Lesson 1.

Entrepreneur
ENTREPRENEUR

 In Economics, output is considered to be created by the amalgamation of

factors of production such as Land, Labour, Capital and Organisation. For
their contribution in the production process, each factor is rewarded .
Land is paid in terms of rent and labour is rewarded with wage while
capital is paid in terms of interest. Organisation/Entrepreneur, combines
al these factors judiously and also assumes risk and faces uncertainity in
the production process and for this activity they are paid in terms of profit.

 An entrepreneur is a person who has possession of an enterprise or

venture and accepts significant accountability for the inherent risks and
the outcome. The word “Entrepreneur” is derived from the French verb
entrepredre. It means to undertake. The term is used to refer to anyone
who undertakes the organization and management of an enterprise
involving independence and risk as well as the opportunity for profit.
According to J.B.Say, “An Entrepreneur is the economic agent who unites
all means of production such as land, labour and the capital, thus produces
a product". Thus, entrepreneur in English is a term applied to the type of
personality who is willing to take upon herself or himself a new venture or
enterprise and accepts full responsibility for the outcome. Entrepreneurs
identify the market opportunity and exploit it by organizing their
resources efficiently to accomplish an outcome which changes existing
interactions within a given sector. According to Joseph Schumepeter, “An
Entrepreneur in an advanced economy, is an individual who introduces
something new in the economy a method of production not yet tested by
experience in the branch of manufacture concerned, a product with which
consumers are not yet familiar, a new source of raw material or of new
markets and the like”.
 The functions of an entrepreneurship according to Schumepeter are
o Introduction of new product (Designer Egg,Crossbred cows, Hybrid
fowls etc.,)
o Introduction of methods of production (Slated floor rearing of
Goat,Integration in poultry farming etc.,)
o Developing new markets (Urban areas) and finding fresh source of
raw materials (animal waste recycling), and
o Making changes.
 To conclude an entrepreneur is the person who bears risk, unites various
factors of production, to exploit the perceived opportunities in order to
evoke demand, create wealth and employment.

THE CONCEPT OF ENTREPRENEURSHIP

 Entrepreneurship is a process of identifying opportunities in the market

place, arranging the resources required to pursue these opportunities and
investing the resources judiciously to exploit the opportunities for long
term gains. It involves creating wealth by bringing together resources in
new ways to start and operate an enterprise.
 According to Higgins “Entrepreneurship stood for the function of
foreseeing investment and production opportunities, raising capital, hiring
labour, arranging the supply of raw materials, finding site, introducing a
new technique, discovering new resources or raw materials and selecting
top managers for day to day operations of the enterprise”.
 To conclude, entrepreneurship is set of activities performed by the
entrepreneur. Thus, entrepreneur proceeds entrepreneurship.

THE CONCEPT OF ENTREPRENEURSHIP

 Entrepreneurship is a process of identifying opportunities in the market

place, arranging the resources required to pursue these opportunities and
investing the resources judiciously to exploit the opportunities for long
term gains. It involves creating wealth by bringing together resources in
new ways to start and operate an enterprise.
  According to Higgins “Entrepreneurship stood for the function of
foreseeing investment and production opportunities, raising capital, hiring
labour, arranging the supply of raw materials, finding site, introducing a
new technique, discovering new resources or raw materials and selecting
top managers for day to day operations of the enterprise”.
 To conclude, entrepreneurship is set of activities performed by the
entrepreneur. Thus, entrepreneur proceeds entrepreneurship.

QUALITIES OF AN ENTREPRENEUR

Some of the essential qualities of entrepreneurs are as follows

 Success and Achievement: The entrepreneurs are self determined to

achieve high goals in business, which strengthen them to oercome the
obstacles, suppress anxieties, repair misfortune and desire expedients, to
run a successful business.
 Opportunity Explorer:A common criterion among successful
Entrepreneurs is their focus on opportunity rather than on resources,
structure or strategy.
 Integrity :Integrity and reliability are the glue and fiber that bind
successful personal and business relationships and make them endure.
 Optimistic and confident :As Entrepreneurs, they often face obstacles and
down periods and during these difficulty days, their self confidence and
optimism only helps them to get out of the crisis.
 Risk Taker: Entrepreneur accepts risk. They select a moderate risk
situation, rather than gambling or avoiding risk. They understand and
manage risk willingly.
 Energetic: The extraordinary workloads and the stressful demands
entrepreneurs face place a premium on energy. Many of them, fine-tune
their energy levels by monitoring their diet, following a fitnees regime and
knowing when to relax.
 Opportunity Explorer: Always entrepreneur identifies opportunities. He
seizes the opportunity with both hands and converts them into realistic
 achievable goals. It may be in the form of new product, newer methods of
production or marketing strategies such as location.
 Perseverance: Entrepreneur makes efforts and works hard till the goal is
successfully accomplished. They are undeterred by uncertainties , extreme
risks and difficulties coming in the way of achievement of final goal.
 Facing Uncertainty: Achievement oriented people tend to successfully
tackle an unfamiliar situation. They go ahead with solutions for the
problems even when the guidelines are not available.It is more common in
the case of entrepreneurs, since they try to do newer things.
 Seek Feedback: Entrepreneurs are quick learners. Entrepreneur likes to
have prompt and immediate feedback of their performance to improve
upon continuously so as to cater to the ever changing consumers' lifestyle.
 Independence: Entrepreneur likes to be their own master and wants to be
responsible for their own decision. An entrepreneur is a job giver and not a
job seeker and don't want to follow others or being dictated.
 Flexibility: Entrepreneur makes decisions time to time based on the
prevailing situations. Successful entrepreneur does not hesitate in revising
their decision. Entrepreneur is a person with open mind, not a rigid
person.
 Planner: Entrepreneur frames realistic business plans and sets goals and
follows them rigorously to achieve the objectives in a stipulated time
limit.They plan meticulously and execute it.Though the plans seems to be
out of the world, they have the vision and ability to achieve it.
 Self Confidence: Entrepreneur directs his abilities towards the
accomplishment of goals with the help of his strengths.
 Motivator: A distinguishing character which separates entrepreneur from
the rest of the flock is his ability to motivate his workers. Entrepreneur
influences and initiates people and makes them think in his way and acts
accordingly.They could improve the productivity of their employees by
their motivation.
 Stress Taker: Entrepreneur as a focal point will make many right decisions
which may involve lot of physical and emotional stress. While decision
making he keeps his cool even under tense situations.
 Self-starter: The ability to take the initiative, work independently and to
develop own ideas.
 Commitment - The willingness to make personal sacrifices through long
hours and loss of leisure time.More than any other factor, total dedication
in the work is the unique quality of an entrepreneur.
 Ability to move - As an Entrepreneur, he should always move ahead as
success comes with overcoming setbacks.
 Vision - Entrepreneurs know the path and direction they have to travel.
They have clear vision of what their farms can be and go after it.
 Team work - Entrepreneurs always believe in team work and motivate it
among the workers.
DISTINCTION BETWEEN AN ENTREPRENEUR AND A MANAGER

Point of Distinction Entrepreneur A Manager

Goal Management An entrepreneur starts a venture by The main aim of a manager is to render his
setting up a new enterprise for his service in an enterprise already set up by
personal gratification. He starts from someone, to achieve the goal of the firm.He
the scrap and build it brick by brick . merely run the business efficiently which
was built by some other person.

Ownership Entrepreneur is the owner of enterprise. A manager is the servant in the enterprise.

Risk Entrepreneur bears all risks and A manager being a servant does not bear
uncertainty involved in the enterprise. any risk or uncertanity involved in the
enterprise.

Rewards Entrepreneur, for his risk bearing role, A manager receives salary as reward for
receives profits. It may fetch him greater service rendered which is fixed at any
returns or may be irregular and particular period and regular, but can
 can at times be negative. never be negative.

Innovation As an innovator he is called as change A manager executes the plans of the

agent who introduces new or modified entrepreneur. Thus a manager translates
goods and services to meet changing others ideas into practice.
needs of the customer.He plans,
envisages the changes and implements
them.
 TYPES OF ENTREPRENEUR

 Clarence Danhof Classification: Clarence Danhof classifies entrepreneurs

into four types.
o Innovative: Innovative entrepreneur is one who assembles and
synthesizes information and introduces new combinations of factors
of production.
o Imitative: Imitative entrepreneur is also known as adoptive
entrepreneur. He simply adopts successful innovation introduced by
other innovators.
o Fabian: The Fabian entrepreneur is timid and cautious. He imitates
other innovations only if he is certain that failure to do so may
damage his business.
o Drone: His entrepreneurial activity may be restricted to just one or
two innovations. He refuses to adopt changes in production even at
the risk of reduced returns.
 Arthur H. Cole Classification: Arthur H. Cole classifies entrepreneurs as
o Empirical: He is an entrepreneur who hardly introduces anything
revolutionary and follows the principle of rule of thumb.
o Rational: The rational entrepreneur is well informed about the
general economic conditions and introduces changes which look more
revolutionary.
o Cognitive: Cognitive entrepreneur is well informed, draws upon the
advice and services of expert’s scheme of enterprise.
 Classification on the Basis of Ownership
o Private: Private entrepreneur is motivated by profit and it would not
enter those sectors of the economy in which prospects of monetary
rewards are not very bright.
o Public Entrepreneurship: In the undeveloped countries Government
will take the initiative to start an enterprise where capital
requirements are very high and returns are less with longer pay back
period .
 Classification Based on the Scale of Enterprise
o Small Scale: This classification is very popular in the developing
countries. In India, small scale enterprise is defined as an industrial
undertaking in which the investment in fixed assets in farm
buildings/animals/plant and machinery does not exceed Rs. 10
million. Investment limit in arm buildings/animals/plantand
machinery in respect of tiny enterprises is Rs. 2.5 million irrespective
of location of the unit. Small entrepreneurs do not possess the
necessary talents and resources to imitate large scale production and
introduce revolutionary technological changes.(Broiler farms, Dairy
farms etc., in India are mainly on small scale).
o Large Scale: In the developed countries large scale enterprises are in
greater numbers. They posses the necessary financial and managerial
capabilities to initiate and introduce new technical changes. The
result is that the developed countries are able to develop and sustain a
high level of technical progress.(Layer farms in India have now
become large scale investment).
Lesson 2. Livestock Entrepreneurship

LIVESTOCK ENTREPRENEURSHIP

 Entrepreneur associated to livestock farming / business, production of raw

materials related to livestock farms and livestock related processing
industries is considered as livestock entrepreneur.
 In other terms, a person who is linked directly or indirectly to the animal
husbandry or livestock sector is referred as livestock entrepreneur.

AVENUES OF LIVESTOCK ENTREPRENEURSHIP

 Livestock Farms
o The veterinarians can start their own livestock farms with their vast
technical knowledge; they can infuse scientific management
techniques in their own farms. In the WTO (World Trade
Organisation) era, GMP (Good Manufacturing Practices), SPS
measures are of great importance for export of livestock commodities,
as the emphasis in international trade is on quality and food safety. If
veterinarians start their own scientifically managed livestock
enterprise, they can exploit this opportunity. Further, practicing
proven scientific management techniques will improve productivity of
animals that would lead to overall quantitative and qualitative
improvement of livestock sector.
 Feed Manufacturer
o The veterinary graduates can start their own feed mill units for
various livestock and poultry species. Commercial feed availability for
various unconventional poultry species such as Quail, Emu, Ostrich,
etc. are far less than the demand. Manufacturing feed for these
species is a niche business as their energy requirement is different
from the existing commercially available broiler or layer feed.
 Fodder Supplier
o The main constraint which hampers the growth of livestock
production is the inadequacy of nutritious fodder. As there is more
 than 60% fodder deficit in India, veterinarians can combine together,
purchase fertile land and produce quality fodder and supply them to
the nearby livestock farmers. They can also start seed / fodder banks
in the potential areas.
 Farm Equipments manufacturer / Dealer
o Number of farm equipments are needed for livestock farms. For
example, in case of dairy farms, chaff cutter, milking machine, feeding
manager etc., are needed. Poultry farmers need debeaker, vaccinator,
automatic feeder, waterer, etc.,. Demand for farm equipments
increases with the wide adoptation of intensive livestock and poultry
farming system. The veterinarians can either start on their own or
they can act as dealer for these equipments.
 Dog breeder
o Dog breeding is an ever green field with potential opportunities in
urban areas. Dogs with good pedigree record fetches good price and
the veterinarians can readily exploit this opportunity. Combining dog
breeding with veterinary consultancy services offer excellent earning
opportunity.
 Hatchery
o Though starting a hatchery requires higher investment, it offers good
return.
 Pet Animal / Large Animal/ Mobile Clinic:
o It is the widely practiced by the veterinarians which offer them good
earnings in both rural as well as urban areas.
 Livestock products processor
o Value addition to the livestock products such as milk, egg, meat, and
fish have huge profit potential. Value of the products get increased
many folds during processing, and thereby provide excellent returns.
Veterinarians can start milk parlour, where they can sell processed
milk and milk products like flavoured milk, goa, ice cream etc., or
meat centre where, fried chicken, chicken 65, mutton khima etc.,
could be sold. Marketing of these value added products could be done
 in their own brand name and they can start chain of parlours / hotels
later.
 Farm consultant
o Livestock farm consultant is a lucrative avenue. Veterinarians with
skill and knowledge can earn well in specialized dairy farms, stud
farms, breeder farms, hatchery, sheep / goat farms. After some years
of experience in managing the farms, they can start their own farms
independently or with partnerships.
 Contract Farming
o Contract farming is a emerging system where the livestock farmers
are given all the inputs such as chicks/animals, feed, medicines,
technical inputs, etc. Farmers have to rear the chicks/animals and the
integrator will take care of the marketing activities. Veterinarians can
join together and venture into contract farming. Being technical savvy
would help them in getting loans, maintaining farm business and
marketing the products.
 Leather Industry
o Leather industry is so far unexplored by the Veterinarians. It offers
great profit potential. The skin and hide from animals are usually
purchased by the intermediaries in the villages at a throw away prices
and are sold to the processors at a huge margin. The processors add
value to the raw skin and make products and export / sell them at a
very high price. The veterinarians can perform the role of this
intermediaries.
 Agents for by products utilization
o The livestock feed manufacturers and pharmaceuticals require several
ingredients such as bone meal, fish meal, blood meal etc. which they
are getting from the agents at contract basis. Here, Veterinarians can
make interventions. They can make a tie-up and could meet the
requirements of feed manufacturers at a reasonable price and also can
earn money.
 Veterinary Pharmaceutical Industry
 o It is also a lucrative opportunity but needs huge investment. After
working some years in the pharmaceutical industry and learning
experience, Veterinarians can initially start a small one with fewer
drugs which can be expanded later to the needs of local farmers. From
thereon, they can grow slowly.

EMPLOYMENT OPPORTUNITIES FOR VETERINARIANS

 Apart from the above avenues, there are vast employment opportunities
available to the Veterinarians. Some of them are listed below:
o Government Veterinary Doctors
o Amul / Aavin-milk plants – Manager / Doctors
o Bank – Technical Officers
o Insurance Companies – Technical Officers
o Central and State Civil Services
o Private sector jobs such as Veterinary /Technical officer/Marketing
executives in dairy, poultry, equine and pharmaceutical sectors
o Extension Agents in NGO’s
o Meat Inspector – in Corporations
o Education – Assistant Professors in various Universities
o Scientists in ICAR and other government departments
o Private practice
o Military Service - Remount Veterinary corps in Indian army
o Researchers in Private, Central, State and International research
institutions
o There is a greater demand for veterinarians in foreign countries
as farm consultant , scientists etc.,
o Eco-jobs such as Wild life ecologist, Conservation scientist etc.,
o Clinical data management-It is an emerging field which was hitherto
unexplored. There is a lot of demand for Veterinary graduates in IT
industry in clincal data managment domain.
 EXPECTATIONS FROM VETERINARIANS

Introduction

 In the face of unprecedented competition, the veterinarian and his/her team

must provide their patients & clients the best scope of medical and surgical
care but also a variety of services and products .For some veterinarians these
services & products are not considered to be "ethical" or part of their
responsibility. However in the eyes of the owners, the veterinarian is the
expert, so it is quite normal and "expected" that he or she would fulfill these
needs. The "animal doctor" is expected to propose such services or products.
However, it is well known that there is a potential cultural conflict. Most
veterinarians will mention that they have not studied medicine and surgery
to "sell dog food, or shampoos". In such case the barrier is the veterinarian,
not the owner.

Expectations & needs

 There are several kinds of expectations. Those who are expressed or so-called
'explicit' and those who are not expressed by the customers or so-called
'implicit' expectations. It is quite important to know what are the client's
implicit expectations since by definition these will not be mentioned by
people. A perfect example is the fact that people expect the personnel and
staff in a veterinary clinic to have a ' professional medical look' (white or
medical types of clothes...), if it is not the case, people may be surprised or
even upset...but they will not mention it...it is implicit for them.
Veterinarians specifically need to have a good understanding of that category
of expectations. Some classical implicit expectations of the consumers
include:
o Availability (no wait, flexible hours, easy access & parking, sufficient
stock, etc.)
o Patience (Clients expect their Doctor to be patient with them, allow
sufficient time for them)
 o Explanatory (Answering the questions calmly, not avoiding them,
clarify their doubts and explains even the minute details)
o Transparency (prices should be clearly marked, invoices should be
itemized, etc.)
o Choice (various products & services, 'freedom of choice', etc.)
o Environment (comfortable, neat, clean, odorless, friendly, modern,
etc.)
o Clarity of the offer (prices listed, estimations, badges, etc)
o Services (various services adapted to their needs as pet owners)
 Various surveys have shown that what clients were looking for in a
veterinarian was by order of importance his or her:
o kindness
o affordability
o availability
o capacity to listen, and only after:
o his or her competency!
o approach
 Measuring client satisfaction in a practice can help maintain a more stable,
satisfied client base. Satisfaction will often be a measure of client perception
of quality. The highly satisfied client will feel they have received a high
quality service, whereas the dissatisfied client will be disappointed by the
quality of service.
 Client service is the ability to meet client requirements. Services are
experienced, and veterinarians, as service providers, are as much in
managing the client's experience as in providing technical expertise.
 "Any business that wants to succeed must be aware of its customer's
requirements...failure to do so is a missed opportunity to satisfy client needs
and to maximize profits." .Many practitioners are focused on the medical &
technical issues. They do not realize that their services do not match
necessarily what their clients expect and do not listen to them.
Lesson 3. Identifying Business Opportunities

INTRODUCTION

 The entrepreneur gets information on investment opportunities from

multiple sources such as the magazines, internet, financial institutions,
government, commercial organisations, media, friends, relations and so on.
Selecting the best business opportunity from the information collected,
requires ingenuity, skill and foresight on the part of the entrepreneur.
 As an entrepreneur, he has to select feasible and rewarding opportunity to
begin with. For this purpose he has to evaluate the ideas and understand gap
between demand and supply. Further he has to perform the following
activities:
o Studying government rules and regulations related to different
business opportunities.
o Extensive study of promising investment opportunity encompassing
technical, commercial, organisational, institutional and socio-cultural
aspects.
o SWOT analysis of business potential (Strength, Weakness,
Opportunities and Threats).
o Market survey for the project.

SOURCES OF BUSINESS OR PRODUCT IDEAS

 Market characteristics: Unfulfilled demand of a product will open the door

for new product. Supply and demand of various products and demand for
new products should also be analyzed. Eg. The introduction of diet cool
drinks such as diet coke with few calories for health conscious people is an
example of success of new idea.Likewise organic egg and designer egg also
offers wide scope.
 Import and Exports: The Government of India is encouraging exports and
various EXIM policy encourage entrepreneur to think about the new
options.There is huge demand exists for quality livestock products in
developed countries which could be utilized.
 Emerging new technology and scientific know how: Commercial
exploitation of indigenous or imported technologies and know how is
another source of project idea.Organic farming is a hot area which offers
ample scope for Indian livestock farmers.
 Social and Economic Trend: Social and economic status of people are always
dynamic in nature and offer wide opportunities. An entrepreneur should
observe such changes. For example, the demand for processed/frozen
livestock products such as cheese, frozen meat, chicken burger, meat
sausages, etc. is escalating in semi-urban and urban areas which could be
utilized by the entrepreneur.
 Product profile: An analytical study of the end products and by products can
throw light on new project idea. For example, by product of sugar industry
gave rise to one more large scale industry called paper industry. Likewise
poultry waste could be recycled and used.
 Changes in consumption pattern: Changes in consumption pattern of the
people in the home country and foreign countries also requires the
entrepreneurs attention. Eg. Increasing urbanization, rising per capita
income and changing lifesytle and food habits, has increased the demand for
livestock products which could be capitalised.
 Revival of sick: A sick unit gives ample investment opportunities in the
hands of dynamic entrepreneur. He can revitalize and turn a sick unit into a
profitable one. Eg. Laxmi Mittal’s acquisition of sick steel units all over the
world and turning it to profitable enterprises by changing management and
processes
 Trade fairs and Trade journals: Magazine, journals, industries or trade fairs
offer wide scope for business opportunities.

IDENTIFYING A BUSINESS OPPORTUNITY

 An entrepreneur is an opportunity seeker. For the potential entrepreneur his

first-task is to explore, identify, and then select an attractive business
opportunity. A good business opportunity must be capable of being
converted into feasible projects.
 Two major characteristics of a business opportunity should be highlighted.
 o Good and wide market scope, i.e. gap between present or likely
demand and supply.
o An attractive, acceptable and reliable return on investment. (IRR)
 Business opportunity need to be analysed from the view point of production,
commercial, managerial, potential and prospective demand for the product,
technical viability etc.

STEPS IN IDENTIFICATION OF BUSINESS OPPORTUNITY

Identification of opportunity involves following steps.

o Preliminary study
o Selection of product or services
o Conducting a market survey
o Contact programmes to collect sufficient information about proposed
venture
o Succeeding in the market

PRELIMINARY STUDY

 As soon as entrepreneur realizes a business opportunity, he has to evaluate

investment opportunities against a set of specific criteria to select those
project ideas which are commercially feasible. The criteria are
o Is the opportunity compatible with the promoter and society?
o Is opportunity compatible with government rules and regulations ?
o Whether raw materials are easily available?
o What is the scope and size of the potential market? Who are all the
major buyers?
o Whether cost justifies the project?
o What are all the risks inherent in the project?
 SELECTION OF PRODUCT OR SERVICE

Entrepreneur should identify the product which he wishes to manufacture/produce.

While deciding about the product, following points should be considered.

 Potential demand for the product or service

 Estimated volume of demand for the product
 Assess potential of existing competitor and estimate about probable
competitors
 Study the scope for the future demand
 Infrastructural facilities- power, transport etc.
 Current status of technology and scientific development in the field
 Availability of resources such as raw material and required labour
 Government policies, rules and regualtions, controls
 Environmental impact
 Returns from the product
 Information regarding particular line of product
 Locational advantage of the product
 Whether the product belongs to an ancillary unit and serves as major
component for the parent industry. It provides a ready demand, hence
selection of this type of product entails easy marketability
 Availability of skilled and unskilled labour and their wages
 Characteristic of the proposed product to be produced.
 Consumer's response to the product/service and their preferences.

CONDUCTING A MARKET SURVEY

Market survey with reference to the availability of raw material, demand, marketing
and distribution and consumer behaviour should be conducted.

 Raw material availability

o Search for leading suppliers of raw material (feed and fodder) and
other materials required for producing the product
 o Study the price policy of various suppliers and analyse impact of price
fluctuations on production
o Analyse availability pattern, transportation and storage facilities
(milk)
o Study local and outside source of raw materials and their advantages
and disadvantages
o Analyze the credit facilities, advance payments, terms and conditions
for suppliers.
 Demand
o Estimate the existing demand here and abroad
o Study the comparative demand structure of various manufacturers
o Price structure of different brands
o Estimate the threshold price for various segments of market(price
discrimination)
o Identify untapped demand in the sector
o Forecast the future demand
 Marketing and distribution
o Selection of best channel of distribution based on marketing efficiency
o Advertising and publicity programme for the product
o Product positioning (Consumers' opinion about the product)
o Outstanding features of product or service
o Market features and practices- credit facility, minimum order,
incentives.
o Business terms, commission, stocks, warehouse facilities
 Consumer behavior
o Motivate buyers to buy new product
o Analyse the buyers purchasing power
o Conversion of latent demand into effective demand
o Analysis of consumption pattern to tap the major market share
o Understand the preference for durability, service, economy
o Understand consumer characteristics of different region and produce
and market accordingly.
 Consumer behavior
 Lesson 4. Concepts and Theories of Self-employment and
Entrepreneuship

INTRODUCTION

 Entrepreneurship is the act of being an entrepreneur. Entrepreneurs

assemble resources including innovations, finance and business acumen in
an effort to transform innovations into economic goods. This may result in
new organizations or may be part of revitalizing mature organizations in
response to a perceived opportunity. The most obvious form of
entrepreneurship is that of starting new businesses; however, in recent
years, the term has been extended to include social and political forms of
entrepreneurial activity.

THE SCHOOLS OF ENTREPRENEURIAL THOUGHT

Macro view

 The macro view of entrepreneurship presents a broad array of external

processes that are beyond the control of the individual entrepreneur.
 In macro view there are three schools of entrepreneurial thought
o The environmental school of thought,
o The financial/capital school of thought, and
o The displacement school of thought.

The Environmental School of Thought

 This school of thought deals with the external factors that affect a potential
entrepreneur’s lifestyle. These can be either positive or negative forces in the
molding of entrepreneurial desires.
 Here, the focus is on institutions, values, and mores that, grouped together,
form a sociopolitical environmental framework that strongly influences the
development of entrepreneurs.
  For example, if a middle manager experiences the freedom and support to
develop ideas, initiate contracts, or create and institute new methods, the
work environment will serve to promote that person’s desire to pursue an
entrepreneurial career.
 Another environmental factor that often affects the potential development of
entrepreneurs is their social group. The atmosphere of friends and relatives
can influence the desire to become an entrepreneur.

The Financial/Capital School of Thought

 This school of thought is based on the capital seeking process. The search for
seed and growth capital is the entire focus of the entrepreneur.
 Certain literature is devoted specifically to this process, whereas other
sources tend to treat it as one segment of the entrepreneurial process.
 The venture capital process is vital to an entrepreneur’s development. This
school of thought views the entire entrepreneurial venture from a financial
management standpoint.

The Displacement School of Thought

 The displacement school of thought focuses on the negative side of group

phenomena where someone feels “out of place” or is literally “displaced”
from the group.
 It holds that the group hinders a person from advancing or eliminates
certain critical factors needed for that person to advance.
 Due to such actions the frustrated individual will be forced into an
entrepreneurial pursuit out of his or her own motivation to succeed. The
individuals will not pursue a venture unless they are prevented or displaced
from doing other activities.
 Cultural awareness, knowledge of political and public policy, and economic
indoctrination will aid and improve entrepreneurial understanding under
the displacement school of thought. The broader the educational base in
economics and political science, the stronger the entrepreneurial
understanding.Three major types of displacement i(Political, Cultural and
Economic) illustrate this school of thought.
 MICRO VIEW

 The micro view of entrepreneurship examines the factors that are specific to
entrepreneurship and are part of the internal locus of control. The potential
entrepreneur has the ability, or control, to direct or adjust the outcome of
each major influence in this view. Unlike the macro approach, which focuses
on events from the outside looking in, the micro approach concentrates on
specifics from the inside looking out.

The Entrepreneurial Trait School of Thought

 Many researchers and writers have been interested in identifying traits

common to successful entrepreneurs. This approach is based on the study of
successful people who tend to exhibit similar characteristics that, if copied,
would increase success opportunities for the followers. For example,
achievement, creativity, determination, and technical knowledge are four
factors that usually are exhibited by successful entrepreneurs. Family
development and educational incubation are also examined. Certain
researchers have argued against educational development of entrepreneurs
because they believe it inhibits the creative and challenging nature of
entrepreneurship. Other authors, however, contend that new programs and
new educational developments are on the increase because they have been
found to aid in entrepreneurial development. The family development idea
focuses on the nurturing and support that exist within the home atmosphere
of an entrepreneurial family. This reasoning promotes the belief that certain
traits established and supported early in life will lead eventually to
entrepreneurial success.

The Venture Opportunity Schools of Thought

 This school of thought focuses on the opportunity aspects of venture

development. The search for idea sources, the development of concepts, and
the implementation of venture opportunities are the important interest areas
for this school. Creativity and market awareness are viewed as essential.
 Additionally, according to this school of thought, developing the right idea at
the right time for the right market niche is the essential criterion to
entrepreneurial success.
 Another development from this school of thought is based on corridor
principle. While exploring or formulating a concept, new pathways or
opportunities will arise that lead entrepreneurs in different directions. The
ability to recognize these opportunities when they arise and to implement
the necessary steps for action are key factors. The maxim that preparation
meeting opportunity equals “luck” underlies this corridor principle.
Proponents of this school of thought believe that proper preparation in the
interdisciplinary business segments will enhance the ability to recognize
venture opportunities.

The Strategic Formulation School of Thought

 George Steiner has stated that “strategic planning"is inextricably interwoven

into the entire fabric of management; it is not something separate and
distinct from the process of management. The strategic formulation
approach to entrepreneurial theory emphasizes the planning process in
successful venture development.
 Ronstadt views strategic formulation as a leveraging of unique elements.
Unique markets, unique people, unique products, or unique resources are
identified, used, or constructed into effective venture formations. The
interdisciplinary aspects of strategic adaptation become apparent in the
characteristic elements listed herewith their corresponding strategies:
o Unique markets. Mountain versus mountain gap strategies, which
refers to identifying major market segments as well as interstice (in-
between) markets that arise from larger markets.
o Unique people. Great chef strategies, which refers to the skills or
special talents of one or more individuals around whom the venture is
built (Venkateshwara Hatchery) .
o Unique products. Better widget strategies, which refers to innovations
that encompass new or existing markets (Kentucky fried chicken -
KFC ) .
o Unique resources. Water well strategies, which refers to the ability to
gather or harness special resources (land, labor, capital, raw
materials) over the long term. Without question, the strategic
formulation school encompasses a breadth of managerial capability
that requires an interdisciplinary approach.
Lesson 5. Criteria for Development of Entrepreneurship .....

INTRODUCTION

Once entrepreneurship is decided upon, there are three main routes an

entrepreneur may follow.

 Starting a new livstock business

o The entrepreneur can begin from scratch on all his own ideas, as there
are no existing problems or concerns from a previous owner. He has
the freedom to start the business in his own way. However, the risk is
higher and he has to devote time, effort, and money—especially for
start-up expenses such as equipment, a building, etc.
 Purchasing an existing livestock business
o Advantages of purchasing an existing business include smaller start-
up costs and building on the existing goodwill or loyalty of established
customers. This option is good if the entrepreneur does not have a
great deal of business experience. Disadvantages might include
inheriting existing problems such as poor location, stiff competition,
fluctuating market, equipment problems, and poor reputation.
 Taking over a family livestock business
o In this situation, an entrepreneur has the support and training
available from the family members, creating trust and togetherness
that bonds the business as one entity. Maintaining separate family
and business relationships is the biggest obstacle to overcome,
making it difficult to get away from the business. Personality conflicts,
different interests, changed values, and burnout are a few reasons that
family-owned businesses don’t survive to the second generation. A
person who grows up in the family business may be ready to spread
his or her wings and explore new career aspirations.
 TYPES OF BUSINESS OWNERSHIP

 Liability, taxes, and financing options will be the deciding factors when
choosing the appropriate business structure for an entrepreneurial venture.
Whether the business is organized as a partnership or as a corporation could
affect the management process, ability to receive a loan and the type and cost
of benefits the business can offer.

SOLE PROPRIETORSHIP

 Sole proprietorship is the easiest, oldest, and most popular form of business
to create. Sole proprietorship usually involves one person owning and
operating a business; the owner and business is the same person. The owner
is the only one responsible for the activities of the business. This form of
business is usually a service business that is handled and operated by one
person. Eg. Veterinary Consultants, Auditors.
 The factors associated with the sole proprietorship, along with their
advantages and disadvantages, are as follows:
o Profits are taxed as income to the owner personally.
o Tax rate is lower than the corporate tax rate.
o Owner has complete control of the business.
o There is unlimited liability for company debts.
o Little reporting is required, and government regulation is minimal.

Sole Proprietorship
Advantages Disadvantages
 easy and inexpensive to create  full liability for debts, etc.
 one owner has complete authority over the  higher risk of losing personal assets, such as
business car, home, etc.
 taxes are not separate from the owner’s;  personal responsibility for workers’ injuries
usually at a lower rate  no one to take over if owner becomes sick
 no certificate of incorporation  difficult to obtain finances for business
 no bylaws, minutes, stock shares  requires more money invested by owner
 all profits go to owner  temptation to mix business money with
 higher flexibility personal money
 only as successful as the skills, abilities, and
talents of the owner
 business dies when owner dies

 Normally, farmers are sole proprietors. They operate their farming

businesses as the owner or boss of the working operation. Any other business
owner who operates under the status of “self-employed” also falls within this
category of sole proprietor, such as the local electrician, plumber, and
mechanic. Farmers do not have to apply for government certificates or status
because they are assuming full responsibility for the business.
 The sole proprietorship is the oldest, simplest, and most common form of
business entity. It is a business owned by a single individual. For tax and
legal liability purpose, the owner and the business are one and the same. The
proprietorship is not taxed as separate entity. The earnings of the business
are taxed at the individual level, whether or not they are actually in cash.
There is no vehicle for sheltering income. For liability purposes, the
individual and the business are also one and the same. Thus, legal claimants
can pursue the personal property of the proprietor and not simply the assets
used in the business.

PARTNERSHIP

 Partnership involves two or more persons who unite in the operation and
management of a business venture. This type of partnership may be
 established for legal or tax purposes. The prospect of becoming a partner in a
business can be an incentive to new employees. Most effective partnership
arrangements include professional service businesses, such as accounting
and law firms.
 Some aspects associated with the partnership form of business are as
follows:
o Business is subject to little government regulation.
o Business is relatively easier to establish.
o Formal partnership agreement is highly recommended to address
possible conflicts that could arise in future.
o Each partner is liable for all debts.
o All profits are taxed as income to the partners according to the
percentage of ownership.
o Business name must be registered with the Registrar of Companies.
 A clearly written agreement containing the partnership terms is essential.
 Have a clear and realistic agreement that anticipates future incidents.
 Include a buy-sell agreement in which terms are provided for the departure
of one or more partners from death, disability, retirement, or resignation.
 Consider carrying life insurance on each partner, so the partnership can pay
the remaining partner’s estate for the value of his or her interest in the
business.

Partnership
Advantages Disadvantages
 share ideas and skills among  personality conflicts and relationship
partners strains
 secure investment capital  liable for each other’s actions
more easily  difficulty in obtaining financing
 tax rates lower than  a partner’s bankruptcy may affect the
corporation other partners
 more flexibility of ownership  can’t sell business unless all partners
and income agree
Private Limited Company

Private limited company is a one

 Has a minimum paid-up share capital of Rs.1 Lakh or such higher capital as
may be prescribed; and
 By its Articles Association:
o Restricts the right of transfer of its share;
o Limits the number of its members to 50 which will not include:-
 Members who are employees of the company; and
 Members who are ex-employees of the company and were
members while in such employment and who have continued
to be members after ceasing to be employees;
 Prohibits any invitation to the public to subscribe for any shares or
debentures of the company; and
 Prohibits any invitation or acceptance of deposits from persons other than its
members, directors or their relatives.

Public Limited Company

 The Company defined under section 3(1)(iv) of the Companies Act, 1956 is a
public company which-
o Is not a private company;
o Has a minimum paid-up capital of Rs. 5 lakhs or such higher capital
as may be prescribed;
o Is a private company but subsidiary of a public company.

Private Companies deemed to be Public Companies

 Certain private companies are deemed to be public companies by virtue of

section 43 A, viz.-
o When 25% or more of its paid-up share capital is held by one or more
body corporate;
o When its average annual turnover (during the last 3 years) exceeds
Rs. 25 crores;
 o When it holds 25% or more of the paid-up share capital of Public
Company; or
o When it accepts or renews deposits from the public after making an
invitation by an advertisement.

CORPORATION

 A corporation is a business that is chartered or registered by the state and

that operates separately from the owner or owners. The advantages and
disadvantages of this business form are as follows:

Corporation
Advantages Disadvantages
 easier to raise money/capital (issuing  expensive to set up and
shares of stocks) organize
 limited liability of owners, only owing for  profits taxed twice
what is invested  extensive record keeping
 better status for employees and paperwork
(pensions/retirement, dividends)
 easier to change ownership

 Limited Liability Corporations are the most recent form of business,

combining the best of both worlds (partnerships and corporations).
 Advantages
o Limited liability of corporation members
o Not liable for company’s debts
o Tax advantages of a partnership
o Shareholders only taxed once
o Popular among professionals (doctors, lawyers, etc.)
o Owners risk only their investment
o Personal assets not at risk
 Corporations are legal entities comprised of persons who have obtained a
charter legally recognizing the corporation as a separate entity that has its
 own rights, privileges, and liabilities that are separate from the individuals
that form the corporation. The Corporation can own assets, borrow money,
and perform business functions without directly involving the owners.

o Most complex form of business corporation

o Comprised of three groups of people: shareholders, directors, officers
o Subject to more regulations than sole proprietorships and
partnerships
o Earnings subject to double taxation (the corporation is taxed and
shareholder dividends are taxed)
o Limited liability
o Not a total protection from lawsuits

 The largest businesses in India, such as Venkateswara Hatcheries Ltd ,

Suguna Chicken,TCS and Infosys are examples of Corporations. They
encompass such a wide array of businesses and involve so many investors
and stockholders that their liability and security are ensured.
 Lesson 6. Essential Criteria for Development of
Entrepreneurship in Livestock Sector

ESSENTIAL CRITERIA FOR DEVELOPMENT OF

ENTREPRENEURSHIP IN LIVESTOCK SECTOR

Entrepreneurship theory has been evolving over the last 20 years and is ever
growing. It is defined as a verifiable and logically coherent formulation
of relationships, or underlying principles that either explain entrepreneurship,
predict entrepreneurial activity or provide normative guidance (prescribing the
right action in particular circumstance). Entreprenuership is interdisciplinary
and contains various approaches that would increase one’s understanding of
it. One way to examine these theories is with a “ schools of thought’
approach that divides entrepreneurship into specific activities. These activities
may be within a “ macro view or a micro view”, but all address the conceptual
nature of entrepreneurship.

 Creativity: Creativity and innovation are often used to mean the same thing,
but each has a unique connotation. Creativity is the ability to bring
something new into existence. Ideas usually evolve through a creative
process whereby imaginative people bring them into existence, nurture
them, and develop them successfully. The creative process for an idea
contains five stages – germination, preparation, incubation, illumination,
and verification.
 Germination: The manner in which an idea is germinated is a mystery. Most
ideas can be traced to an individual’s interest in or curiosity about a specific
problem or area of study.
 Preparation: After germination, creative people start on a conscious search
for answers. It may be a problem to solve- such as C.Subramanian and
M.S.Swaminathan determination to make India self sufficient in food and to
help the Indian farmers resulted in Green Revolution. If it is an idea for a
new product or service, then market research is the business equivalent.
 Incubation: Incubation is a stage of mulling it over while the subconscious
intellect assumes control of the creative process and may take time
 depending upon the problem, individual etc., This is a crucial aspect of
creativity because when we consciously focus on a problem, we behave
rationally to attempt to find systematic resolutions.
 Illumination: It is the fourth stage which occurs when the idea resurfaces as
a realistic creation. It may be triggered by an opportune incident. as in the
case of Alexander Flemming discovery of Penicillin. This stage is critical for
entrepreneurs because ideas, by themselves have little meaning unless and
otherwise they are converted into reality. It is the recognition of idea as being
feasible solution.
 Verification: It is a stage of development that refines knowledge into
application. This is often tedious and requires perseverance by an individual
committed to finding a way to harvest the practical results of his or her
creation.An idea may be good and useful, but if it lacks applicability, it could
not be executed.
 Innovation : Entrepreneurs innovate and is the specific instrument of
entrepreneurship which differentiates them from others. It is the act that
endows resources with a new capacity to create wealth and in fact creates a
resource. Successful entrepreneurs, whoever they may be or whatever their
aim may be - try to create value and to make a contribution. Still successful
Entrepreneurs aim high and not content simply to improve on what already
exists, or to modify it. They try to create new and different values and it is the
most important function of an entrepreneur, according to Joseph Schumpter
and is the core attribute of an entrepreneur. For an innovator, the market is
never too saturated.The entire world progress based on innovation only.

BASIC REQUIREMENTS FOR ENTREPRENEURIAL

INITIATIVES IN LIVESTOCK AND ALLIED SECTOR

Techno-Economic feasibility of the enterprises under different

conditions

A number of critical factors are important for new-venture assessment. One way to
identify and evaluate them is with a checklist. In most cases, however, such a questionnaire
approach is too general. The assessment must be tailor-made for each activity.
  A new venture goes through three specific phase: pre start-up, start-up, and
poststart-up. The pre start-up phase begins with an idea for the venture and
ends when the doors are opened for business. The start-up phase
commences with the initiation of sales activity and the delivery of products
and services and ends when the business is firmly established and beyond
short-term threats to survival. The post start-up phase lasts until the venture
is terminated or the surviving organizational entity is no longer controlled by
the entrepreneur.
 The prestart-up and start-up phases, are the critical segments for
entrepreneurs. During these two phases, five factors are critical:
o The relative uniqueness of the venture,
o The relative investment size at start-up,
o The expected growth of sales and/or profits as the venture moves
through its start-up phase,
o The availability of products during the prestart-up and start-up
phases, and
o The availability of customers during the prestart-up and start-up
phases.

New - venture idea checklist

 Basic Feasibility of the Venture

 Competitive Advantages of the Entrepreneur with reference to Venture
 Buyer Decisions in the Venture
 Production of the Goods and Services
 Marketing of the Goods and Services
 Staffing Decisions in the Venture
 Control of the Venture
 Financing the Venture

INTRODUCTION

Technical Feasibility
 The evaluation of a new-venture idea should start with identifying the
technical requirements and the technical feasibility for producing a product
or service that will satisfy the expectations of potential customers. The most
important of these are:
o Functional design of the product and attractiveness in appearance.
o Flexibility, permitting ready modification of the external features of
the product to meet the changing customer demands or technological
and competitive changes. Adaptability to newer changes is an
essential criterion for the success of the product.
o Quality of the ingredients from which the product is made.
o Reliability, ensuring performance as expected under normal operating
conditions.
o Product safety, posing no potential dangers under normal operating
conditions to the customers.
o Reasonable utility-an acceptable rate of obsolescence.
o Ease and low cost of maintenance.
o Standardization which meets the regional standards and which are
good for the public health.
 SPECIFIC ACTIVITIES OF FEASIBILITY ANALYSIS

Technical Feasibility Market Feasibility Financial Analysis of Competitive Analysis

Analysis Analysis Feasibility Organizational
Analysis Capabilities

 Standard  Market  Required  Personnel  Existing

quality potential financial requirements competitors
specifications  Market resources  Required skill  Size, financial
 Technical planning issues  Available levels of potential resources, market
requirements financial employees entrenchment
 Product resources  Managerial  Potential
development requirements reaction of
 Product  Determination competitors to
testing of individual newcomer
 Plant location responsibilities  Potential new
competitors
 Scope for
future expansion
Lesson 7. Aspects of project preparation and
Analysis

INTRODUCTION

 Projects are the cutting edge of development. Perhaps the most difficult
single problem confronting livestock administrators in developing countries
is implementing development programs. Much of this can be traced to poor
project preparation.Project preparation is clearly not the only aspect of
livestock development or planning. Identifying national livestock
development objectives, selecting priority areas for investment, designing
effective price policies, and mobilizing resources are all critical. But for most
agricultural/livestock development activities, careful project preparation is
the best available means to ensure efficient, economic use of capital funds
and to increase the chances of implementation on schedule. Unless projects
are carefully prepared in substantial detail, inefficient or even wasteful
expenditure is almost sure to result-a tragic loss in nations short of capital.
 To formulate and analyze effective projects, those responsible must consider
many aspects that together determine how remunerative a proposed
investment will be. All these aspects are inter-related.
 All must be considered and reconsidered at every stage in the project
planning and implementation cycle.

TECHNICAL ASPECTS

 The technical analysis concerns the projects inputs (supplies) and outputs
(production) of real goods and services.It is mostly concerned with the
standard and other qualitative aspects of the product.
 The technical analysis will examine the possible technical relations in a
proposed livestock project: the climate in the region of the project and their
potential for livestock production, the availability of water, both natural
(rainfall, and its distribution) and supplied (the possibilitiesfor developing
irrigation, with its associated drainage works); the livestock species suited to
 the area; the production supplies and their availability; the potential and
desirability of mechanization; and diseases prevalent in the area and the
kinds of vaccination that will be needed. On the basis of these and similar
considerations, the technical analysis will determine the potential yields
from the livestock, the coefficients of production, and the possibilities for
further expansion. The technical analysis will also examine the marketing
and storage facilities required for the successful operation of the project, and
the processing systems that will be needed.
 It is extremely important, and the project framework must be defined clearly
enough to permit the technical analysis to be thorough and precise.
 The other aspects of project analysis can only proceed in light of the
technical analysis.
 Good technical staffs are essential for this work; they may be drawn from
consulting firms or technical assistance agencies abroad.

 A major responsibility of the project analyst is to keep questioning all the

technical specialists who are contributing to the project plan to ensure that
all relevant aspects have been explicitly considered and allowed for.
 Project preparation and analysis is divided into five aspects: technical,
institutional – organizational – managerial, social, commercial, financial and
economic.

Approaches in preparation of Livestock Entrepreneurial project

 Different approaches are followed while preparing Entrepreneurial project

on livestock.
 Based on the technical knowledge, past experience and guidance from the
subject matter specialist, the entrepreneur himself can choose the activity,
budget, location etc., taking into account the resources available with him
and the market demand for the products.
 After choosing the activity, he can assess it's profitability by preparing the
Entrepreneurial project.
 While preparing the livestock project , the following aspects have to be
adhered.

INSTITUTIONAL - ORGANIZATIONAL-MANAGERIAL
ASPECTS

 A whole range of issues in project preparation revolves around the

overlapping institutional, organizational and managerial aspects of projects,
which clearly have an important affect on project implementation. The socio-
cultural patterns and institutions of those, the project will serve must be
considered.
 The organizational proposals should be examined to see that the project is
manageable. The analyst must examine the ability of the available staff to
judge whether they can administer such large-scale activities such as Dairy
processing unit, Integrated poultry complex(feed mill, hatchery, layers unit
and processing) etc.,. When managerial skills are limited, provision may
have to be made for training.

SOCIAL ASPECTS

 There is a greater need for analysts to consider the social patterns and
practices of the clientele a project will serve. More and more frequently,
project analysts are also expected to examine carefully the broader social
implications of the proposed investments.The project should not affect the
local sentiments of the region. Cattle rearing for beef marketing, pork
production and sales tanneries etc., are some of the examples. If the social
aspect is not taken care of, the project may face severe opposition from the
local people, which could ruin the profitability of the project.Though the
project may be technically and economically feasible, it could not be
processed, if it affects the local people sentiments or their livelihood.

COMMERCIAL ASPECTS
  On the output side, careful analysis of the expected market for the project’s
production is essential to ensure that there will be an effective demand at a
remunerative price. Where will the products be sold? Is the market large
enough to absorb the new production without affecting the price? If the price
is likely to be affected, by how much? Is the product meant for domestic
consumption or for export? Does the proposed project produce the grade or
quality that the market demands? Since the product must be sold at market
prices, a judgment about future government price supports or subsidies may
also be considered.If the demand is not estimated or forecasted accurately, it
may end in over production or missed sale opportunities.

Financial aspects

 The financial aspects of project preparation and analysis encompass the

financial effects of a proposed project on each of its various participants. In
livestock projects the participants include farmers, private sector firms,
public corporations, project agencies, and perhaps the national treasury.
 The farm budget becomes the basis for shaping the credit terms to be made
available. The analyst must judge whether farmers will need loans to finance
on-farm investment (and if so, what is the margin money the farmers should
invest from their own resources) or to meet some production costs, and
whether seasonal short-term credit should be provided for working capital to
finance inputs and pay for hired labor.In long term projects , the analyst
should judge, whether the farmers have adequate capacity to lead their life
till the returns are expected or any special financial arrangements need to be
created.The analysis of farm income will also be helpful in assessing the
incentives for farmers to participate in the project. What will be the probable
level of change in farm income? When it is expected? How likely are price
changes or fluctuations could affect farm income? What will be the effect of
subsidy arrangements on farm income, and what changes in government
policy might affect the income earned by farmers?

Economic aspects
 The economic aspects of project preparation and analysis require a
determination of the likelihood that a proposed project will contribute
significantly to the development of the farm economy and total economy and
whether it justifies using the scarce resources it reuired. The point of view
taken in the economic analysis is that of the society as a whole. The financial
and economic analyses are thus complementary-the financial analysis takes
the viewpoint of the individual participants and the economic analysis that of
the society.

ENTREPRENEURSHIP DEVELOPMENT THROUGH

TRAINING

 Studies on the entrepreneur have revealed that both cultural or social factors
and personality factors are related to entrepreneurial behaviour.
Entrepreneurs are more likely to emerge from permissive middle class
families.
 Closely-knit and extended families tend to discourage mobility, self-reliance
and initiative which are essential qualities of entrepreneurs. Further more,
children of parents with business-related occupations, members of unstable
families have been found to have greater entrepreneurial propensity. Since
there are cultural and personality factors which bear upon entrepreneurial
behaviour, entrepreneurship development policies and programmes should
be so devised that individuals with latent potentials for entrepreneurship can
be selected and trained effectively to tap such potentials.
 It is in this regard that the training approach to entrepreneurship
development comes to the fore. Experiences in entrepreneurship
development have led many to conclude that significant increase in
indigenous entrepreneurship can indeed by stimulated by a well-balanced
training programme, that is including appropriate selection of both trainers
and trainees, motivation and techniques of enterprise building and
management. Training increases human productivity. Specifically, it
provides the entrepreneur with a better comprehension of his environment
as well as with a wider range of alternatives for decision-making. Training
 further equips him for innovations. It therefore, becomes a tool for
entrepreneurship complementing direct assistance such as environmental
stimulation and government incentives.
 The training approach should addresses two broad categories of people:
o Those who are entrepreneurs in status whether by choice or
circumstance, and
o Those who are potential entrepreneurs but are dysfunctionally
engaged in non-industrial activities.
 Training the first group is directed at improving business performance and
raising aspiration levels higher, as indicated by greater readiness (and
success) in expanding existing businesses and taking the risks of introducing
change. Training the second group entails the convincing of individuals of
the social and economic advantages of industrial activity. People in less
developed areas need to understand their potential contributions to society
as they assume risks or break away from the bonds of tradition.

MANAGEMENT/INTERPERSONAL SKILL &BUSINESS

COMMUNICATION

 One type of communication travels from individual to individual in face-to-

face and group settings. Such flows are termed interpersonal
communications, and the forms vary from direct verbal orders to casual,
nonverbal expression. Interpersonal communication is the primary means of
managerial communication.
 The problems that can arise when managers attempt to communicate with
other people can be traced to perceptual and interpersonal style differences.
Each manager perceives the world based on his background, experiences,
personality, frame of reference, and attitude.

Interpersonal Styles

 Interpersonal styles differ among individuals, and understanding these

differences is important for managerial and organizational performance.
 Interpersonal style refers to the way in which an individual prefers to relate
to others.

Interpersonal Styles and communication

 The arena: The region most conducive to effective interpersonal

relationships and communications is termed the arena. Here, all the
information necessary to carry on effective communication is known to both
the sender (self) and the receivers (others).
 The blind spot: When relevant information is known to others but not to the
sender (self), a blind spot result. In this context, a person (self) is at a
disadvantage when communicating with others because he cannot know the
others’ feelings, sentiments, and perceptions. Consequently, interpersonal
relationships and communications suffer. The greater the blind spot, the
smaller the arena, and vice versa.
 The facade: When information is known to the self but unknown to others,
the person (self) may resort to superficial communications; that is, he may
present a façade. A façade is a false front. The façade area is particularly
damaging when a subordinate “knows” and an immediate supervisor “does
not know.” The façade, like the blind spot, diminishes the arena and reduces
the possibility of effective communication.
 The unknown: If neither party knows the relevant feelings, sentiments, and
information, each party is functioning in the unknown region. Such a
situation often is stated as “I can’t understand them, and they don’t
 understand me.” In this predicament, interpersonal communications are
sure to suffer.

Exposure and Feedback

 Interpersonal communication problems are the results of unsound

relationships. An individual can improve unsound relationships by adopting
two strategies-exposure and feedback.
 Exposure: Increasing the arena area by reducing the façade area requires
that one be open and honest in sharing information with others. The
unwillingness of companies to discuss salary matters is an example of
inadequate exposure.
 Feedback: When the self does not know or understand, more effective
communications can be developed through feedback from those who do
know. Thus, the blind spot can be reduced with a corresponding increase in
the arena.
 Lesson 8. National Institute for Entrepreneurship and Small
Business Development (NIESBUD)

NATIONALINSTITUTEFORENTREPRENEURSHIPAND SMALL BUSINESS DEVELOPMENT (NIESBUD)

 The National Institute for Entrepreneurship and Small Business

Development (NIESBUD) was established in 1983 by the Ministry of
Industry (now Ministry of Small Scale Industries), Govt. of India, as an apex
body for coordinating and overseeing the activities of various institutions/
agencies engaged in Entrepreneurship Development Particularly in the area
of small industry and small business.
 The Institute which is registered as a society under Govt. of India Societies
Act (XXI of 1860). The policy, direction and guidance to the Institute are
provided by its Governing Council whose Chairman is the Minister of SSI.

ENTREPRENEURSHIP DEVELOPMENT INSTITUTE OF INDIA

 The Entrepreneurship Development Institute of India (EDI), an autonomous

body and not-for-profit institution, set up in 1983, is sponsored by apex
financial institutions, namely the IDBI Bank Ltd, IFCI Ltd. ICICI Ltd and
State Bank of India (SBI).
 The Institute is registered under the Societies Registration Act 1860 and the
Public Trust Act 1950. The EDI has been selected as a member of the
Economic and Social Commission for Asia and the Pacific (ESCAP) network
of Centres of Excellence for HRD Research and Training. EDI as a member
of the Network will have interactive access to information on other 123
member institutions via Internet.
 EDI will also be invited to collaborate with ESCAP in the development and
delivery of a series of ESCAP HRD courses to train social development
personnel working to alleviate poverty in the region.

INDIAN INSTITUTE OF ENTREPRENEURSHIP

  With an aim to undertake training, research and consultancy activities in the
small industry sector focusing on entrepreneurship development, the Indian
Institute of Entrepreneurship (IIE) was established in the year 1993 at
Guwahati by the erstwhile Ministry of Industry (now Ministry of Small Scale
Industry), Government of India as an autonomous national institute.
 The policy direction and guidance is provided to the Institute by its Board of
Management whose Chairman is the Secretary to the Government of India,
Ministry of Small Scale Industries.


MINISTRY OF SMALL SCALE INDUSTRIES

Ministry of Small Scale Industries

 Ministry of Small Scale Industries is the nodal Ministry for formulation of

policy, promotion, development and protection of small scale industries in
India.
 The Ministry of Small Scale Industries (SSI) designs and implements the
policies through its field organizations for the promotion and growth of
small scale industries.
 The Ministry also performs the functions of policy advocacy on behalf of
small scale industries (SSI) sector with other Ministries/Departments.

SMALL INDUSTRIES DEVELOPMENTORGANISATION

(SIDO)

 SIDO was established in 1954 on the basis of the recommendations of the

Ford Foundation. Over the years, it has seen its role evolve into an agency for
advocacy, hand holding and facilitation for the small industries sector.
 It has over 60 offices and 21 autonomous bodies under its management.
These autonomous bodies include Tool Rooms, Training Institutions and
Project-cum-Process Development Centres. SIDO provides a wide spectrum
of services to the small industries sector.
  These include facilities for testing, training for entrepreneurship
development, preparation of project and product profiles, technical and
managerial consultancy, assistance for exports, pollution and energy audits
etc.
 SIDO provides economic information services and advises Government in
policy formulation for the promotion and development of SSIs.

THENATIONALSMALLINDUSTRIESCORPORATION LIMITED (NSIC)

 The National Small Industries Corporation Ltd., an ISO 9001:2000

Company, was established in 1955 by the Government of India with a view to
promote, aid and foster the growth of Small Industries in the country.
 NSIC continues to remain at the forefront of industrial development
throughout the country, with it's various programs and projects, to assist the
small scale sector in the country.
 The Corporation provides integrated Technology, Marketing and Financial
support to Small Scale Sector.

NATIONAL INSTITUTE FOR SMALL INDUSTRY EXTENSION TRAINING (NISIET)

 The NISIET, since its inception in 1960 by the Government of India, has
taken gigantic strides to become the premier institution for the promotion,
development and modernization of the SME (Small and Medium Scale
Enterprises) sector.
 An autonomous arm of the Ministry of Small Scale Industries (SSI), the
Institute strives to achieve its avowed objectives through a gamut of
operations ranging from training, consultancy, research and education, to
extension and information services.

SMALLINDUSTRIES DEVELOPMENT BANKOFINDIA

(SIDBI)
 Small Industries Development Bank of India (SIDBI) was established in
April 1990 under an Act of Indian Parliament as the principal financial
institution for Promotion, Financing , Development of industry in the small
scale sector and Co-ordinating the functions of other institutions engaged in
similar activities.
 Since its inception, SIDBI has been assisting the entire spectrum of SSI
Sector including the tiny, village and cottage industries through suitable
schemes tailored to meet the requirement of setting up of new projects,
expansion, diversification, modernisation and rehabilitation of existing
units.

THEKHADIANDVILLAGEINDUSTRIESCOMMISSION (KVIC)

 The Khadi and Village Industries Commission (KVIC) is a statutory body

created by an Act of Parliament (No.61 of 1956 and as amended by Act No. 12
of 1987). Established in April 1957, it took over the work of the former All
India Khadi and Village Industries Board. The broad objectives that the
KVIC has set before it are :
o The social objective of providing employment,
o The economic objective of producing saleable articles, and
o The wider objective of creating self-reliance amongst the poor and
building up of a strong rural community spirit.
 The KVIC is charged with the planning, promotion, organisation and
implementation of programs for the development of khadi and other village
industries in the rural areas in coordination with other agencies engaged in
rural development wherever necessary.
 Lesson 9. Entrepreneurship Development
Training Programmes

INTRODUCTION

 Various Government agencies are offering different training programmes for

different skill level for tapping, developing and harnessing the
entrepreneurial qualities of rural people so as to empower them.
 Khadi And Village Industries Commission (KVIC)
 Government of India has approved the introduction of a new credit
linked subsidy programme called Prime Minister’s Employment Generation
Programme (PMEGP) by merging the two schemes that were in operation till
31.03.2008 namely Prime Minister’s Rojgar Yojana (PMRY) and Rural
Employment Generation Programme (REGP) for generation of employment
opportunities through establishment of micro enterprises in rural as well as
urban areas. PMEGP will be a central sector scheme to be administered by
the Ministry of Micro, Small and Medium Enterprises (MoMSME).The main
objective of the scheme is to generate employment opportunities in rural as
well as urban areas of the country through setting up of new self-
employment ventures/projects/micro enterprises.
 Self Help Groups
 SHG is a small group of rural poor, who have voluntarily come forward to
form a group for improvement of the social and economic status of the
members.
 It can be formal (registered) or informal.
 The concept underlines the principle of Thrift, Credit and Self Help.
 Members of SHG agree to save regularly and contribute to a common fund.
 Community Based (SC, ST, BC) Development Programmes
 Some of the online programmes which provide material, videos and
clippings on Entrepreneurship include
http://etl.stanford.edu/,http://ecorner.stanford.edu/podcasts.html,
http://eclips.cornell.edu/entrepreneurs.do,
http://www.enterprisetoronto.com/ etc.,
Importance of Entrepreneurship Development Programmes

 Ensures availability of skilled manpower at all management levels

 Enhancing abilities, potential among entrepreneurs
 Increase efficiency
 Maintain and enhance product quality
 Minimise wastages in production process
 Minimise accidents on the job
 Reduce fatigue and increase speed of work
 Standardisation in industry and internal processes

Methods of Training

 Individual instruction
 Group instruction
 Lecture method
 Demonstration method
 Written instruction method
 Conference
 Meetings

TRAINER'S TRAINING PROGRAMMES

 Enterprise Launching and Management

 EMT Accreditation Programmes
 Barefoot Managers
 Self-Employment / PMRY
 Project Formulation & Appraisal
 Planning & Organising EDPs

SMALL BUSINESS PROMOTER'S PROGRAMMES

 Entrepreneurship Orientation for Weaker Sections/DWACRA Functionaries

 Grassroot Management Training
 Women Empowerment through Enterprise Development
 Orientation Programmes for Voluntary Organisations
 Small Business Development
 Micro-Enterprise for Women/SC/ST/Weaker Section
 TRYSEM/ISB Beneficiaries

DEVELOPMENT OFFICER'S ORIENTATION PROGRAMMES

 DICs - Managers and General Managers

 SIDO Officers
 Voluntary Organisations
 Income - Generating Activities
 ITI/Vocational Institute Instructors and Principals
 KVIC
 Performance Improvement and Personal Effectiveness
 Techniques for Identification & Selection of Entrepreneurs

CONTINUING EDUCATION PROGRAMMES FOR SSI

ENTREPRENEURS

 Working Capital Assessment & Management

 Opportunity Identification & Guidance
 Managing & Controlling Small Business Accounts
 Marketing Strategies for small Entrepreneurs
 Managing Finance
 Creative Selling & Promotion for Small Enterprise
 Marketing Survey Methods
 TQM for Small Business
 Business Forecasting Techniques
 Export Marketing for SSI Entrepreneurs
 Accounting Business and Industry
 Strategic Management for Small Entrepreneurs
 Managing Finance SSI
 Effective Business Communication for Small Business Owners
 Leadership & Team Building Skills for Small Business Owners
  Computers for Small Entrepreneurs
 Opportunity & Support for Expansion, Diversification & Modernisation of
Small Enterprises
 Small Enterprise Management Assistants Programme (Barefoot Managers)
 Enhancing Productivity & Improving Quality

INTERNATIONAL TRAINING PROGRAMMES

 Small Business Creation & Development for Women Entrepreneurs

 Development of Entrepreneurship & Entrepreneurial Skills
 Entrepreneurship for Small Business Trainers/Promoters
 Entrepreneurship Development for Business Entrants
 Micro-Enterprise Development
 Case Development
 Curriculum Development
 Entrepreneurship Development & Promotion of Income-Generating
Activities
 Business Advisors' Training Programmes
 Small Business Planning & Promotion
 Besides Institute conducts country-specific entrepreneurship/small business
development programmes (Already done for CIS, Nepal, Bangladesh & Fiji)
or for specific international organistions (Done for UNIDO/ UNDP, ILO,
Commonwealth Secretariat & USAID)

ENTREPRENEURSHIP DEVELOPMENT PROGRAMMES

These are done on-campus in Delhi or off campus in different locations. These are
of two types

 Target specific such as

o General
o Women
o Science & Technology Graduates
o School Leavers
 o SC/OBC
o Ex-Servicemen (Veterans)
o Self-Employment (SEEUY, TRYSEM, PMRY etc.)
 Product/Process Oriented
o Leather
o Builders Hardware
o Food
o Plastics
o Chemicals
o Sports Goods
o Readymade Garments
o Electronics
o Information Technology etc.
Entrepreneurship Development Training Institutes and Training Programmes offered in India

S.No. Institute Training Programmes offered Duration Eligibility

1. National Institute for  Computer hardware & networking 3 days to 3 Graduate /

Entrepreneurship and Small Business  Entrepreneurship and Skill Development months Diploma
Development (NIESBUD), Programmes in Garment drafting & construction depending holders
NOIDA(nisebud.nic.in)  Entrepreneurship and Skill Development upon the with
Programmes in Mushroom cultivation programme adequate

 Entrepreneurship and Skill Development English

Programmes in Room boys Knowledge

An apex body established by Ministry  ToT Entrepreneurship Development – Capacity

of Industries, Govt. of India for building under SJSRY
coordinating, training and overseeing  Entrepreneurship and Skill Development
the activities of various institutions/ Programmes in Basic Computer Hardware Training
agencies engaged in Entrepreneurship Programme
Development Particularly in the area  Entrepreneurship and Skill Development
of small industry and small business. Programmes in Mobile repairing
 Entrepreneurship and Skill Development
Programmes in sewing operator
 National workshop on Entrepreneurship and skill
 development for urban poor
 Entrepreneurship and skill development on
Desktop publishing
 Human Resource Development and
Entrepreneurship Education Training (HRD-EE)
 Small Business Planning and Promotion (SBPP)
 Business Advisors’ Training (BAT)
 Women and Enterprise Development (WED)
 Trainers Training on Entrepreneurship and
Promotion of Income Generation Activities (TT-
EPIGA)
 Entrepreneurship for Small Business
Trainers/Promoters (ESB-TP)
 Trainers Training on Sustenance and Growth of
Self Help Groups (TT-SHSHG)

2.  Communication Skills in English and Promotion of 8-12 weeks Graduate /

Micro, Small and Medium Enterprises Diploma
National Institute of Micro, Small and
(EPMSMEs) holders
Medium Enterprises (NIMSME),
 Communication Skills in English and Promotion of with
 Hyderabad Food Processing Enterprises (EPFPE) adequate
 Communication Skills in English and Managing English
Micro and Small Enterprises (EMMSEs) Knowledge
(Formerly National Institute of Small
 Empowerment of Women through Enterprises
Industry Extension Training
(EWE)
(NISIET))
 Planning and Promotion of Agro and Food
Enterprises (PAFE)
 Tourism and Hospitality Management (THM)
 Enterprise Development through Micro Finance
(EDMF)
 Intellectual Property Rights (IPRs) and
Implications for SMEs (IPRIS)
 Capacity Building for providing Alternative
Livelihood Opportunities for Poor (CBALO)
 Training Methods and Skills for Managers
(TMSM)
 Promotion of Micro Enterprises (POME)

3. Entrepreneurship Development  Governance & Management of Non-Profit 6 weeks Graduate

Organizations (NPOs)/NGOs with
 Institute of India, Gandhi Nagar  Use of English Language in Business adequate
Communication English
(www.ediindia.org)
 ICT Skills for Small Enterprise Operations Knowledge
 Entrepreneurial Management
 Entrepreneurship & Small Business Promotion
 Business Development Service Providers for
Micro Enterprise and Micro Finance
 Industrial & Infrastructure Project Preparation &
Appraisal
 Business Research Methods & Data Analysis

4. National Institute of Rural  Microfinance for poverty alleviation 4-12 weeks Senior and
Development, Hyderabad  Participatory rural development Middle
 Management of rural drinking water and sanitation level
projects managers/

 Natural resources management for sustainable rural officers

(www.nird.org.in)
livelihood
 Geo informatics applications in rural development
 Strategies for sustainable agriculture and rural
development
 Planning for poverty reduction and sustainable
development
 Information Technology for rural development
Lesson 10. Project Evaluation

INTRODUCTION

 A project is a specific plan or design presented for consideration.

 It is a location specific activity with specific objectives, time and cost
limitations and of non-repetitive nature.
 In banking, projects refers to an activity in which financial resources are
expended to create capital assets that produce benefits over an extended
period of time and which logically lends itself to planning, financing and
implementing as a unit. Whereas, UNIDO defines a project as a proposal for
an investment to create and or develop certain facilities in order to increase
the production of goods/services in a community over a certain period of
time.
 Projects are common term used by many to denote specific action plans.
 Project can be long term or short term, limited or comprehensive, single
sector concentrated or multi sector concentrated.
 Project Evaluation is a step-by-step process of collecting, recording and
organizing information about project results, including short-term outputs
(immediate results of activities, or project deliverables), and immediate and
longer-term project outcomes (changes in behaviour, practice or policy
resulting from the project).
 Common rationales for conducting an evaluation are:
o response to demands for accountability;
o demonstration of effective, efficient and equitable use of financial and
other resources;
o recognition of actual changes and progress made;
o identification of success factors, need for improvement ;
o validation for project staff and partners that desired outcomes are
being achieved.

Importance

 Evaluating project results is helpful in finding answers to key questions like

 o What progress has been made?
o Whether the desired outcomes were achieved, if not why?
o Are there ways that project activities can be refined to achieve better
outcomes?
o Do the project results justify the project inputs?

DEFINITION

Project: can be defined thus as

 A scientifically evolved work plan

 Devised to achieve a specific objectives
 Within specified time limit
 Consuming planned resources

IDENTIFYING THE PROJECT

 The first phase of project management is concerned with identifying the

project to achieve the desired objectives.
 The initial task coming under project identification is to find out the sources
of the project.
 Agencies like government organisations, international institutions like
WHO, World Bank, UNDP, Non Governmental Organisations can serve as
the better source of projects.
 Progressive farmers, successful entrepreneurs, technical experts, Bankers,
Media, National priorities and Thrust areas of Development also serve
sources for Identification of Projects.

PROJECT NEED ANALYSIS

 The aspects included under project need analysis are the beneficiaries (target
group), problem, solutions, and decisions.
 The problem should exhibit the necessity of immediate intervention.
 The focus should be to identify the beneficiaries (target group).
 The solutions should solve the original problem.
 The decision to take up the project lies on how these three aspects problem,
solutions and beneficiaries are important to project intervention.

PROBLEM FORMULATION ANDSTATEMENTOFTHE

PROBLEM

 The crux of the project lies in the problem formulation process.

 The project team should have detailed understanding of the problem, scope,
intervention areas and the out come of the project to be hypothesized.
 Based on a multi phased understanding and analysis, describe the problem
to be addressed and resolved.

PROJECT PLANNING

 Project planning can be defined as a scientific and systematic process, in

which logical linkages are clearly established among various element of
projects. Successful implementation of the project lies on effective project
plan.
 Based on the anticipated goals and objectives the project planning shall be
made.
 The project plan is the blue print of the project.
 Effective planning gives proper direction in the implementation of the
project and it further helps in adequate monitoring and evaluation.
 For the implementation of plan, an activity chart has to be prepared.
 The activity chart consists of all the proposed activities in the
implementation process, including the start date, calendar for the entire
project, dates of monitoring and evaluation periods, finishing stages, series
of out puts, slack time and responsible person who is going to coordinate the
activities etc.

PROJECT BUDGET
  The project budgeting phase is in the project formulation phase.
 Two types of budgets are to be made.
 One is the cost category budget (materials, administration, capital;
expenditures etc) and the second is the activity budget.
 This project budget is to calculate the cost of each project inputs.
 The estimation of the project cost should be made on fairly realistic sense of
financial values.
 In the multi year projects the inflation rate also has to be anticipated in
advance.

Lesson 11. Investment Analysis

CAPITAL BUDGETING/PROJECT APPRAISAL/CAPITAL

EXPENDITURE DECISIONS

 Generally in livestock projects, the investments are made during different

time periods and the associated benefits are spread overtime.
 These investments and returns are not comparable as such without adjusting
for their time value.
 Thus the time value of money has to be necessarily taken into reckoning in
the investment analysis of agricultural projects.

Capital expenditures are defined as investments to acquire fixed or long lived assets
from which a stream of benefits is expected. Such expenditures represent an
organization's commitment to produce and sell future products and engage in other
activities. The estimate of the costs and benefits of a capital project should show the
difference that results from making the investment. The important information is
the change in cash flows as a result of undertaking the project, i.e., the differential
principle.

Approaches to Preparation of Entrepreneurial Project on Livestock

While formulating a livestock project several factors, such as, kind of enterprise,
amount of investment, availability of inputs and skilled labour,market potential,
Veterinarian's availabilty and nearness, sale price, scope for further expansion have
to foreseen and worked out. Apart from this, availability of bank loans, their
requirements, technical and financial detail would have to be sketched out. It starts
from project planning, cost estimation, modalities of formulating the project and
also availing the bank loans.

Fixed Investment Estimates

 Fixed investments consist of all the costs necessary to bring the project to full
operation. These include the construction of animal sheds, purchase of
animals, purchase of equipment costs, installation, training, commissioning,
initial spoilage, spare parts inventory, etc.

Working Capital Estimates

 The analysis includes estimates of all investments required for a project. The
project may require increases (or decreases) in cash, accounts receivable,
accounts payable, or inventory. These changes in working capital should be
included in the calculation as should the changes to these at the end of the
economic life of the project.

Economic Life

 It is often difficult to estimate the life of a project (i.e., its planning horizon).
The criterion is the continued ability to generate satisfactory cash flows or
other intangible benefits. The economic life of a project is the lesser of its
physical life, technological life or product-market life.
 Physical Life - Physical life represents the time taken for an asset to become
physically worn out so that it can no longer be efficiently maintained and
must be replaced.
 Technological Life -Technological life is the period of time that elapses
before an even newer machine or process becomes available which would
make the proposed machine or process obsolete.

Market Estimates
  Market Study - A market study forecasts sales revenue t hrough the life of a
project. It should describe fully all aspects of the company's position in the
market and estimate the degree of marketing risk associated with the
venture. It provides information on demand, supply and price trends in the
overall market, and specific forecasts of market share, sales volume, net
returns and selling costs, as well as what competitors are or may be doing in
the market place.
 Competitive Factors - The demand forecast should indicate the competitors
and their market share. The productive capacity in existence and potentially
available would then be assessed in relation to the forecasted demand to
show the volume and timing of expansion needs. Competitors' expansion
possibilities and economics should also be considered along with their
product and technology life cycles.
 Price Estimation - The estimation of price trends is frequently the most
difficult area of market forecasting. However, analysis of the supply/demand
balance and estimation of competitors' economics can provide a guide. The
elasticity of demand in relation to the price may also be considered. A careful
study of the product life cycle is often needed since, in the early development
stages of a new product, the price is often high; it falls as demand levels off at
maturity, and then declines further as new substitutes appear on the market.

Operating Cost Estimates

 Cost of feed and fodder, labour(Casual), health care charges, electricity and
other miscellaneous costs are usually included.

Risk Analysis

 Risk exists in capital budgeting when more than one outcome may occur. A
quantitative evaluation of a capital expenditure proposal requires that
several predictions be made, often far into the future. As a general rule, the
risk associated with achieving an expected cash inflow or outflow in a given
year increases as one moves further into the future as there are more factors
in the long term which cannot be foreseen but which will affect cash flows.
Evaluation Techniques

 Several techniques are available to arrive at a financial decision regarding a

capital expenditure project. The project appraisal techniques are broadly
classified under two heads namely.,
 Undiscounted Measures
 Discounted Measures

UNDISCOUNTED MEASURES

 They are the naïve (simple) methods of ranking agricultural projects. They
don't consider the time value of money and simply compare the cost and
returns and rank the project.
 The three important undiscounted measures are
o Pay back period
o Proceeds per rupee of outlay
o Average annual proceeds per rupee of outlay

PAY BACK PERIOD

 Payback period refers to the period of time required for the return on an
investment to "repay" the sum of the original investment. For example, a
Rs.1000 investment which returned Rs.500 per year would have a two year
payback period. Shorter payback periods are obviously preferable to longer
payback periods (other things being equal).
 Payback period as a tool of analysis is often used because it is easy to apply
and easy to understand for most individuals.
 The payback period is considered a method of analysis with serious
limitations and qualifications for its use, because it does not properly
account for the time value of money , risk , financing or other important
considerations such as the opportunity cost.
  It is generally agreed that this tool for investment decisions should not be
used in isolation.
 Alternative measures of "return" preferred by economists are net present
value and internal rate of return. An implicit assumption in the use of
payback period is that returns to the investment continue after the payback
period.
 There is no formula to calculate the payback period, excepting the simple
and non-realistic case of the initial cash outlay and further constant cash
inflows or constant growing cash inflows.
 Pay back period is a simple technique of ranking projects based on the actual
period of time in which one can get back total investment.

P = I/E

 where, P is the pay back period

 I is the total investment made in the project and
 E is the net cash revenues / net revenues per annum.

PROCEEDS PER RUPEE OF OUTLAY

Proceeds per Rupee of Outlay = Total Proceeds / Total Investment

ANNUAL PROCEEDS OF RUPEE OUTLAY

 This method is another method of choosing between the projects and

measured by the following formula:

Average annual proceeds of rupee = ( Total proceeds / Life span of project ) / Total
Investment

 The projects are estimated by the magnitude of the estimate.

 The major draw back of the undiscounted measures is that for the same data
of the project, we will get different rankings depending upon the measure.
 Thus undiscounted measures are inconsistent and incompatible in ranking.
 DISCOUNTED MEASURES

 Here the cash flows which are accrued in the project are discounted with an
appropriate discount rate.They take into account of the time value of money.
A rupee does not have the same value over time.That is, its value or
purchasing power in terms of goods and services declines.
 Generally the existing interest rate is taken as discount rate for this purpose.
 The discounted cash flows are the best estimates to measure the worth of the
projects.
 The three important discount rate measures are
o Net Present Worth (NPW)
o Benefit Cost Ratio (BCR)
o Internal rate of Returns (IRR)

NET PRESENT WORTH

 The Net Present Worth which is also called as Net Present Value (NPV) is
nothing but the present value/worth of the cash flow stream in the project.
 The cash flow in the project is the difference between cash inflow and cash
outflow.
 The investments made in the projects are generally called costs or cash
outflows.
 The receipts that accrued during different time periods are called as cash
inflows or gross returns.
 The cash flows discounted with an appropriate discount rate will give the net
present worth of the project.

Bt is cash flows in tth year, Ct is cash outflows in tth year, t is 1 to 10 years that is life
span of the project.
 The choice criterion using NPW is that the project with positive NPW is
accepted for implementation and the project with negative NPW is rejected.
 If he is to choose among different projects, the project with highest NPW has
to be chosen.

BENEFIT COST RATIO (BCR)

 BCR is worked out by dividing the present value of cash inflows by the
present value of cash outflows.
 If the BCR is more than one, that project is accepted and if BCR is less than
one the project is rejected.
 Among the different projects, the project with highest BCR is to be selected.

INTERNAL RATE OF RETURNS (IRR)

 It is the rate of return per rupee invested in an agricultural project over its
life span.
 For example if the IRR is 30 per cent in a livestock project, it means that this
project gets an average annual return of Rs. 30/ per Rs. 100/ invested in the
project over its life span.
 It is the rate of return at which the present value of total cash flows in a
project is equal to zero. In other words, it is the discount rate at which the
NPW of the project is zero i.e.,
 For a project to be viable it should have a BCR of one or greater than one at
the opportunity cost of capital and a NPW of zero or greater than zero at the
opportunity cost of capital and the discount rate for IRR should be greater
than the opportunity cost
Lesson 12. Financial Resources

SOURCES OF AGRICULTURE/ LIVESTOCK FINANCE

Finance for agriculture can be obtained from formal and informal sources

 Formal sources
o Credit co-operatives
o Commercial banks
o Government
o Regional Rural Banks
 Informal sources
o Money lender
o Friends and relatives
o Traders
o Landlords

3 R’s OF CREDIT
 To estimate the rationality of a loan, it is essential to know credit analysis.
 The considerations involved in credit analysis generally fall into three
groups:
o Returns.
o Repayment capacity
o Risk bearing ability.
 These are popularly known as the three R’s of credit.

Returns

 This R of credit has great significance for the creditor as well as the
borrower.
 It requires that both the borrower and the financier should be satisfied with
the returns from credit.
 The problem of determining the profitable use of capital is a part of decision
making and it involves selection of enterprises, determining the most
 economically optimum production techniques and determining the size of
each enterprise.

Repayment capacity

 It is the test of economic feasibility.

 It determines the amount the farmer will be able to spare for repayment of
loan.
 It is generally acceptable that if an investment is profitable, the loan can be
repaid without any difficulty.

Risk bearing ability

 Risk bearing ability implies the capacity to cope with an unexpected low
income and unpredictable expenses and losses due to the vagaries of nature
and other hazards such as diseases and price fluctuations.

3 C's OF CREDIT
 They are character, capacity and capital.
 Character implies the borrower’s moral qualities, such as honesty, integrity
and sense of responsibility which all influence the risk bearing ability and
repayment.
 Capacity signifies the potential of the borrower to repay the loan, when it is
due and depends upon his income.
 Capital reflects the net worth of the borrower (assets minus liabilities) which
also reflects his repayment and risk bearing ability.

METHODS OF REPAYMENT OF LOANS

Four methods are commonly used.

 Straight end repayment or lumpsum repayment

o The entire loan is paid on the expiry of the term but the interest on the
loan is paid each year.
 Partial repayment or variable repayment
 o A part of the loan together with a part of the interest on the loan is
paid up every year.
 Amortized even repayment
o An equal amount is repaid every year.
o This includes a larger proportion of the principal and a smaller
amount of interest in each succeeding installment of payment.
o The method of payment is suitable when income is likely to flow at a
constant rate throughout the period.
o The annual installment is arrived at through the formula given.

Where,
I = Annual installment in Rs.
B = Principal amount borrowed in Rs.
n = Loan period in year.
i = Annual interest rate in fraction.

 Amortized decreasing repayment

o The amount of the principal remains constant and the share of
interest declines with every installment of repayment.
o Thus, the annual payment becomes smaller every succeeding year.

Lesson 13. Financial Analysis of Accounts

FINANCIAL STATEMENT

Some of the financial statements useful to know the financial structure and position
of any livestock enterprise are listed below.

 Balance Sheet
 Profit and Loss statement
 Cash flow statement
 BALANCE SHEET

 A balance sheet is a summary statement of all the assets and liabilities of a

business at a given point of time.
 To be precise, it presents the net value of assets and liabilities in a concise
form at a given time and is usually prepared towards the end of the financial
year.
 Balance sheet is also known as Net Worth statement.
 In a typical Balance sheet, the assets are listed on the left hand side and
liabilities are listed on the right hand side.
 Apart from this, at the bottom of right hand side of balance sheet Net worth
or Equity is mentioned.
 Generally the left hand side values are equal or balances the right hand side
values and hence this statement is called as Balance sheet.

An Asset may be defined as a property which a farmer/firm owns. A Liability is the

amount of money owed by the farmer/firm to others. On the basis of liquidity,
assets/liabilities are classified into

 Current assets
o The assets which are used up in one production cycle and which can
be easily converted into cash.
o Eg.: Cash on hand, accounts receivable, market securities, inventories
etc.,
 Medium term assets
o The assets which are used up in production process for more than one
year and upto 5 years.
o Eg. : Animals, equipments etc.,
 Fixed assets
o The assets which are used up in production process over a long period
and which cannot be easily converted into cash.
o Eg.: Land, buildings, machinery etc.,
 Current Liabilities
 o They refer to short time commitments of the business/farmer which
has to be repaid within the current year.
o Eg.: Accounts payable, taxes payable, interest payable.
 Working/Medium term loans
o They refer to commitments of the business farmer which could be
deferred at present but the due falls in the next season and their time
period ranges from 1 – 5 years.
o Eg. : Medium term loans for Animals or small machinery such as chaff
cutter loans etc.,
 Deferred Liabilities
o They refer to long term loans and other such commitments which
could be repaid over a period of 5-15 years.
o Eg.: Long term loans for land, feed mill, hatchery etc., .
 Net Worth/Equity
o It is the difference between the total assets and total liabilities in the
business.
o The most liquid current asset is cash in hand and the least liquid
current asset is inventory.Eg. Milk can.
o The most liquid current liability is money at call and the least liquid
asset is long term loans.

MODEL OF BALANCE SHEET

Assumptions

An entrepreneur has a land of 2 acres, worth of Rs.500000/- He has khoa producing

unit worth of Rs.50000/- In his current account in Indian Bank he has Rs. 25000/-
Taxes payable for this year is Rs. 20000/- Wealth tax is Rs. 5000/- He borrowed Rs.
10000/- from his neighbour. He has inventory worth of Rs.30000/- He has ice cream
mix unit worth of Rs. 100000/- He has bank deposit of Rs.25000/- He bought loan
 from bank which must be paid within 3 years. He also borrowed loan for land
development of Rs. 200000/-.
Balance sheet of Dairy processing unit business as on -
Liabilities Amount Assets Amoun
in Rs. t in Rs.
Current Liability Current assets
1. Taxes payable 20000 1. Current account 25000
balance
2. Wealth tax 5000 2. Inventories 30000
3. Neighbour borrowing 10000 3. Bank deposit 25000
35000 80000
Medium term Working assets
liability
1. Bank loan 100000 1. Khoa unit 50000
2. Ice cream unit 100000
100000 150000
Long term Fixed assets
Liability
1. Land development loan 200000 1. Land 500000
200000 500000
Total Liability 335000 Total Assets 730000
Networth = Total Assets – Total Liability = Rs. 395000/-

TEST RATIOS

 The balance sheet is analysed by estimating various ratios to understand the

exact financial position and stability of the farm business.
 Current Ratio
o Current Ratio = Total current assets/ Total current liabilities
o Current ratio indicates the capacity of the farmer to meet immediate
financial obligations (liquidity).
 o A ratio of more than one indicates a favourable position of the farm
business.
 Intermediate or working Ratio
o Intermediate Ratio =Total current assets+Total intermediate assets/
Total current liabilities+ Total intermediate liabilities.
o Working ratio indicates the liquidity position of the farm business
over an intermediate period of time, ranging from 2 to five years.
o Here, there is time for the farmer to build up the farm business to
improve his liquidity position.
o The ratio should be more than one.
 Net Capital Ratio
o Net Capital Ratio= Total assets/ Total current liabilities.
o NCR indicates the solvency position of the farmers and more than one
indicates that the funds of the institutional agencies are safe.
o A consistently increasing ratio over the years reveal the sound
financial growth of the farm business.
 Acid test ratio or Quick ratio
o Acid test ratio or Quick ratio= Cash receipts+Accounts
receivable+marketable securities available in more than one year/
Total current liabilities.
o Indicates adequacy of cash and income surpluses to cover all current
liabilities during the period of one to two years.
 Current liability Ratio
o Current liability Ratio = Current liabilities/Owner’s equity which
indicates the farmer’s immediate financial obligations against the net
worth and a ratio of less than one indicates a healthy performance of
the farm business.
 Debt-equity Ratio (Leverage Ratio)
o Debt-equity Ratio = Total debts/Owner’s equity which reflects the
capacity of the farmer to meet the long term commitments also.
 Equity-value Ratio
o Equity-value Ratio = Owner’s equity/Value of assets.
 o Highlights the productivity gained by the farmer in relation to the
assets.

PROFIT AND LOSS STATEMENT (INCOME STATEMENT)

 Profit and Loss statement is an important financial statement employed to

assess the performance of farm business.
 It shows the operational efficiency of the farm business in terms of receipts,
expenses, profits and losses.
 Generally it is prepared by the entire farm for one agricultural year.
 However, it may also be prepared over a period of time.
 So, we can know the trend in receipts and expenses which indicates the
success or failure of a farm business.
 Thus it contains basically three important items, namely., Receipts,
Expenses and Net income.

Receipts

 They include returns from all the enterprises in the farm.

 It also includes the appreciation in the value of assets, gifts, many other types
of receipts etc.,.
 However the returns from the sale of capital assets such as land, buildings,
machinery etc., are not counted as receipts.

Expenses

 All the expenses and the variable inputs are taken as operational expenses
which includes the interests on working capital.
 The fixed expenses include, depreciation, interests on fixed capital, rental
value of owned land, land revenue etc.,.
 The amount spent on the purchase of any capital asset does not come under
expenses.

Net Income
 It is calculated in three different ways.
o Net Cash Income
 This is worked out by reducing total cash expenses from the
total cash receipts.
o Net Operating Income
 It is calculated by reducing the total operational expenses from
the gross income.
o Net Farm Income
 It is worked out by deducting total fixed expenses from the net
operating income.
 Of the three types of net incomes, net farm income is the best measure and is
most frequently used for assessing the performance of farm business.

CASH FLOW STATEMENT

 This is also known as cash flow summary or cash flow budget or flow of
funds statement.
 Cash flow statement is a summary of cash inflows and cash outflows of a
business organization in a particular period, say a season or a year.
 It is usually prepared for the future, hence the name cash flow budget.
  The merit of this particular statement is that, it helps to assess the time at
which the funds are required for farming and other allied enterprises,
sources from which these can be raised, the purpose for which the loan is
required, the need of sale and purchase of capital assets, the time and
quantum of repayment, etc.
 Cash flow statement is prepared at the beginning of the agricultural year and
checked every quarterly.
 For convenience, quarterly checks are made
 Cash Receipts
o Cash Balance
o Total Operating Sales
o Total Capital Sales
o Non-farm income
o Borrowings
o Total
 Cash Expenses
o Operating Expenses
o Capital Investment
o Family Living Expenses
o Payment of Previous year’s Debts
o Payment of ST Loans and Installments on Investment Loans
o Total
 Cash Balance is the difference between Cash Receipts and Cash Expenses

Advantages of Cash Flow Budget

 It is a summary of all the financial matters of the farmer in a comprehensive

report.
 This helps
o to estimate the total credit needs (Short term, Medium term and Long
term) of the farmer along with time and quantum;
o to plan the repayment schedule,
 o in making purchases and sales at the appropriate time thereby helping
to minimize the credit dependence, so that the farmers can keep limits
to avoid wastages
o to keep ready input requirements well in advance so that the last
minute rush can be avoided
o to know the farm household’s expenditure pattern and enable the
farmer to exercise a check on farm costs,
o the farmer in preparing the farm business plans for the ensuing years,
o the banker for revising the scale of finance, rescheduling loans, etc.,
and
o finally, as a tool of financial control to the farmer.

BREAK EVEN ANALYSIS

 In any business, there is a point where total costs become equal to total
revenues and that point is called as Break Even Point and the corresponding
output is known as Break Even Output (BEO).
 This means that at this point, the business is making no profit/no loss.
 Break even point is the minimum point of average total cost.
 A farmer must produce atleast this amount of product to cover the total cost
of production.
 Whatever is produced above this point will be the profit for the farmer.
 The point where the farmer recoups his investment is the Break Even Point.

There are two approaches to measure the Break Even Point:

 Linear Approach
o Here the sale price of output remains constant for all the output sales.
o Here the total cost curve and the total revenue curve are linear that is
these two curves are straight lines, where the total revenue curve cuts
the total cost curve in the Break even point and the corresponding
output is known as Break even output .
 o Margin of safety
 The margin of safety of a farmer is the difference between its
normal capacity and break even output.
 Margin of safety indicates the shock absorbing capacity of the
farmer in times of risk and uncertainty.
 In other words it reflects the financial strength of the
enterprise.
 Margin of safety = Normal capacity – Break even output
 Margin of safety in monetary terms = Revenue of the total
output – Revenues from Break even output.
 Curvilinear approach
o Here the total revenue changes over the period of time, since the price
changes, one output sales to the other.
o Generally the curvilinear approach is used for perennial crops and
also in business where the gestation period is very long.

Shut down point

 Shut down point is the minimum point of average variable cost.

 A farmer must produce atleast this amount so that he will be able to cover
the variable cost of production.
 If the total revenue curve goes below this point, it is better to close the
business instead of incurring losses.
 So this point is called as Shut down point.
Lesson 14. Scheme Formulation for Bank Loan

SCHEME

 The needy livestock farmer visits the banks in the local area and enquire with
the bank manager about the livestock projects and after having discussion
with him, he visits the technical expert.
 A Scheme can be prepared by a beneficiary after consulting local technical
persons of State animal husbandry department, DRDA, SLPP etc., livestock
co-operative society/union/federation/commercial livestock farmers.
 If possible, the beneficiaries should also visit progressive livestock farmers
and government/military/agricultural university livestock farm in the
vicinity and discuss the profitability of livestock farming.
 A good practical training and experience in livestock farming will be highly
desirable.
 The livestock co-operative societies established in the villages as a result of
efforts by the Livestock Development Department of State Government and
National Livestock Development Board would provide all supporting
facilities particularly marketing of fluid milk.
 Nearness of livestock farm to such a society, veterinary aid centre, artificial
insemination centre should be ensured.
 There is a good demand for milk, if the livestock farm is located near urban
centre.
 The scheme should include information on land, livestock markets,
availability of water, feeds, fodders, veterinary aid, breeding facilities,
marketing aspects, training facilities, experience of the farmer and the type
of assistance available from State Government, livestock
society/union/federation.
 The scheme should also include information on the number of and types of
animals to be purchased, their breeds, production performance, cost and
other relevant input and output costs with their description.
 Based on this, the total cost of the project, margin money to be provided by
the beneficiary, requirement of bank loan, estimated annual expenditure,
 income, profit and loss statement, repayment period, etc. can be worked out
and shown in the Project report.

SCRUTINY OF SCHEMES BY BANKS

 The scheme so formulated should be submitted to the nearest branch of a

bank.
 The bank's officers would assist in preparation of the scheme for filling in the
prescribed application form.
 The bank will then examine the scheme for its technical feasibility and
economic viability.

Technical Feasibility

 Nearness of the selected area to veterinary/breeding/milk collection centre

and the financing bank's branch.
 Availability of good quality animals in nearby livestock market.
 Availability of training facilities.
 Availability of good grazing ground/lands.
 Green/dry fodder, concentrate feed, medicines etc.
 Availability of veterinary aid/breeding centres and marketing facilities near
the scheme area.
 Capability of the owner and employees such as technical knowledge and skill

Economic Viability

 Unit Cost of livestock .

 Input cost for feeds and fodders, veterinary aid, breeding of animals,
insurance, labour and other overheads.
 Output costs i.e. sale price of livestock products, manure, gunny bags, young
ones, other miscellaneous items etc.
 Income-expenditure statement and annual gross surplus.
 Cash flow analysis
 Repayment schedule (i.e. repayment of principal loan amount and interest).
  Other documents such as loan application forms, security aspects, margin
money requirements etc. are also examined.
 A field visit to the scheme area is undertaken for conducting a techno-
economic feasibility study for appraisal of the scheme.
 Break Even Point, Investment Analysis (IRR), Payback period, Marketing
process.

SANCTION OF BANK LOAN AND ITS DISBURSEMENT

 After ensuring technical feasibility and economic viability, the scheme is

sanctioned by the bank.
 The loan is disbursed in kind in 2 to 3 stages against creation of specific
assets such as construction of sheds, purchase of equipments and machinery,
purchase of animals and recurring cost on purchase of feeds/fodders for the
initial period of one/two months.
 The end use of the fund is verified and constant follow-up is done by the
bank.

LENDING TERMS

 Each Regional Office (RO) of NABARD (www.nabard.org)has constituted a

State Level Unit Cost Committee under the Chairmanship of RO-in-charges
and with the members from developmental agencies, commercial banks and
cooperative banks to review the unit cost of various investments once in six
months.
 The same is circulated among the banks for their guidance.
 These costs are only indicative in nature and banks are free to finance any
amount depending upon the availability of assets.

Margin Money

 NABARD had defined farmers into three different categories and where
subsidy is not available the minimum down payment as shown below is
collected from the beneficiaries.
 S.No. Category of Level of predevelopment Beneficiary's
Farmer return to resources Contribution

1 Small Farmers Upto Rs.11000 5%

2 Medium Rs.11001 - Rs.19250 10%

Farmers

3 Large Farmers Above Rs. 19251 15%

Interest Rate

 As per the RBI guidelines the present rate of interest to the ultimate
beneficiary financed by various agencies are as under :

S.No. Loan Amount CB's and RRB's SLDB/SCB

1 Upto and inclusive 12% As determined by SCB/SLDB subject to minimum 12%

of Rs.25000

2 Over Rs. 25000 and 13.5% As determined by SCB/SLDB subject to minimum 12%
upto Rs. 2 lakhs

3 Over Rs. 2.0 lakhs As determined by As determined by SCB/SLDB subject to minimum 12%
the banks
 Security will be as per NABARD/RBI guidelines
issued from time to time.

Repayment Period of Loan

 Repayment period depends upon the gross surplus in

the scheme.
 The loans will be repaid in suitable monthly/quarterly
installments usually within a period of about 5 years.
 In case of commercial schemes it may be extended
 upto 6-7 years depending on cash flow analysis.

Insurance

 The animals may be insured annually or on long term

master policy, where ever it is applicable.
 The present rate of insurance premium for scheme
and non scheme animals are 2.25% and 4.0%
respectively.

Security
 INTRODUCTION- LIVESTOCK INSURANCE

 Livestock farming involves numerous risks – natural, social and human.

 The uncertainty of livestock yields as a result of death of animals is one of the
basic risks that every farmer has to face.
 Risks are simply future issues that can be avoided or mitigated and risk is always a
probability issue whereas uncertainty is the lack of complete certainty, that is, the
existence of more than one possibility. The true outcome/state/result/value is not
known.
 The individual farmer with limited resources is seldom able to face such
risks, and this result in disastrous losses.
 Livestock insurance, exists in many countries as an institutional response to
nature induced risk.
 The importance of risk mitigation cannot be overstated as far as Indian
farmers are concerned.
o In India, agriculture and allied activities such as animal husbandry
continues to be the main source of livelihood for millions of
households.
o A large majority of producers are small farmers.
 Livestock for their feed depends on the fodder production which depends on
the monsoon which has been uneven.
 Apart from this, there is widespread incidence of diseases, drought, floods
and fluctuations in market prices of livestock products which makes it a risky
venture.
o A recent example is the incidence of Bird flu which resulted in a huge
loss to the poultry industry.
 In this juncture, livestock insurance plays a vital role for maintaining the
sustainability of the production.
 A concrete step for introducing crop insurance at the national level was taken
only in October 1965 and livestock insurance was started after that in late
70’s.
Present status of Livestock Insurance

 For promotion of the livestock sector, it has been felt that along with
providing more effective disease control and improvement of genetic quality
of animals, a mechanism of assured protection to the farmers and cattle
rearers needs to be devised against eventual losses of such animals.
 In this direction, the Government has approved a new centrally sponsored
scheme on Livestock Insurance.A Centrally sponsored scheme of livestock
insurance is being implemented in all the States with
twin objectives: providing protection mechanism to the farmers and cattle
rearers against any eventual loss of their animals due to death; and
demonstrating the benefits of insuring livestock to the people. The
scheme, which was introduced in 100 selected districts on pilot basis during
2005-06, has now been extended to 300 selected districts covering all states.
The scheme benefits farmers and cattle rearers
having milch cattle and buffaloes. In 2010-11, `. 20.12 crore has been
released up to December 2010 and 20.63 lakh animals were insured from
2006-07 to 2009-10.

TYPES OF INSURANCE IN LIVESTOCK SECTOR

 Livestock insurance in India is a multi-agency programme.

o General Insurance Corporation (GIC) along with its subsidiaries –
United India Insurance Company Ltd., New India Assurance
Company Ltd., Oriental Insurance Company Ltd., and National
Insurance Company Ltd., is carrying out livestock insurance.The
insurance market was liberalized only in the year 2000. After this,
understanding the volume of business, private sector (BASIX-Royal
Sundaram) have also entered into the market.The type of insurance,
procedure, claim details etc., are listed below.
 Cattle Insurance
o Under this insurance, animals are covered against death due to
diseases or accident (including fire/lightning/famine/flood cyclone)
surgical operation, strike, riot, civil commotions risk.
o Generally there are three types in it :
 Cattle Insurance,
 Foetus (Unborn Calf Insurance) and
 Calf Heifer rearing insurance.

 Sheep and Goat Insurance

o This scheme is also governed under Market Agreement.
o Policy provides indemnity to indigenous cross-bred and exotic sheep
and goat against death due to accident (including fire, lightening,
flood, cyclone, famine, strike, riot and civil commotion) and disease.
o Earthquake and landslide covers are also provided. Standard and
common exclusions apply as per Cattle Policy.
o Animals are identified by means of small brass buttons ear tags.
o Animals under scheme category enjoy certain benefits in premium
rate and claim procedure.

 Pig, Horse, Donkey, Yak, Mule insurance etc., are also available.
 Poultry/Duck Insurance
o The cover is available to the Poultry/Duck farm owned by the farmers.
o Insurance covers all types of exotic and cross breed poultry birds and
ducks against death due to accident (including fire, lightning, famine,
riot and strike and civil commotion) or diseases as per Poultry
Insurance Policy.

 Animal Driven Cart Insurance

o This insurance covers carts, tongas and coaches drawn by buffaloes,
bulls, bullocks, horse, mule, donkeys and camels and also the animals
pulling it. T.P. liability and death, disablement of the driver as per
Animal driven cart Insurance policy.
 CATTLE INSURANCE

 The scheme covers the following animals, whether indigenous, exotic or

cross-bred.
o Milch Cows and Buffaloes
o Calves / Heifers
o Stud Bulls
o Bullocks (Castrated Bulls) and Castrated Male Buffaloes
 Animals within a specified age group are accepted under the Standard
Insurance Scheme.
 Sum Insured under the policy will be the Market Value of the animal.
 Indemnity under the policy will be the sum insured or market value prior to
illness whichever is less. The indemnity is limited to 75% of Sum Insured in
case of a PTD claim.
 The basic premium rate per annum is 4% of the Sum Insured. Long term
policies are also issued with long term discounts.
 The premium rates under the policy are concessional for covering animals
under government subsidized schemes.
 Group Discounts are also available.

Insurance Coverage

 The policy shall give indemnity for death due to.

o Accident (Inclusive of fire, lightning, flood, inundation, storm,
hurricane, earthquake, cyclone, tornado, tempest and famine).
o Diseases contracted or occurring during the period of the policy.
Surgical Operations.
o Riot and Strike.
 The Policy can also be extended to cover PTD on payment of extra premium;
o Permanent Total Disability which, in the case of Milch Cattle result in
permanent and total incapacity to conceive or yield milk.
o PTD which in the case of Stud Bulls results in permanent and total
incapacity for breeding purpose.
 o In case of Bullocks, Calves / Heifers and Castrated male buffaloes
results in permanent and total incapacity for the purpose of use
mentioned in the proposal form.

Documents to Effect Insurance Coverage

 Proposal Form
 Veterinary Health Certificate from a qualified Veterinarian giving the age,
identification marks, health, and market value of the animal in the
prescribed format.

Identification of Animal

 All insured animals should be suitably identified by natural identification

marks and color should be clearly noted in the proposal form and
Veterinarian's Report.
 Ear tags made of suitable material are applied to the ear of the animals and
the code number is entered into the Veterinary Health Certificate.
 Photographs of animals may be insisted in case of high value animal.

Claim Procedure

 In the event of death of an animal, immediate intimation should be sent to

the Insurers and the following requirements should be furnished:
o Duly completed claim form.
o Death Certificate obtained from qualified Veterinarian on Company's
form.
o Postmortem examination report if required by the Company.
o Ear Tag applied to the animal should be surrendered. The condition
of' No Tag- No claim' will be applied if the tag is not surrendered..
 Claim Procedure For PTD Claim
o A certificate from the qualified Veterinarian to be obtained.
o The animal will be inspected by the company's Veterinary Officer also.
o Complete chart of treatment, medicines used, receipts, etc., should be
submitted.
 o Admissibility of claim will be considered after two months of
Veterinary Doctor / Company Doctor's report.
o The indemnity is limited to 75% of Sum Insured.

SHEEP AND GOAT INSURANCE

Highlights

 All indigenous, crossbred and exotic Sheep and Goat will be covered under
the Scheme.

Scope

 The policy provides indemnity against death of sheep and goats due to
accident including Fire, Lightning, Flood, Cyclone, Famine, Earthquake,
landslide, Strike, Riot or diseases contracted or occurring during the period
of insurance.

Sum Insured

 The market value of sheep and goats varies from breed to breed, from area to
area and from time to time.
 The examining Veterinarian's recommendations is considered as the proper
guide for acceptance of insurance as well as for settlement of claims.
 Sum insured will not exceed 100% of market value.

Claim Procedure

 In the event of death", immediate intimation should be given to the

Company and the Insured should furnish the following documents and
required information.
 Duly completed claim form.
 Death certificate from a Veterinarian on Company's form
 Post mortem examination report if required by the Company.
 Ear tag wherever applicable.
 POULTRY INSURANCE

Highlights

 This is a comprehensive insurance scheme applicable to poultry farms

consisting layer birds, broiler birds and parent stock (Hatchery) which are
exotic and cross-bred.
 All birds in a farm should be covered. After issuing policy, if additional birds
are introduced in the farm, immediate notice to be given to insurer otherwise
claim will be repudiated.
 The scheme is applicable to poultry farms consisting of minimum number of
birds as specified.

The scheme is available for insuring birds in the following age groups

Broilers  1 day to 8 weeks

 1 day to 6 weeks

Layers  1 day to 20 weeks

 21 Weeks to 72 WEEks
 1 day to 72 WEEks

Hatchery Birds (Parent Stock)  1 day to 72 WEEks

 The premium rates are applicable on per cent basis which are applicable to
the peak value of birds in the applicable categories.
 The sum insured is the peak value and for broilers it is Rs 45 and for layers
Rs 75. There is a week wise valuation table in-built in the policy which is
applied for calculating indemnity. In case of parent stock the same is
negotiable.
 The policy is charactersied by excess and final indemnity is restricted to 80%
(60% in case of Gumboro).
  The scheme is characterized by No claim discounts as well as good feature
discount.

Insurance Coverage

 The Policy shall provide indemnity against death of birds due to accident
(including fire, lightning, flood, cyclone/ storm/ tempest/ earthquake, strike,
riot, act of terrorism) or diseases contracted or occurring during the period
of insurance subject to the exclusions.

How to Effect Insurance

 Proposal Form.
 Veterinary Health Certificate from a qualified Veterinarian.
 All birds in the farm should be covered. Farm should follow standard
package of practices, vaccination schedule, deworming and debeaking.
 Farm should maintain essential records as per insurers specifications.

Claim Procedure

 In the event of death of birds immediate intimation should be given to the

Company and the Insurer should be supplied with the following documents
and required information :
o Duly filled in claim form.
o Vet. P.M. Report for sample birds.
o Daily records of mortality, feeding etc.
o Purchase invoices for the birds.
o Any other point to substantiate the loss like photographs, medical
bills, etc. as and when required.
 In case of alarming death/outbreak of epidemic nature immediate notice
within 12 hours should be given to the Company and all birds should be
segregated and produced to the representative of the Company or to any
person authorised by the Company for inspection.
 Daily mortality details should be sent to the Company on weekly basis failing
which report will be treated as nil for that particular week.
 Delay in reporting of the claim should be avoided and if there is delay for
more than three days the claim would be treated as non-standard.
 In case of doubtful claims/ farms for which claim ratio is adverse, Technical
Report from an expert may be insisted for settlement of claim.
 Lesson 15. Procurement Management

PROCUREMENT MANAGEMENT

 Procurement is the acquisition of goods and/or services at the best possible

total cost of ownership, in the right quality and quantity, at the right time, in
the right place and from the right source for the direct benefit or use of
companies, individuals, or even governments, generally via a contract.
 Simple procurement may involve nothing more than repeat purchasing.
Complex procurement could involve finding long term partners – or even
'co-destiny' suppliers.
 Economic analysis methods such as cost-benefit analysis or cost-utility
analysis could be applied for purchasing decisions, when the data is accurate
and available.

Direct and Inirect Procurement

Types

Direct Indirect
Procurement Procurement

Raw Material Maintenance, Capital Goods and

and Repair and Services
Production Operating
Goods (MRO)
Supplies

Features Quantity Large Low Low

Frequency High Relatively high Low

Value Industry Low High

 specific

Nature Operational Tactical Strategic

Examples Feed, Spare parts in Milking machine, Feed

Fodder, feed machines chaffer Computers,
Medicines and Hatcher etc.,
equipments.
Example for
Milking
machine, Feed
chaffer,
Hatcher etc.,

 Direct procurement is seen in manufacturing settings only.

 Direct procurement directly affects the production process of manufacturing
firms.
 It comprises a wide variety of goods and services, from standardised low
value items like office supplies and fuels to complex and costly products and
services like milking machine and consulting services of Veterinary Experts.

PROCUREMENT VS ACQUISITION

 Procurement covers the act of buying goods and services whereas acquisition
is a much wider concept than procurement, covering the whole life cycle of
acquired systems.

PROCUREMENT SYSTEMS

Procurement Systems

 Another common procurement issue is the timing of purchases.

 Just-in-time (JIT) is a system of timing the purchases of consumables such
as straw, fodder in quantities to meet daily procurement needs.In this system
inventories will not be maintained.
 Just-in-time is commonly used by Japanese companies but widely adopted
by many global manufacturers from the 1990s onwards.

PROCUREMENT PROCESS

 Procurement may also involve a bidding process i.e, Tendering.

 A company may want to purchase a given product such as Chaff cutter or
service such as Vaccination of birds.
 Then the farmer or Company is required to state the product/service desired
and make the contract open to the bidding process.
 They may have ten submitters that state the cost of the product/service they
are willing to provide.
 Then, the farmer or Company will usually select the lowest bidder.
 If the lowest bidder is deemed incompetent to provide the desired
product/service, they will go far the next best price, and is competent to
provide the product/service.

PROCUREMENT STEPS

 First, details about the suppliers capable of fulfilling the requirements have
to be gathered.
 Contact has to be established with the identified suppliers for further details
such as price, quantity etc.,
 Then discussions and negotiations with the suppliers would be undertaken
for price, availability, quality etc.,
 After, finalization of the deal, the product/services would be delivered and
details such as shipment, delivery, and payment for the suppliers are
completed, based on contract terms had been fulfilled.
 The farmer/company would then utilize the products/services and would
also evaluate the products/services.
 Finally, renewal of contract would be established based on the performance
of products.
 QUALITY MANAGEMENT

 Quality management consists of three main components: quality control ,

quality assurance and quality improvement.
 Quality management is focused not only on product quality, but also the
ways to achieve it.
 Quality management therefore uses quality assurance and control of
processes as well as products to achieve more consistent quality.

ORIGIN

 Customers recognize that quality is an important attribute in products and

services.
 Suppliers recognize that quality can be an important differentiator between
their own offerings and those of competitors (quality differentiation is also
called the quality gap).
 In the past two decades this quality gap has been greatly reduced between
competitive products and services.
 This is partly due to the contracting (also called outsourcing) of manufacture
to countries like India and China, as well internationalization of trade and
competition.

QUALITY IMPROVEMENT

There are many methods for quality improvement. Each company or country or
production system follows different approaches based on their own needs.

ISO 9004 :2000 — Guidelines for performance improvement.

 ISO 15504 -4: 2005 — Information technology — Process assessment — Part

4: Guidance on use for process improvement and process capability
determination.
 QFD — Quality Function Deployment, also known as the House of Quality
approach.
 Kaizen — Japanese for change for the better; the common English usage is
continual improvement.
 Zero Defect Program — created by NEC Corporation of Japan, based upon
Statistical Process Control and one of the inputs for the inventors of Six
Sigma.
 Six Sigma — 6σ, Six Sigma combines established methods such as Statistical
Process Control , Design of Experiments and FMEA in an overall framework.
 PDCA — Plan, Do, Check, Act cycle for quality control purposes. (Six Sigma's
DMAIC method (Design, Measure, Analyze, Improve, Control) may be
viewed as a particular implementation of this.)
 Quality circle — a group (people oriented) approach to improvement.
 Taguchi methods — statistical oriented methods including Quality
robustness, Quality loss function and Target specifications.
 The Toyota Production System — reworked in the west into Lean
Manufacturing .
 Kansei Engineering — an approach that focuses on capturing customer
emotional feedback about products to drive improvement.
 TQM — Total Quality Management is a management strategy aimed at
embedding awareness of quality in all organizational processes. First
promoted in Japan with the Deming prize which was adopted and adapted in
USA as the Malcolm Baldrige National Quality Award and in Europe as the
European Foundation for Quality Management award (each with their own
variations).
 TRIZ — meaning "Theory of inventive problem solving"
 BPR — Business process reengineering , a management approach aiming at
'clean slate' improvements (That is, ignoring existing practices).

QUALITY STANDARDS

 The International Organization for Standardization ( ISO ) created the

Quality Management System ( QMS ) standards in 1987. They were the ISO
9000:1987 series of standards comprising ISO 9001:1987, ISO 9002:1987
and ISO 9003:1987; which were applicable in different types of industries,
 based on the type of activity or process: designing, production or service
delivery.
 The standards are reviewed every few years by the International
Organization for Standardization . The version in 1994 was called the ISO
9000:1994 series; comprising of the ISO 9001:1994, 9002:1994 and
9003:1994 versions.
 The ISO 9004:2000 document gives guidelines for performance
improvement over and above the basic standard (ISO 9001:2000). This
standard provides a measurement framework for improved quality
management, similar to and based upon the measurement framework for
process assessment.
 The Quality Management System standards created by ISO are meant to
certify the processes and the system of an organization, not the product or
service itself. ISO 9000 standards do not certify the quality of the product or
service.
 In 2005 the International Organization for Standardization released a
standard, ISO 22000 , meant for the food industry. This standard covers the
values and principles of ISO 9000 and the HACCP standards. It gives one
single integrated standard for the food industry and is expected to become
more popular in the coming years in such industry.

STANDARDS

 A Standard specifies what basic quality a product must have to be consistent

with the established characteristics.
 Standards are set with regard to the shape, size, colour, flavour, composition,
weight etc.
 A technical standard may be developed privately or unilaterally, for example
by a corporation, regulatory body, military, etc.
 Standards can also be developed by groups such as trade unions, and trade
associations.
 Standards organizations often have more diverse input and usually develop
voluntary standards: these might become mandatory if adopted by a
government, business contract, etc.
Geographic levels

When a geographically defined community needs to solve a community-wide

coordination problem , it can adopt an existing standard, or produce a new one. The
main geographic levels are

 National standard: by National Standards Organizations.

 Regional standard: Example- CEN standards.
 International standard: Example- ISO and ASTM International .
o Standards often get reviewed, revised and updated.
o It is critical that the most current version of a published standard be
used or referenced.
o The originator or standard writing body often has the current versions
listed on its web site.

STANDARDISATION FACILITIES IN INDIA

 Directorate of Marketing and Inspection has a set up for quality certification

of agricultural produce through the net work of 22 Regional Agmark
Laboratories at different places in the country with Central Agmark
Laboratory, Nagpur as the apex laboratory.
 250 technical persons are working in these laboratories.
 These laboratories have been established to formulate standards and
conduct physical and chemical analysis of agricultural and allied
commodities in accordance with APGM Act 1937.

Central Agmark Laboratory has the following specialized commodity divisions for
carrying out research and standardization work more efficiently.

 Agricultural Products (Foodgrains)

 Spices and Essential Oils
 Oils and Fats
 General Chemistry
 Livestock Products including microbiology
 Toxicology
The main functions of Central Agmark Laboratory are:

 To work as apex laboratory for challenged sample under APGM Act 1937.
 To evolve/standardize methods of analysis/tests of agricultural and allied
commodities and meat products.
 To advise on technical matters to various quality control agencies and State
Government Grading Laboratories, in relation to grading of various
agricultural commodities, food under Agmark.
 Formulation of specifications for new commodities for bringing under the
purview of Agmark.Revision of specifications of various agricultural, allied
products, meat products etc. periodically.
 Training to the personnel engaged in the analysis of various commodities
under Agmark.
 To create awareness with regard to grading, standardisation and quality of
various agricultural and food products.

The Regional Agmark Laboratories are engaged in analysis of agricultural and food
commodities for evaluating the quality of the product.

 The main activities of Regional Agmark Laboratories are as follows:

o Analysis of commodities covered under Agmark.
o Technical advice to approved grading laboratories
o Training of Grading chemists of the private approved lab., State
Grading Lab and other similar organization.
o Associate with Central Agmark Laboratory, in collaborative
studies/research/standardization work of various agricultural, food
and livestock products.
o To organize awareness programmes in grading, standardisation and
quality control.

AGMARK

 Quality Grading and Certification for : Export and Domestic Trade

 Farm Level Grading : Grading at Producer's Level.
 Quality Certification Mark : AGMARK
  Acts as : Third Party Guarantee to Quality Certified.
 Legal Backup : Agricultural Produce (Grading and Marking ) Act, 1937 as
amended in 1986.

AGRMARK Grades given for the following livestock products

 Animal Casings
 Bristles
 Creamery butter
 Ghee
 Goat hair
 Hides
 Raw meat (chilled or frozen)
 Skins
 Table eggs and
 Wool

PACKAGING

Packaging is a marketing necessity - consumer require explanation, assurance,

encouragement, confidence, praise, under keen competition customer needs an
effective means to recognize a difference and establish preference that will ensure
repeat purchase. The package should have some of the following components.

 attract immediate attention

 build consumer confidence
 tell true product story at a glance
 be clean and sanitary
 should have protective seal
 be convenient to use
 should look like a good value to the consumer

Importance of packing

Packaging and package labeling have several objectives

  Physical protection
 Barrier protection
 Grouping
 Providing information
 Building value
 Safety
 Usability
 Portion control

Packaging types

 Primary packaging is the material that first envelops the product and holds
it. This usually is the smallest unit of distribution or use and is the package
which is in direct contact with the contents. Eg. : Aluminum foil covering
milk sweets
 Secondary packaging is outside the primary packaging – perhaps used to
group primary packages together.
 Tertiary packaging is used for bulk handling , warehouse storage and
transport shipping. The most common form is a palletized unit load that
packs tightly into containers .

RETAIL MARKETING

 Retailing consists of the sale of goods or merchandise from a fixed location,

such as a department store , egg shop, meat shop, or by post, in small or
individual lots for direct consumption by the purchaser.
o Retailing may include subordinated services, such as delivery.
Purchasers may be individuals or
businesses/organisations(Institutional Buyers).
  In commerce , a "retailer" buys goods or products in large quantities from
manufacturers or importers, either directly or through a wholesaler and then
sells smaller quantities to the end-user.
 Retailers are at the end of the supply chain.
 Manufacturing marketers see the process of retailing as a necessary part of
their overall distribution strategy.
 The term "retailer" is also applied where a service provider services the needs
of a large number of individuals, such as a public utility , like electric power.

Marketing Channel

 Marketing channel is defined as a path through which a product moves from

producer's farm gate to consumer plate.Marketing of agri and livestock
commodities is different from manufactured or industrial goods. Most of the
agri / livestock products are perishable in nature and the period of
perishability varies from a few hours to few months. Most of the farmers are
landless , marginal or small . Therefore the produce of individual is very less.
Lastly, most of the farm products are processed before they are used,
purchased and consumed by the ultimate consumers.
 Selling of perishable products like fruits, vegetables, and livestock products
(milk, meat, and egg) require fast movement of the commodities from the
producers to the ultimate consumers. Marketing channel can be defined as a
path through which product moves from producer to consumer. Hence a
short channel of distribution will be an effective tool to reach the target
consumers. However, distribution of products having lower unit value and
high turn over like eggs involves a large number of middle men.
 The channels of distribution serve as a network, which creates value for the
consumer by generating possession, time and place utilities. There are
number of middleman and merchants, including Government and co-
operative agencies, who act as links between the producers and consumers.

The possible visible channels of distribution for Milk is given below

 TRANSFER MECHANISM

There are several ways in which consumers can receive goods from a retailer:

 Counter service
 Delivery (commerce)
 Direct marketing
 Online shopping
 Door-to-door
 Self-service

There are several ways in which consumers can receive goods from a retailer:

RETAIL PRICING

 The pricing technique used by most retailers is cost-plus pricing, which

involves adding a markup amount (or percentage) to the retailer's cost.
 Another common technique is suggested MRP (Maximum retail price),
which simply involves charging the amount suggested by the manufacturer
and usually printed on the product by the manufacturer.

DISCOUNT STORES
  Discount stores are outlets developed by firms to sell their products, usually
at reduced prices.

DESTINATION STORE

 A Destination store is one that customers will initiate a trip specifically to

visit, sometimes over a large area.
 These stores are often used to " anchor " a shopping mall or plaza, generating
foot traffic, which is capitalized upon by smaller retailers.
 Eg.Trade fair, Exhibitions.

Lesson 16. Sales Operations

INTRODUCTION

 Sales Operations are a set of business activities and processes that help a
sales organization run effectively, efficiently and in support of business
strategies and objectives.
 Sales Operations may also be referred to as Sales Ops, Sales Support or
Business Operations.
 BENEFITS

 Helpful in making decisions

 Quality improvement
 Improvement in productivity
 Improvement in sales performance
 Address workers issues
 Improve employee morale
 Increased profit

SALES MANAGEMENT

 Sales management is the process of achieving an organization's sales goals in

an effective and efficient manner through planning, staffing, training,
leading and controlling organizational resources.
 Revenue, sales, and sources of funds fuel organizations and the management
of that process is the most important function.

SALES MANAGEMENT PROCESS

 Conception - What will be offered?

 Planning - How to improve sales?
 Execution - When and at what pace and scale?
 Control - How will feedback and contingencies be acted upon?
 Feedback - How to integrate and reply back activity to activity? This model is
cyclical and continuous process.

SALES PLANNING

 An essential sales leadership role is to establish a sense of purpose or vision

and clear direction to reach there.
 A key element of a business’ strategic 12-month plan is to answer the
question: “Where will all the sales come from?” The sales plan isn’t a
guesstimate.
 It takes its direction from the marketing strategy and is based on thorough
research and a considered positioning of the company within the market
place.
 Sales planning involves predicting demand for the product and demand on
the sales assets (machines, people, or a combination of both).
o Failure to plan always means lost sales and sometimes over
production.
o Planning insures that when a consumer wishes to purchase the
product, the product is available, but it also means opportunities for
additional sales are presented and the sales assets are available to
exploit these opportunities.It is making available the product at right
place at right time and at right price.
o Planning should allow for meeting increased customer demand for
more products, services and/or customization as the business is
growing, but also react quickly when demand decreases.
o Sales planning improves efficiency and decreases unfocused and
uncoordinated activity within the sales process.

MARKETING OF SERVICES

 Services marketing is marketing based on relationship and value. It may be

used to market a service such as that of veterinary service or a product like
egg.
 Marketing a service-based business is different from marketing a goods-
based business. There are several major differences, such as
o Services are intangible
o Service marketing may be based on the value of the individual
o Services of different types can’t be compared quantitatively
o Services could not be returned
Service

 A service is the action of doing some activity for someone or some

organisation. It is largely intangible (i.e. not material).
 A product is tangible (i.e. material) since one can touch it, feel it and own it.
 A service tends to be an experience that is consumed at the point where it is
purchased, and cannot be owned since it quickly perishes.
 A person could go to a dairy farm one day and have excellent service, and
then return the next day and have a poor experience. So often marketers talk
about the nature of a service as:
o Inseparable - from the point where it is consumed, and from the
provider of the service.
o Intangible - and cannot have a real, physical presence as does a
product. For example, livestock insurance may have a certificate, but
the financial service itself cannot be touched i.e. it is intangible.
o Perishable - in that once it has occurred it cannot be repeated in
exactly the same way. For example, once a Veterinarian has offered
treatment for some diseases, it is over and you can not store his
services and re-utilise them at a later stage.
o Variability- since the human involvement of service provision means
that no two services will be completely identical. For example, for the
same disease different Veterinarians would offer different treatments
and the same Veterinarian may offer different treatments for the same
disease during different stages and different periods of time.
o Right of ownership - is not taken to the service, since you merely
experience it. For example, a Veterinarian may treat your pets, but
you do not own the service of the Veterinarian or his medicines. You
cannot sell it on once it has been consumed, and do not take
ownership of it.

SUSTAINABLE LIVESTOCK PRODUCTION

Introduction
 Livestock play a vital role in rural economy.
 The combination of livestock and crop farming enables complementarity
through productive utilisation of farm by-products and conservation of soil
fertility, thus increasing rural farm income.
 Apart from providing food products like milk, egg and meat, livestock sector
generates productive employment and valuable supplementary income to the
vast majority of rural households, majority of whom are small and marginal
farmers and landless labourers.
 Growing human population, increasing urbanisation, rising domestic
incomes and changing lifestyles in the country have led to increasing
demand for livestock products.
 Livestock like cattle (bulls and cows), buffaloes, sheep and goat are an
integral part of India’s socio-economic life. Animal husbandry is a part of
agricultural economy. It directly supports about five per cent (20 million) of
our population. India has two per cent of the geographical area and accounts
for 15 per cent of livestock population (400 million). Cows and buffaloes
comprise 56.5 per cent of world population.India ranks first, second, third
and fifth in buffalo, cattle and goat, sheep and poultry population in the
world, respectively. (Economic Survey, 2008-09). The total livestock
population of Tamil Nadu stood at 249.42 lakhs which comprises 4.94, 1.69,
9.10, 6.58 and17.7 per cent of the cattle, buffalos, sheep, goat and poultry
population of the country (17th livestock census All India Summary Report,
2004).
 It has been estimated in official reports that capacity of land to support
grazing is 31 million, whereas the population, which grazes, is 90 to 100
million. It has also been calculated that fodder required for total population
is 1800 million tons (MT) per annum whereas the total fodder available is
900 MT.
 For sustainable rural livelihood, resource poor farmers have to overcome
technical, economic and social constraints to take benefit of increasing
demand of livestock products and compete with commercial producers.
There are indications that this can be done in developing countries by
complete understanding of the different production systems evolved over a
 period of time and introduction of improved and appropriate technologies
eliminating the constrained faced by the farmers.

Importance of Livestock

 Livestock sector employs over 11 million rural poor and women in principal
status and eight million in subsidiary status, which is about 5 per cent of
total working force in the country. According to estimates of CSO (2009), the
value of output from livestock and fisheries sector together was about Rs. 2,
82,779 crore during 2007-08, which is 31.6 per cent of the value of output
from Agricultural and allied sectors. The contribution of these factors in the
total GDP during 2007-08 was 5.21 per cent.
 During 2008-09, the country produced 108.5 million tonnes of milk 55.6
billion eggs, 42.7 million kg of wool and 3.8 million tonnes of meat from the
organized sector (Economic Survey, 2008-09).
 According to estimates of CSO (2009), the value of output from livestock and
fisheries sector together was about Rs. 2, 82,779 crore during 2007-08,
which is 31.6 per cent of the value of output from Agricultural and allied
sectors. The contribution of these factors in the total GDP during 2007-08
was 5.21 per cent.
 The livestock sector is one of the fastest growing parts of the agricultural
economy, the FAO report underlines. Globally, livestock contributes 15
percent of total food energy and 25 percent of dietary protein. Products from
livestock provide essential micronutrients that are not easily obtained from
other plant food products.

Livelihoods

 Strong demand for animal food products offers significant opportunities for
livestock to contribute to economic growth and poverty reduction. But many
smallholders are facing several challenges in remaining competitive with
larger, more intensive production systems.FAO recommends that
smallholders should be supported in taking advantage of the opportunities
provided by an expanding livestock sector and in managing the risks
associated with increasing competition.
Environment and Eco Jobs

 There is a need to enhance the efficiency of natural-resource use in the

livestock sector and to reduce the environmental footprint of livestock
production. It has to be ensured that continued growth in livestock
production does not create undue pressure on ecosystems, biodiversity, land
and forest resources and water quality and does not contribute to global
warming. Market-based policies, such as taxes and fees for natural-resource
use or payments for environmental services, would encourage producers to
ensure that livestock production is carried out in a sustainable way.Livestock
can play an important role in both adapting to climate change and mitigating
its effects on human welfare, FAO said. To realize the sector's potential to
contribute to climate change mitigation and adaptation based on enhanced
capacities to monitor, report and verify emissions from the livestock
production new technologies will need to be developed.
 A Eco/green job, also called a green-collar job is, according to the United Nations
Environment Program "work in agricultural, manufacturing, research and
development (R&D), administrative, and service activities that contribute(s)
substantially to preserving or restoring environmental quality. Specifically, but not
exclusively, this includes jobs that help to protect ecosystems and biodiversity;
reduce energy, materials, and water consumption through high efficiency strategies;
de-carbonize the economy; and minimize or altogether avoid generation of all forms
of waste and pollution. In 2007 the United Nations Environment Program (UNEP),
the International Labor Organisation (ILO),and the International Trade Union
Confederation (ITUC) jointly launched the Green Jobs Initiative. The International
Employers Organisation (IEO) joined the Initiative in 2008.Now Corporate Social
Responsibility (CSR) is also stressed in rejuvenating the environment and
they are also contributing both qualitatively and quantitatively in improving
the environment.

Sustainable livestock production strategies

 Proper management and nutrition are essential to the health and well being
of domestic animals;particularly livestock species that are expected to
 maintain a high level of production while relying on livestock owners to meet
all their physiological and behavioral needs. As livestock production becomes
more intensified, the need to ensure that management and nutrition do not
limit only to animal health or productivity increases. Best management
practices have to be followed in biosecurity management of livestock and
also in handling livestock manure.
 Management and nutrition are also central to the prevention and control of
many infectious and noninfectious diseases besides high-level production
performances. Although infectious diseases require the presence of a specific
infectious organism(s) , the mere presence of the causal microbe is not
usually sufficient to assure that disease will develop. Other environmental
and host factors influence whether the infected animal develops clinical
disease or has reduced productivity as a result of the infection.
 The most effective method of preventing infectious disease is to eradicate
and exclude the organism(s) causing the disease. Often, this is impossible or
impractical. It becomes necessary to control the infectious disease by
minimizing circumstances that favor the spread of the infectious agent,
mitigating the environmental circumstances that contribute to development
of the disease in the presence of the infectious agent, and minimizing
circumstances that increase the host’s susceptibility.
 Proper nutritional management is essential to animal health and
productivity and thereby reduce the uses of scarce resources which are
essential for sustainability. Nutrition plays a significant role in influencing
the animal’s susceptibility to disease as well as in managing certain diseases .
Rations/diets must be formulated to provide for the basic physiologic needs
(eg, energy, protein, fats, carbohydrates, vitamins, minerals) of the animal
and to ensure optimal growth and productivity.
 Loss of biodiversity is another continuing danger to soil.
 Watershed management can partly take care of such ill-effects, which
consists of conservation of soil, biomass and water resources, development
of reclaimable areas, introduction of improved crop production practices,
etc.

Sustainable production measures

  Many different management practices can improve a livestock operation’s
production efficiency and reduce greenhouse gas emissions. Improved
livestock management reduces atmospheric concentrations of carbon dioxide
through the mechanism of soil carbon sequestration on grazing lands.
 As plants grow, they remove carbon dioxide from the atmosphere. Even
though grazing cattle harvest a large portion of the plant material, through
good management residues accumulate and increase the amount of organic
matter in the soil. Some of this organic matter will remain in the soil or plant
root system for long periods of time instead of being released back into the
atmosphere as carbon dioxide. Some of the most effective practices include

Improving grazing management

 Soil testing, followed by the addition of proper amendments and fertilizers

 Supplementing cattle diets with needed nutrients
 Developing a preventive herd health program
 Providing appropriate water sources and protecting water quality
 Improving genetics and reproductive efficiency

Livestock Waste Management

 Livestock waste contains many microorganisms such as bacteria, viruses,

and protozoa. Some of these microorganisms do not cause sickness in
animals or humans. However, some others are pathogens, meaning they are
capable of causing disease in animals and/or humans. Irrespective of the size
of their farms, all livestock producers have an important role in limiting
pathogen movement from their operation to the environment. Waste
management provide livestock producers to control pathogens in their
production system. The Best Management Practices (BMPs) are pertaining
to animal management and housing, dietary modifications, production
 management, land application of manure, and the chemical and biological
treatment of stored manure.

Animal Husbandry and Green House Gases

 The two major green house gases produced by animal husbandry are
methane and nitrous oxide. Their concentrations have increased
considerably over the past 120 years. In this period the atmospheric CH4
concentration has more than doubled and the N20 concentration has risen
by more than 30 per cent. One source of CH4 in animal husbandry is the
fermentation of feed in the stomach of ruminants and non-ruminants. Due
to their ability to digest cellulose, ruminants account for the greater share in
the production of CH4. Another source of CH4 associated with animal
husbandry is the decomposition of animal wastes. These mainly consist of
organic material, which produces CH4 when decomposed under anaerobic
conditions. The source of nitrous oxide due to animal husbandry is the
decomposition of animal wastes. Any further intensification of animal
husbandry will increase the amount of animal waste, making a further
increase in N20 emissions likely.

INTERVENTIONS FOR SUSTAINABLE LIVESTOCK

PRODUCTION

 Policy instruments fall into three main groups: (a) price policies, (b)
institutional policies, and(c) policies promoting technological change. Price
policies are the responsibility of national governments, although they may be
influenced by international agencies, such as customs unions,the World
Bank or the WTO. However, national and local governments, private
individuals orassociations, development agencies and Non-Government
Organizations introduce institutional andtechnological changes.
 Price policies can be categorized into (i) trade policy, (ii) exchange rate
policy, (iii) tax and subsidy policy, and (iv) direct interventions such as floor
and fixed prices. Trade policy, from a developing country’s perspective,
should include continued pressure, through international fore such as the
 WTO, on developed countries to reduce tariffs and other barriers aimed at
supporting their own producers. However, greater benefits might be
achieved by reducing levels of protection for industrial s ectors within the
developing countries, as such protection raises input costs and effectively
taxes agricultural producers. Taxes, subsidies and governments’ direct
market interventions have usually failed to bring lasting benefits. There
remains a case for limited use of subsidies for disaster relief and to promote
the use of new inputs, such as vaccines or drugs. Alternatively moderate
taxes on livestock producers might be used to recover costs of providing
public goods such as disease control or eradication programmes.
 Policies for the promotion of appropriate institutions have a major impact on
livestock development. The authors of a review of about 800 livestock
development projects found that most had failed to bring about significant
sustainable improvements in livelihoods of the poor.
 Institutional development is also needed for the provision of credit, animal
health services and genetic material. The introduction of new technology
must be accompanied by the strengthening of the institutional framework
required for its implementation. The other key area, where institutional
change is essential for the success of livestock development, is that of
marketing, including transport, processing and selling. As marketing
activities exhibit economies of scale, large commercial operations are most
likely to be cost-effective. Unfortunately, in negotiating contracts with such
companies, small-scale producers are in a weak position, lacking market
power and information on patterns of supply, demand and prices. Thus in
promoting institutional development, there is a need for dissemination of
market information, and encouragement of co-operative group action and
participation by small-scale producers to strengthen their bargaining
position.
 Technological change may be promoted by supporting research and
development and the dissemination of information to farmers. Public
funding for agricultural research, and particularly for livestock research, has
declined over recent decades. Since much research output provides public
 goods it is unlikely to receive adequate funding from the private sector. The
decline in public sector funding should therefore be reversed.
 An appropriate institutional framework must be developed to integrate a
farmer participatory systems approach with science-based adaptive and
applied research, depending on collaboration between producers, and
natural and social scientists. The national research organizations must take
responsibility for research prioritization, ensuring that it is appropriate for
relative resource availability, taking into account the needs of the poor, and
coordinating donor assistance. To improve food security in a sustainable
manner, developing countries will often require an investment in their
agricultural research system at a level of 1 percent of the value of agricultural
output over the short term and 2 percent in the long term.
 Areas of research deserving attention include animal and veterinary public
health measures, improvements in forage crops and utilization of crop by-
products, and improvements in husbandry and management of production
systems. Local breed improvement is a slow process and crossbreeding with,
or adopting, exotic breeds generally more easily achieve increases in
production. Technical research has to be complemented by socio-economic
research into the institutional framework for the allocation of natural
resources, credit, and labor hire, the delivery of inputs and the processing
and marketing of livestock products. Research is needed to describe and
analyze the strengths and weaknesses of existing institutions and to propose
and test alternatives for improvement. In addition, socio-economists are
needed to contribute to the research prioritization process, by assessing
likely costs and benefits of proposed research projects.

Conclusions

 Human progress depends on the judicious utilization of animals and nature’s

resources in a balanced way.
 In sheer self-interest, proper animal care is a must.
 Massive and intensive campaigns are required to create awareness among
farmers that better animal care would lead to tangible economic benefits to
them by way of increased income.
 This can only be achieved through better technology inputs and
management.
 The enormous economic benefits, arising from improvement in productivity,
would adequately justify the investment required for modernizing the
existing system.
 Thus modernization and management of the livestock sector will pave the
way for sustainable development and protection of the Environment.

INTERVENTIONS FOR SUSTAINABLE LIVESTOCK

PRODUCTION

 Policy instruments fall into three main groups: (a) price policies, (b)
institutional policies, and(c) policies promoting technological change. Price
policies are the responsibility of national governments, although they may be
influenced by international agencies, such as customs unions,the World
Bank or the WTO. However, national and local governments, private
individuals orassociations, development agencies and Non-Government
Organizations introduce institutional andtechnological changes.
 Price policies can be categorized into (i) trade policy, (ii) exchange rate
policy, (iii) tax and subsidy policy, and (iv) direct interventions such as floor
and fixed prices. Trade policy, from a developing country’s perspective,
should include continued pressure, through international fore such as the
WTO, on developed countries to reduce tariffs and other barriers aimed at
supporting their own producers. However, greater benefits might be
achieved by reducing levels of protection for industrial s ectors within the
developing countries, as such protection raises input costs and effectively
taxes agricultural producers. Taxes, subsidies and governments’ direct
market interventions have usually failed to bring lasting benefits. There
remains a case for limited use of subsidies for disaster relief and to promote
the use of new inputs, such as vaccines or drugs. Alternatively moderate
taxes on livestock producers might be used to recover costs of providing
public goods such as disease control or eradication programmes.
 Policies for the promotion of appropriate institutions have a major impact on
livestock development. The authors of a review of about 800 livestock
development projects found that most had failed to bring about significant
sustainable improvements in livelihoods of the poor.
 Institutional development is also needed for the provision of credit, animal
health services and genetic material. The introduction of new technology
must be accompanied by the strengthening of the institutional framework
required for its implementation. The other key area, where institutional
change is essential for the success of livestock development, is that of
marketing, including transport, processing and selling. As marketing
activities exhibit economies of scale, large commercial operations are most
likely to be cost-effective. Unfortunately, in negotiating contracts with such
companies, small-scale producers are in a weak position, lacking market
power and information on patterns of supply, demand and prices. Thus in
promoting institutional development, there is a need for dissemination of
market information, and encouragement of co-operative group action and
participation by small-scale producers to strengthen their bargaining
position.
 Technological change may be promoted by supporting research and
development and the dissemination of information to farmers. Public
funding for agricultural research, and particularly for livestock research, has
declined over recent decades. Since much research output provides public
goods it is unlikely to receive adequate funding from the private sector. The
decline in public sector funding should therefore be reversed.
 An appropriate institutional framework must be developed to integrate a
farmer participatory systems approach with science-based adaptive and
applied research, depending on collaboration between producers, and
natural and social scientists. The national research organizations must take
responsibility for research prioritization, ensuring that it is appropriate for
relative resource availability, taking into account the needs of the poor, and
coordinating donor assistance. To improve food security in a sustainable
manner, developing countries will often require an investment in their
 agricultural research system at a level of 1 percent of the value of agricultural
output over the short term and 2 percent in the long term.
 Areas of research deserving attention include animal and veterinary public
health measures, improvements in forage crops and utilization of crop by-
products, and improvements in husbandry and management of production
systems. Local breed improvement is a slow process and crossbreeding with,
or adopting, exotic breeds generally more easily achieve increases in
production. Technical research has to be complemented by socio-economic
research into the institutional framework for the allocation of natural
resources, credit, and labor hire, the delivery of inputs and the processing
and marketing of livestock products. Research is needed to describe and
analyze the strengths and weaknesses of existing institutions and to propose
and test alternatives for improvement. In addition, socio-economists are
needed to contribute to the research prioritization process, by assessing
likely costs and benefits of proposed research projects.

Conclusions

 Human progress depends on the judicious utilization of animals and nature’s

resources in a balanced way.
 In sheer self-interest, proper animal care is a must.
 Massive and intensive campaigns are required to create awareness among
farmers that better animal care would lead to tangible economic benefits to
them by way of increased income.
 This can only be achieved through better technology inputs and
management.
 The enormous economic benefits, arising from improvement in productivity,
would adequately justify the investment required for modernizing the
existing system.
 Thus modernization and management of the livestock sector will pave the
way for sustainable development and protection of the Environment.
Lesson 17. Advertising

ADVERTISING

 Advertising is a form of communication that typically attempts to persuade

potential customers to purchase or to consume more of a particular brand of
product or service.
 Mass production necessitated mass consumption, and this in turn required a
certain homogenization of consumer tastes for final products.

CHARACTERISTICS AND OBJECTIVES OF ADVERTISING

The important features of Advertising are as follows

 Paid form of public presentation and expressive promotion of ideas

 Aimed at masses
 Manufacturer has the control over what goes into advertisement
 Pervasive and impersonal medium

Objectives of Advertising

 Maintain demand for well-known goods

 Introduce new and unknown goods
 Increase demand for well-known goods/products/services
 Penetration of newer market
 Create Awareness

FUNCTIONSANDADVANTAGESOFSUCCESSFUL
 ADVERTISING

 Task of the salesman made easier

 Maximize sales
 Publicity
 Brand building
 Create awareness
 Persuade buyers
 Introduction of new product
 To capture newer market
 Enable market leadership
 To face competition
 To inform changes
 To counteract to competitors advertisement
 To enhance goodwill

REQUIREMENTS OF A GOOD ADVERTISEMENT

 Attract immediate attention (awareness)

 Able to impress the audience within the stipulated time
 Focus on its own strength and it's comparative advantage
 Stimulate interest
 Create a desire
 Bring about action

TYPES OF ADVERTISING

 Commercial advertising media can include wall paintings, billboards, street

furniture components, printed flyers and rack cards, radio, cinema and
television adverts, web banners, mobile telephone screens, shopping carts,
web popups, skywriting, bus stop benches, human billboards, magazines,
newspapers, town criers, sides of buses, banners attached to or sides of
airplanes ("logojets"), in-flight advertisements on seatback tray tables or
overhead storage bins, taxicab doors, roof mounts and passenger screens,
 musical stage shows, subway platforms and trains, elastic bands on
disposable diapers, stickers on apples in supermarkets, shopping cart
handles (grabertising), the opening section of streaming audio and video,
posters, and the backs of event tickets and supermarket receipts.
 Any place an "identified" sponsor pays to deliver their message through a
medium is advertising.

Covert advertising

 Covert advertising is when a product or brand is embedded in entertainment

and media.
 For example, in sports events such as foot ball matches and cricket matches
players wear the logos of companies in T-shirts, Bats etc.,.

Television commercials

 The TV commercial is generally considered the most effective mass-market

advertising format, as is reflected by the high prices TV networks charge for
commercial airtime during popular TV events.
 The majority of television commercials feature a song or jingle that listeners
soon relate to the product.

Celebrity advertising

 This type of advertising focuses upon using celebrity power, fame, money,
popularity to gain recognition for their products and promote specific stores
or products.

Global advertising

 Advertising has gone through five major stages of development: domestic,

export, international, multi-national, and global.
 For global advertisers, there are four, potentially competing, business
objectives that must be balanced when developing worldwide advertising:
building a brand while speaking with one voice, developing economies of
 scale in the creative process, maximising local effectiveness of ads, and
increasing the company’s speed of implementation.

DECIDING ADVERTISING BUDGET

Approaches to setting the advertising budget

Method - 1 : Fixed percentage of sales

 In markets with a stable, predictable sales pattern, some companies set their
advertising spend consistently at a fixed percentage of sales.
 This policy has the advantage of avoiding an “advertising war” which could
be bad news for profits.
 However, there are some disadvantages with this approach.
 This approach assumes that sales are directly related to advertising.

Method - 2 : Same level as competitors

 This approach has widespread use when products are well-established with
predictable sales patterns.
 It is based on the assumption that there is an “industry average” spend that
works well for all major players in a market.
 A major problem with this approach (in addition to the disadvantages set out
for the example above) is that it encourages businesses to ignore the
effectiveness of their advertising spend – it makes them “lazy”.

Method - 3 : Task

 The task approach involves setting marketing objectives based on the “tasks”
that the advertising has to complete.
 These tasks could be financial in nature (e.g. achieve a certain increase in
sales, profits) or related to the marketing activity that is generated by the
campaigns. For example:
 Numbers of enquiries received quoting the source code on the advertisement
  Increase in customer recognition / awareness of the product or brand (which
can be measured)
 Number of viewers, listeners or readers reached by the campaign

Method - 4 : Residual

 The residual approach, which is perhaps the worst of all, is to base the
advertising budget on what the business can afford – after all other
expenditure.
 There is no attempt to associate marketing objectives with levels of
advertising.In a good year large amounts of money could be wasted; in a bad
year, the low advertising budget could guarantee a further low year for sales.