzing the status of any investment proposal. It shows the expected profitability and risk associated with the project and this way helps in choosing the best option. 2. Approval of Project: It is essential for registration or approval purposes of the proposed project. Different authorities like District industries center, Directorate of industries, government departments, etc. require project reports for giving approval. 3. Tracking: The Project report assists in tracking the current activities of the project. It helps team members and other stakeholders to check the project progress from time to time and helps in finding out any deviations against the original plan. 4. Visibility: Another important advantage of having the project report is that it gives full insight into the project. It gives a clear description of activities to be undertaken and avoids any confusion or disorder. 5. Risk Identification: Identification of risk is a significant step for the completion of every project. The project report enables in spotting the risk early and taking all corrective actions timely. 6. Cost Management: Project report helps in managing the expenses through regular reporting of all activities. It sets the standard cost of every operation in advance and helps in finding out any deviation in these costs through tracking of the project. 7. Financial Assistance: It is an important tool for availing financial assistance from financial institutions or fund providers. The project report enables financial institutions in judging the profitability of the proposed project and then takes the decision accordingly for approving the funds. 8. Test Business Soundness: Project report helps in testing the profitability and soundness of the proposed project. It tells the total estimated costs, possible income and risk associated with any proposal. Requirements / Contents of a Project Report Following are the contents of a project report: 1. General Information A project report must provide information about the details of the industry to which the project belongs to. It must give information about the past experience, present status, problems and future prospects of the industry. It must give information about the product to be manufactured and the reasons for selecting the product if the proposed business is a manufacturing unit. It must spell out the demand for the product in the local, national and the global market. It should clearly identify the alternatives of business and should clarify the reasons for starting the business. School of Distance Education 85 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT Every proposed business unit must draw a time table for the project. It must indicate the time within the activities involved in establishing the enterprise can be completed. Implementation schemes show the timetable envisaged for project preparation and completion. 11. Social responsibility The proposed units draws inputs from the society. Hence its contribution to the society in the form of employment, income, exports and infrastructure. The output of the business must be indicated in the project report. General Principles of a Good Reporting System A good reporting system helps the management in proper planning and controlling. If the reports are available to every level of management at the proper time, current activities may be regulated and controlled and necessary corrective actions may also be taken in time. Hence, some principles have been followed for making the reporting system more effective. Such principles are briefly explained below. 1. Proper Flow of Information: The information should be free flow from the proper place to the right end user of the report. Hence, the information should be presented in the right format and at a proper time so that it helps in planning and co-ordination. The flow of report should not be delayed at any cost. Flow of information is a continuous activity. Information may flow upward, downward or side ways within an organization. Orders, instructions, plans etc., may flow from top to bottom. Reports of grievances, suggestions etc. may flow from bottom to top. Notifications, letters, settlements and complaints may flow from outside. Annual Report, Financial Statement Analysis Report, Directors Report, Auditors report etc. may flow from inside to outside. Information flows as sideways from one manager to another at the same level through meetings, discussion etc. 2. Proper Timing: The very purpose of preparation of report is controlling the unfavourable activities. Hence, the report should be submitted at the required time at any cost. If not so, there is no use of preparing such report. Moreover, the efforts used for preparing the report and time are also waste. In the case of routine report, the time schedule should be strictly adhered to. The absence of information at required time leads to taking wrong decision. 3. Accurate Information: The report contains only accurate information. If wrong information are included in the report, it may lead to take wrong decision. Hence, the supply of accurate information helps the managerial executives to understand the situation very clearly. At the same time, the presentation of accurate information in the report should not involve excessive cost of preparation and should not result in the delay in the presentation of report. 4. Relevant Information: Proper attention should be devoted to include only relevant information in the report. The inclusion of irrelevant information is waste one and increase the time in the report preparation. Moreover, the irrelevant information confuse the end user of the report. 5. Basis of Comparison: The information bestowed by reports will be helpful when it carries provision to compare with past figures, standards set or objectives. The trend of the variation can be find out only through the comparison. Corrective action can be taken with the help of comparative information. School of Distance Education 86 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT 6. Reports should be Clear and Simple: The very purpose of preparing a report is helping the management in planning, coordinating and controlling. Hence, the report should be presented in very simple terms and can be clearly understood by anybody. If not so, there is no meaning of preparing a report. The method of presenting a report is in such a way that attracts the eye of the readers and enables them to arrive at a conclusion. The arrangement of information in a report is in brief, complete, clear and simple. 7. Cost: The management incur some expenses with regard to report preparation. Such expenses should be commensurate with the benefits derived from the report preparation. If possible, more benefits may be available than the expenses incurred. In this way, reporting system can be installed. In other words, there should be an endeavor to make the system as economical as possible. 8. Evaluation of Responsibility: The reporting system has been installed in such a way to evaluate the managerial responsibility. The standards or targets are fixed for each functional department. The record of actual performance is monitored along with the standards so as to enable management to assess the performance of different individuals. Performa of a Project Report A project report for new business conducts a profound road map for effectual business venture. It discusses whether the business requires finance or not, the challenging risks, several problems en route, etc. Hence it becomes vital for every new business to prepare a project report, to acquaint them on forewarning issues. Project report for New Business - Format Below is the sequence of standard format which should be followed while preparing new business project report: 1. Background of the business. 2. Customer's profile 3. Long and short term Corporate Objectives  To perform a viability assessment of the proposed new business ideas in terms of marketability, technical feasibility, financing and authorities  To be able to prepare a relevant business plan  To recognize fundamental startup issues 4. Market Analysis  Brief discussion on the type of market, chief influencers, players, etc.,  Market description.  Reasons for starting business in a particular market  Target clients  Advantages of the services offered by the new business  Market consumption patterns  Past and existing supply location School of Distance Education 87 | B.COM/BBA – SEMESTER IV – ENTREPRENEURSHIP DEVELOPMENT  Production prospects and limitations  Exports and Imports  Price structure  Flexibility of demand  Client behavior, purposes, intentions, impetus, approaches, inclinations and needs  Supply network and marketing rules formulated by the government  Government and technical limitations imposed on the promotion of the product 5. Financial Assessment  Investment expenditure and value of the entire project  Methods of investment  Anticipated productivity  Money flows of the project report  Investment value evaluated in context of different points of merit  Estimated financial ranking  Marketing Assessment  Product  Price  Place  Promotion 6. Operational Plan  Business models  Production of goods and services 7. Financial Plan 8. Management Structure 9. Business structure (Ownership, staff, etc.,) 10. SWOT Analysis: Significant Success aspects depending on Strengths, Weaknesses, Opportunities and Threats to be faced by the firm in future 11. Appendices  Break-Even Assessment  Profit and Loss Synopsis  Fund Flow Summary Tips for designing an effectual Project report for New Business