New Business Development
New Business Development
New Business Development
Zakir Patel, Prof, Naran Lala College of Commerce & Management, Navsari
SHORT NOTES
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LONG ANSWERS
Growth of any country depends upon social, economic, political, cultural & psychological
factors. They are environmental factors.
These factors may be having positive & negative influence on growth of entrepreneurship.
Positive influence helps the growth whereas negative influence of these factors becomes
barriers to entrepreneurship in a country.
Barriers to
entrepreneurship
ECONOMIC FACTORS:
The growth of entrepreneurship depends upon certain economic factors like capital, labour, raw
material & markets.
Capital: Capital is one of the most important requirements to start a business. If capital is not
available, then it may create problems in hiring labour, buying raw-material & compete in the
market... Thus, availability of capital helps growth of entrepreneurship & lack of it acts as a
barrier to it.
Labour: The quality as well as the quantity of labour is another factor that influences the
growth of entrepreneurship. It must be noted that persons without proper technical skills may
act as a barrier to entrepreneurship. Different countries face this problem differently. Some
countries, like India, have abundant labour which helps in bringing labour cost down.
Raw material: If adequate raw material is not available, neither any enterprise can be
established nor can entrepreneurship emerge. However, in some cases it may not be true. E.g.
Japan lacks adequate raw material but still there is no problem in entrepreneurship growth.
Market: The size & competition of market has major influences on growth of
entrepreneurship. Monopoly situation is more favourable to entrepreneurship as compared to
competitive situation. The larger the market size, the better the scope of entrepreneurship.
Small market acts as a barrier.
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CULTURAL FACTORS:
Culture is all about the values, customs, traditions, norms, beliefs and assumptions which are
shared among the members of the society. Every society show a different set of cultural
background. This affects the business also. The cultural factors in a country decide the level of
entrepreneurial activities in the country. Some countries place a very high value to business and
ultimately help in creating wealth whereas some other cultures might value business only to a
certain extent. If the culture does not attach great value to business talents, industrial leadership
etc. then people may not prefer any business.
SOCIAL FACTORS:
Society is highly important factor in deciding the business activities. Social factors also play an
important role in encouraging entrepreneurship in a country.
Customs & tradition: If customs & traditions play a dominant role in production decision
making rather than critical assessment of facts, then entrepreneurship will not be encouraged
because an entrepreneur will be guided more by customs rather than his own initiative &
drive. In fact, in Europe, people rejected customs & tradition and hence entrepreneurship
growth became possible.
Rationality of society: A society is said to be rational when decisions regarding resource
utilization are based on facts & critical scientific standards. It must not be based on anything
that is not logical.
Social system: The social system existing in a locality also affects entrepreneurship. For
example, in a society where there is joint family system, entrepreneurship becomes difficult
to be developed because those members of joint family who are working hard for the
success of the business more than the other members of the family, do not get the
opportunity to enjoy the fruits of their labour since they have to share their wealth with other
members of the family.
Social set-up: The social set-up in some countries is not favourable to entrepreneurship. For
example, in some societies, education, research & training are given very little importance.
Such societies cannot expect entrepreneur to emerge & take up new ventures.
PERSONALITY FACTORS:
Following are some important personality related factors that act as barriers in entrepreneurship
development.
Suspect personality: In less developed countries, the entrepreneur is looked upon with
suspicion. People tend to see a suspect personality in the entrepreneur. They see the
entrepreneur only as a profit maker & an exploiter of resources. Such negative feelings
towards entrepreneur affect the growth of entrepreneurship.
Emergence of Government Planning: In less developed countries, people favour direct
state activity (government actions) in the economy rather than private entrepreneur due to
suspect personality factors. Planning imposes controls & this goes against the very
personality of an entrepreneur.
PSYCHOLOGICAL FACTORS:
There are many theories that focus on psychological factors for the development of
entrepreneurship. As per these theories, entrepreneurship can only develop when the entrepreneurs
have a certain personality traits. These personality traits decide the emergence of entrepreneurship
in the society. The best among these theories is David McClelland’s theory of need of
achievement. According to this theory, entrepreneurship can only grow if the average level of
need for achievement is high. If need for achievement is low, it acts as a barrier to
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entrepreneurship in a country.
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GOVERNMENT FACTORS:
The industrial policy of government influences the growth of entrepreneurship in a country. By
providing basic infrastructure facilities & services, incentives & concessions, the government can
provide support to entrepreneurs. If the government policy lacks these entirely, then, it may
become a barrier to entrepreneurship. Hence, we can say that in societies where the government is
interested in economic development, entrepreneurship grows; otherwise government may also act
as a barrier.
Besides the above factors, there are some other factors which may act as barriers for
entrepreneurship development. They are:
Non co-operation of banks & financial institutions: If banks & other financial institutions
develop a negative attitude in providing easy access to finance to the entrepreneurs, then they
would become a barrier to entrepreneurship growth.
Political stability: If the government changes frequently, policies also change fast with new
government. As a result of this political instability, entrepreneurs do not get motivated to start a
new enterprise. Frequently changing industrial policies act as a barrier to the overall growth of
entrepreneurship.
Patent problems: Since big business houses have large facilities of R&D, they can offer
innovation in production & thereby, they get patents on their inventions. Hence, for small
entrepreneurs, these patents act as barrier to their growth.
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Entrepreneurs initiate and sustain the process of economic development in the following ways:
1. Capital Formation:
Entrepreneurs mobilize the idle savings of the public through the issues of industrial securities.
Investment of public savings in industry results in productive utilization of national resources.
Rate of capital formation increases which is essential for rapid economic growth. Thus, an
entrepreneur is the creator of wealth.
3. Generation of Employment:
Entrepreneurs generate employment both directly and indirectly. Directly, self-employment as an
entrepreneur offers the best way for independent and honourable life. Indirectly, by setting up
large and small scale business units they offer jobs to millions. Thus, entrepreneurship helps to
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6. Economic Independence:
Entrepreneurship is essential for national self-reliance. Industrialists help to manufacture
indigenous substitutes of hitherto imported products thereby reducing dependence on foreign
countries. Businessmen also export goods and services on a large scale and thereby earn the
scarce foreign exchange for the country.
Such import substitution and export promotion help to ensure the economic independence of the
country without which political independence has little meaning.
Important role that entrepreneurship plays in the economic development of our economy
(India) are:
2. Generation of Employment:
Entrepreneur generates employment both directly and indirectly. By starting their business they
present an opportunity to others for work by offering jobs.
5. Economic Independence:
Entrepreneurship is essential for national self-reliance. Industrialists help to manufacture
substitutes of imported products thereby reducing dependence on foreign countries. These
businessmen also export products thereby earning foreign exchange for the country.
Entrepreneurship does not emerge and grow spontaneously. There are various factors having both
positive and negative influence on the growth of entrepreneurship. (Positive influence implies
facilitating and conducive conditions whereas negative influences refer to factors inhibiting the
emergence of entrepreneurship).
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WOMEN ENTREPRENEURSHIP
Definition:
“Women Entrepreneurs may be defined as the women or a group of women who initiate, organize
and operate a business enterprise”.
“Government of India has defined women entrepreneurs as an enterprise owned and controlled by
a women having a minimum financial interest of 51% of the capital and giving at least 51% of
employment generated in the enterprise to women”.
invested capital.
Fredrick Harbiscon, has enumerated the following five functions of a women entrepreneur’s :
Exploration of the prospects of starting a new business enterprise.
Undertaking a risk and handling of economic uncertainties involved in business.
Introduction of innovations, imitations of innovations.
Coordination, administration and control.
Supervision and leadership.
In short, women entrepreneur are those women who think of a business enterprise, initiate it
organize and combine the factors of production, operate the enterprise, undertake risk and handle
economic uncertainties involved in running a business enterprise.
With education and training, the women have gained confidence to do all work, which was the
prerogative of man and do it excellently, rather better than men. Over the years, the educated
women have become ambitious, acquired experience and basic skills of competency and self-
assurance.
housewives again. The result is that they are forced to rely on their own savings, and loan
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5. Indian women give more emphasis to family ties and relationships. Married women have
to make a fine balance between business and home. More over the business success is
depends on the support the family members extended to women in the business process
and management. The interest of the family members is a determinant factor in the
realization of women folk business aspirations.
6. Another argument is that women entrepreneurs have low-level management skills. They
have to depend on office staffs and intermediaries, to get things done, especially, the
marketing and sales side of business. Here there is more probability for business fallacies
like the intermediaries take major part of the surplus or profit. Marketing means mobility
and confidence in dealing with the external world, both of which women have been
discouraged from developing by social conditioning. Even when they are otherwise in
control of an enterprise, they often depend on males of the family in this area.
7. The male – female competition is another factor, which develop hurdles to women
entrepreneurs in the business management process. Despite the fact that women
entrepreneurs are good in keeping their service prompt and delivery in time, due to lack of
organisational skills compared to male entrepreneurs women have to face constraints from
competition. The confidence to travel across day and night and even different regions and
states are less found in women compared to male entrepreneurs. This shows the low level
freedom of expression and freedom of mobility of the women entrepreneurs.
8. Knowledge of alternative source of raw materials availability and high negotiation skills
are the basic requirement to run a business. Getting the raw materials from different souse
with discount prices is the factor that determines the profit margin. Lack of knowledge of
availability of the raw materials and low-level negotiation and bargaining skills are the
factors, which affect women entrepreneur’s business adventures.
9. Knowledge of latest technological changes, know how, and education level of the person
are significant factor that affect business. The literacy rate of women in India is found at
low level compared to male population. Many women in developing nations lack the
education needed to spur successful entrepreneurship. They are ignorant of new
technologies or unskilled in their use, and often unable to do research and gain the
necessary training (UNIDO, 1995b, p.1). Although great advances are being made in
technology, many women’s illiteracy, structural difficulties, and lack of access to technical
training prevent the technology from being beneficial or even available to females
(“Women Entrepreneurs in Poorest Countries,” 2001). According to The Economist, this
lack of knowledge and the continuing treatment of women as second-class citizens keep
them in a pervasive cycle of poverty (“The Female Poverty Trap,” 2001). The studies
indicate that uneducated women do not have the knowledge of measurement and basic
accounting.
10. Low-level risk taking attitude is another factor affecting women folk decision to get into
business. Low-level education provides low-level self-confidence and self-reliance to the
women folk to engage in business, which is continuous risk taking and strategic cession
making profession. Investing money, maintaining the operations and ploughing back
money for surplus generation requires high risk taking attitude, courage and confidence.
Though the risk tolerance ability of the women folk in day-to-day life is high compared to
male members, while in business it is found opposite to that.
11. Achievement motivation of the women folk found less compared to male members. The
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low level of education and confidence leads to low level achievement and advancement
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motivation among women folk to engage in business operations and running a business
concern.
12. Finally high production cost of some business operations adversely affects the
development of women entrepreneurs.
Meaning:
Business incubators support the development of start-ups by providing them with advisory
and administrative support services.
According to the National Business Incubation Association, an incubator's primary
objective is to produce successful and financially viable firms that can survive on their
own.
Early incubators focused on technology companies or on a combination of industrial and
service companies, but newer incubators work with companies from different industries.
Incubation is a dynamic process of business development. Incubators nurture young firms,
helping them to survive in their early stage.
Incubators provide:
o Infrastructural support i.e. office space, meeting room
o Platform to do networking
o Management assistance
o Other support services, specific to incubators
Features of BIC:
Flexible space for office, meetings, events
Inspired by ‘Co working spaces’ / ‘Multi-tenant non-profit centres’ i.e. share space,
resources
Flexible tenancy & payment: by hour, day, month
Positive filter on the organizations who can work there i.e. ethical, creative
Meeting place for people, network, support, tools and inspiration
Sound business model – not ‘dependent’ charity
Finance
Incubators help start-ups save on operating costs. The companies that are part of an incubator can
share the same facilities and share on overhead expenses, such as utilities, office equipment
rentals, and receptionist services. Start-ups can also take advantage of lower lease rates if the
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incubator is located in low-rent industrial parks. Incubators may also help start-ups with their
financing needs by referring them to angel investors and venture capitalists, and helping them
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with presentations. Start-ups may have better luck securing financing if they have the stamp of
approval of incubator programs.
Management
In addition to financial help, start-ups also need guidance on how to compete successfully with
established industry players. Incubators can tap into their networks of experienced entrepreneurs
and retired executives, who can provide management guidance and operational assistance. For
example, a biotechnology start-up would benefit from the counsel of retired pharmaceutical
executives who have first-hand experience of the drug development and clinical approval process.
Similarly, a restaurant entrepreneur could learn about the difficulties of overseas expansion from
retired hospitality-industry executives. Start-ups usually benefit from having respected individuals
on their boards of directors and scientific advisory panels, because these individuals bring
invaluable connections and experience to the table.
Synergy
The close working relationships between an incubator's start-ups create synergies. Even after the
start-ups leave an incubator, the connections and networks established through these relationships
can endure for a long time. Start-up entrepreneurs can provide encouragement to one another, and
employees may share ideas on new approaches to old problems. Start-ups may plan joint
marketing campaigns and cooperate on product development initiatives. These synergies do not
necessarily exist among start-ups funded by venture capitalists, because the companies that
receive the funds do not necessarily know one another and they may be located in different
geographic locations.
Economy
By helping new businesses prosper, incubators assist in creating long-lasting jobs for their host
communities. Start-ups in incubation programs have greater viability and show superior financial
performance over the long term. They create long-lasting jobs for new graduates, experienced
mid-career personnel, and veteran executives. This benefits communities and drives economic
growth.
Benefits of BIC:
For Entrepreneurs:
1. New technology / product gets developed
2. Informed investment decision
3. Possibilities of takeover
For Government:
1. Economic development
2. Social benefits
3. Encouragement to innovate
AIM has supported the launch of incubation centres called Atal Incubation Centres (AICs) to
create world class incubation facilities across India with suitable physical infrastructure. The AICs
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should provide capital equipment, operating facilities, experts for mentoring the start-ups,
NEW BUSINESS DEVELOPMENT, MBA SEM 2, VNSGU, Surat
Dr. Zakir Patel, Prof, Naran Lala College of Commerce & Management, Navsari
business planning support, supply of seed capital, providing industry partners, trainings etc.,
required for encouraging innovative start-ups. Atal Incubation Centres are established in in areas
such as manufacturing, transport, energy, health, education, agriculture, water and sanitation etc.
Business and technology related entities including higher educational institutions, R&D institutes,
corporate sector, alternative investment funds registered with SEBI, business accelerators,
individual groups, and even individuals are eligible to apply as AICs.
Selected AICs will get a grant-in-aid of up to Rs. 10 crore for a maximum period of 5 years to
cover the capital and operational expenditures under the AIM.
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CHARACTERISTICS OF MSME
According to Micro, Small & Medium Enterprises Development (MSMED) Act, 2006 the Micro,
Small and Medium Enterprises (MSME) are classified in two Classes:
(a) Manufacturing Enterprises- These enterprises are engaged in the manufacture or production
of goods pertaining to any industry specified in the Industries (Development and regulation) Act,
1951. The Manufacturing Enterprise is defined in terms of investment in Plant & Machinery.
(b) Service Enterprises: The enterprises engaged in providing services and are defined in terms
of investment in equipments.
The limit for investment in plant and machinery / equipment for manufacturing / service
enterprises are as under:
Manufacturing Sector
Enterprises Investment in plant & machinery
Micro Enterprises Does not exceed 25 lakh rupees
Small Enterprises More than 25 lakh rupees but does not exceed 5
crore rupees
Medium More than 5 crore rupees but does not exceed 10
Enterprises crore rupees
Service Sector
Enterprises Investment in equipments
Micro Enterprises Does not exceed 10 lakh rupees:
Small Enterprises More than 10 lakh rupees but does not exceed 2
crore rupees
Medium More than 2 crore rupees but does not exceed 5
Enterprises core rupees
Following are the characteristics of some industries which identify them as MSME industries:
1. Labour intensive:
Small-scale industries are fairly labour-intensive. They provide an economic solution by creating
employment opportunities in urban and rural areas at a relatively low cost of capital investment.
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2. Flexibility:
Small-scale industries are flexible in their operation. They adapt quickly to various factors that
play a large part in daily management. Their flexibility makes them best suited to constantly
changing environment.
3. One-man show:
A small-scale unit is generally a one-man show. It is mostly set up by individuals. Even some
small units are run by partnership firm or company, the activities are mainly carried out by one of
the partners or directors. Therefore,’ they provide an outlet for expression of the entrepreneurial
spirit. As they are their own boss, the decision making process is fast and at times more
innovative.
4. Use of indigenous raw materials:
Small-scale industries use indigenous raw materials and promote intermediate and capital goods.
They contribute to faster balanced economic growth in a transitional economy through
decentralisation and dispersal of industries in the local areas.
5. Localised operation:
Small-scale industries generally restrict their operation to local areas in order to meet the local and
regional demands of the people. They cannot enlarge their business activities due to limited
resources.
6. Lesser gestation period:
Gestation period is the period after which the return or investment starts. It is the time period
between setting the units and commencement of production. Small-scale industries usually have a
lesser gestation period than large industries. This helps the entrepreneur to earn after a short
period of time. Capital will not be blocked for a longer period.
7. Educational level:
The educational level of the employees of small industries is normally low or moderate. Hardly
there is any need of specialised knowledge and skill to operate and manage the SSI.
8. Profit motive:
The owners of small industries are too much profit conscious. They always try to keep high
margins in their pricing. This is one of the reason for which the unit may lead to closure.
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it. Nowadays, MNCs are buying semi-finished, and auxiliary products from small
return on investment due to shorter gestation period. The pay-back period is quite short in
small scale industries. SSI functions as a stabilizing force by providing high output capital
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ratio as well as high employment capital ratio. It encourages the people living in rural
areas and small towns to mobilize savings and channelize them into industrial activities.
11. Promotes Exports: SSI does not require sophisticated machinery. Hence, it is not
necessary to import the machines from abroad. On the other hand, there is a great demand
for goods produced by small scale sector. Thus it reduces the pressure on the country’s
balance of payments. SSI earns valuable foreign exchange through exports from India.
12. It Complements Large Scale Industries: SSI plays a complementary role to large scale
sector and supports the large scale industries. SSI provides parts, components, accessories
to large scale industries and meets the requirements of large scale industries through
setting up units near the large scale units. It serves as ancillaries to large Scale units.
13. It Meets Consumer Demands: SSI produces wide range of products required by
consumers in India. SSI meets the demand of the consumers without creating a shortage
for goods. Hence, it serves as an anti-inflationary force by providing goods of daily use.
14. It Ensures Social Advantage: SSI helps in the development of the society by reducing
concentration of income and wealth in few hands. SSI provides employment to people and
pave for independent living. SSI helps the people living in rural and backward sector to
participate in the process of development. It encourages democracy and self-governance.
15. Develops Entrepreneurship: 1. It helps to develop a class of entrepreneurs in the society.
It helps the job seekers to turn out as job givers. It promotes self-employment and spirit of
self-reliance in the society. Development of small scale industries helps to increase the per
capita income of India in various ways. It facilitates development of backward areas and
weaker sections of the society. Small Scale Industries are adept in distributing national
income in more efficient and equitable manner among the various participants of the
society
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Small scale industries normally tap local sources for meeting raw material requirements. These
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units have to face numerous problems like availability of inadequate quantity, poor quality and
even supply of raw material is not on regular basis. All these factors adversely affect t e
functioning of these units.
Large scale units, because of more resources, normally corner whatever raw material that is
available in the open market. Small scale units are thus forced to purchase the same raw material
from the open market at very high prices. It will lead to increase in the cost of production thereby
making their functioning unviable.
(3) Idle Capacity:
There is under-utilisation of installed capacity to the extent of 40 to 50 percent in case of small
scale industries. Various causes of this under-utilisation are shortage of raw material problem
associated with funds and even availability of power. Small scale units are not fully equipped to
overcome all these problems as is the case with the rivals in the large scale sector.
(4) Technology:
Small scale entrepreneurs are not fully exposed to the latest technology. Moreover, they lack
requisite resources to update or modernise their plant and machinery Due to obsolete methods of
production, they are confronted with the problems of less production in inferior quality and that
too at higher cost. They are in no position to compete with their better equipped rivals operating
modem large scale units.
(5) Marketing:
These small scale units are also exposed to marketing problems. They are not in a position to get
first-hand information about the market i.e. about the competition, taste, liking, disliking of the
consumers and prevalent fashion.
With the result they are not in a position to upgrade their products keeping in mind market
requirements. They are producing less of inferior quality and that too at higher costs. Therefore, in
competition with better equipped large scale units they are placed in a relatively disadvantageous
position.
In order to safeguard the interests of small scale enterprises the Government of India has reserved
certain items for exclusive production in the small scale sector. Various government agencies like
Trade Fair Authority of India, State Trading Corporation and the National Small Industries
Corporation are extending helping hand to small scale sector in selling its products both in the
domestic and export markets.
(6) Infrastructure:
Infrastructure aspects adversely affect the functioning of small scale units. There is inadequate
availability of transportation, communication, power and other facilities in the backward areas.
Entrepreneurs are faced with the problem of getting power connections and even when they are
lucky enough to get these they are exposed to unscheduled long power cuts.
Inadequate and inappropriate transportation and communication network will make the working
of various units all the more difficult. All these factors are going to adversely affect the quantity,
quality and production schedule of the enterprises operating in these areas. Thus their operations
will become uneconomical and unviable.
(7) Under Utilisation of Capacity:
Most of the small-scale units are working below full potentials or there is gross underutilization of
capacities. Large scale units are working for 24 hours a day i.e. in three shifts of 8 hours each and
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are thus making best possible use of their machinery and equipments.
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On the other hand small scale units are making only 40 to 50 percent use of their installed
capacities. Various reasons attributed to this gross under- utilisation of capacities are problems of
finance, raw material, power and underdeveloped markets for their products.
(8) Project Planning:
Another important problem faced by small scale entrepreneurs is poor project planning.
These entrepreneurs do not attach much significance to viability studies i.e. both technical
and economical and plunge into entrepreneurial activity out of mere enthusiasm and
excitement.
They do not bother to study the demand aspect, marketing problems, and sources of raw
materials and even availability of proper infrastructure before starting their enterprises.
Project feasibility analysis covering all these aspects in addition to technical and financial
viability of the projects, is not at all given due weight-age.
Inexperienced and incomplete documents which invariably results in delays in completing
promotional formalities. Small entrepreneurs often submit unrealistic feasibility reports
and incompetent entrepreneurs do not fully understand project details.
Moreover, due to limited financial resources they cannot afford to avail services of project
consultants. This result is poor project planning and execution. There are both time
interests of these small scale enterprises.
(9) Skilled Manpower:
A small scale unit located in a remote backward area may not have problem with respect
to unskilled workers, but skilled workers are not available there. The reason is Firstly,
skilled workers may be reluctant to work in these areas and secondly, the enterprise may
not afford to pay the wages and other facilities demanded by these workers.
Besides non-availability entrepreneurs are confronted with various other problems like
absenteeism, high labour turnover indiscipline, strike etc. These labour related problems
result in lower productivity, deterioration of quality, increase in wastages, and rise in other
overhead costs and finally adverse impact on the profitability of these small scale units.
(10) Managerial:
Managerial inadequacies pose another serious problem for small scale units. Modern
business demands vision, knowledge, skill, aptitude and whole hearted devotion.
Competence of the entrepreneur is vital for the success of any venture. An entrepreneur is
a pivot around whom the entire enterprise revolves.
Many small scale units have turned sick due to lack of managerial competence on the part
of entrepreneurs. An entrepreneur who is required to undergo training and counselling for
developing his managerial skills will add to the problems of entrepreneurs.
The small scale entrepreneurs have to encounter numerous problems relating to
overdependence on institutional agencies for funds and consultancy services, lack of
credit-worthiness, education, training, lower profitability and host of marketing and other
problems. The Government of India has initiated various schemes aimed at improving the
overall functioning of these units
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STRENGTHS
WEAKNESSES
It can be difficult to reach enough potential customers to establish a successful base of
customers. Potential customers might be less likely to do business with a small business
that does not offer a well-known brand of products or services.
One of the largest weaknesses for small business owners is to raise finance. Many business
owners invest their own money at the start of a business or if the business falls upon hard
times because institutional lenders like banks and government financial corporations are
generally reluctant to advance money to these small units.
Small business owner has to bear high cost of production, which acts as one of the
weakness for the small businesses.
Most of small scale businesses do not have skilled personnel. Due to which these
businesses lack in identification of industrial projects for development consultancy and
counselling services and providing industrial training and skill `formation
Small businesses do not use Information technology and its applications such as the
designing of prototype machines for product identified according to country resources and
requirements.
Many times it becomes very difficult to obtain the permission of and licence from, the
Industrial Development of the state, local bodies etc.
Marketing is one of the weaknesses for small businesses.
Besides these, the entrepreneurs face many problems in marketing due to
Lack of standardization Poor finish
Poor designing Poor bargaining power
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OPPORTUNITIES
The opportunities enjoyed in the present scenario by the MSMEs are government support,
reservation of product items, excise relief and ancillary for large business. Keeping the
weaknesses aside, MSMEs have access to opportunities like a number of bilateral and multilateral
trade agreements have taken place, which opens the gateway to a great source of revenue for
entrepreneurs/business owners. Likewise enhanced credit support with more and more
government initiatives for their promotion are offered, hence entrepreneurs/ business owners can
expect some relief in terms of access to credit facilities. In addition, with the arrival of digital era
(internet), the access to newer opportunities has become easier and increased significantly. Some
of the entrepreneurs have also used made a stand against monopolies & made a mark in the
industry. Therefore, the emergence of online marketplaces and alternative funding has also made
it easier for entrepreneurs to make safe business funding. Also, NSIC (National Small Industries
Corporation) have launched several marketing programmes to promote MSMEs. Therefore, small
business owners can utilize adequate marketing support avail from Government agencies for the
growth of MSMEs.
THREATS
Some of the threats related to MSMEs are:
Slow Payment: While large corporations and banks have been fortified with ample low-
cost cash to buy small businesses‟ products and services, they continue to pay slowly,
bargain harder and demand more concessions from powerless small businesses who are
selling their souls “where the money is.”
New costs, taxes and compliance: As social causes like sustainability, diversity,
healthcare and fair taxation are being legislated by governments and lobbied into
favourable terms for corporations, small business is getting choked. Now, the new costs,
taxes and compliance rules are sapping the will of owners to believe that they should risk,
invest and remain confident in their businesses.
“Approved” vendor programs force buying solely on price: To shift responsibility and
outsource their liability, corporations and governments are hiring third party sourcing
companies whose objective is to reduce small business vendor power and commoditize
their products and services.
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The number of items exclusively reserved for the small-scale sector has been considerably
increased during the Five Year Plan Periods and now stands at 822.
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However, prior to the 1997 – 98 Budget the number of items reserved for the small-scale sector
stood at 836. The Finance Minister de-reserved 14 items in the 1997 – 98 Budget.
3. Price preference:
The SSI units are given price preference up to a maximum of 15 per cent in respect of certain
items purchased both from small-scale and large-scale units.
5. Excise duty:
In respect of SSI units excise duty concessions are granted to both registered and unregistered
units on a graded scale depending upon their production value. Full exemption is granted up to a
production value of Rs.30 lakhs in a year and 75 % of normal duty is levied for production value
exceeding Rs.30 lakhs but not exceeding Rs.75 lakhs. If the production value exceeds Rs.75 lakhs,
normal rate of duty will be levied.
7. Financial assistance:
Small-scale industries are brought under the priority sector. As a result, financial assistance is
provided to SSI units at concessional terms by commercial banks and other financial institutions.
With a view to providing more financial assistance to the small-scale sector, several schemes have
been introduced in the recent past the Small Industries Development Fund (SIDF) in 1986,
National Equity Fund (NEF) in 1987 and the Single Window Scheme (SWS) in 1988.
SIDF provides refinance assistance to small-scale and cottage and village industries and the tiny
sector in rural areas. NEF provides equity type support to small entrepreneurs for setting up new
projects in the tiny/small-scale sector. In 1996, the small-scale sector received 42.3 per cent of the
total priority sector advances from public sector banks.
October, 1982.
The Technical Consultancy Organisation provides consultancy services to MSME units at a
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subsidised rate. Many financial institutions are also providing subsidies to SSI units for availing of
NEW BUSINESS DEVELOPMENT, MBA SEM 2, VNSGU, Surat
Dr. Zakir Patel, Prof, Naran Lala College of Commerce & Management, Navsari
consultancy services. For instance, small entrepreneurs proposing to set up rural, cottage, tiny or
small-scale units, can get consultancy services at a low cost from the Technical Consultancy
Organisations approved by the All-India and State-level financial institutions.
They have to pay only 20% of the fees charged by a technical consultancy organisation. The entire
balance of 80% or Rs.5, 000 whichever is lower is subsidised by the Industrial Finance
Corporation of India.
– Publicity abroad
NEW BUSINESS DEVELOPMENT, MBA SEM 2, VNSGU, Surat
Dr. Zakir Patel, Prof, Naran Lala College of Commerce & Management, Navsari
4. Credit Guarantee Trust Fund for Micro & Small Enterprises (CGT SME)- Collateral free loan
up to a limit of Rs. 100 lakh is available for individual MSE on payment of guarantee fee to bank
by the MSE.
5. Credit Linked Capital Subsidy for Technology Upgradation (CLCSS)- it provides 15% subsidy
for additional investment up to Rs. 1 cr for technology upgradation by MSEs.
6. Technology and Quality Upgradation Support to MSMEs- use of energy efficient technologies
(EETs) in manufacturing units. Following assistance will be provide:
– Funding support
– Setting up of Carbon Credit Aggregation Centres.
– Encouraging MSMEs to acquire product certification / licenses from National /
International bodies etc.
**********************************************************************
Assistance to MSMEs
i. Solar Pump:
Government of Gujarat has introduced this scheme to help the salt producers in
obtaining solar pump system at concessional rates.
Bharat Ratna Dr. Baba Saheb Ambedkar Udhyog Uday Yojna for SC/ST Entrepreneurs of
MSME
22
Government of Gujarat has introduced this scheme to help the SC/ST categories of entrepreneurs .
assistance is provided in case of investment subsidies, patent registration, quality certification,
Page
technology upgradation, venture capital, rehabilitation of sick units, consumption of energy and
water etc.
Schemes for Assistance to MSEs for Shed and Plot developed By Private Developer Schemes
Assistance to Private Developer for developing readymade sheds in Mini Estate
Assistance in rent to MSEs
Sr.
No Eligible Activity Quantum of Assistance
1 Implementation of Cleaner production technology (1). Upton 35% of cost of Plant &
in place of existing process such as substitution & M.S.M.E. Machinery with ceiling of Rs.
optimization of raw material, reduction in water 35 Lacs during the operative
consumption or energy consumption or waste period of the scheme for
23
generation. MSME.
Page
Sr.
No Eligible Activity Quantum of Assistance
Any other environment management project with (1). Upton 25% of cost of Plant &
use of Clean, Efficient and Innovative Pollution M.S.M.E. Machinery with ceiling of Rs.
Control Equipment Lakhs during the operative
period of the Scheme of
MSME.
Awards to MSMEs:
Separate awards will be given for Micro, Small and Medium Enterprise Category
Award will be given in each of following three category
Growth in Production & Profit
Quality and Environment Improvement Measures
Innovation in Technology for New Product or Process Development
Award of Rs.2 lakh, Trophy and Appreciation Letter to each winner
Awards to Best MSEs Entrepreneur in the following category one to each -
Women Entrepreneur
Young Entrepreneur (first generation Entrepreneurs below 35 years age)
SC Entrepreneur
ST Entrepreneur
Award of Rs.2 lakh, Trophy and Appreciation Letter to each winner
******************************************************************************
24
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Meaning of Market Analysis: Market analysis means getting answers to the following two
questions:
1. What will be the total demand for the product/service?
2. What shall be the market share of our proposed project?
Process of Market Analysis: Market analysis should be carried out in an orderly and systematic
manner. The important steps in such analysis are as follows:
Example: Suppose a company has invented a new type of food processor with many new features
as compared to old style mixer-grinder. Suppose the entrepreneur needs information about where
and how to market the food processor. The objectives of market and demand analysis in this case
may be;
Who are the buyers of mixer-grinder?
What is the total current demand for mixer-grinder?
How is the demand distributed temporally (pattern of sales over the year) and
geographically?
What is the nature of demand for mixer-grinder of different sizes?
25
How can potential customers be convinced about the superiority of the food processor?
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What price and warranty will make sure that customers accept the new food processor?
What channels of distribution are most suited for the food processor?
What trade margins will influence distributors?
2. Select the Sampling Scheme and Sample Size: There are many sampling methods: simple
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random sampling, cluster sampling, sequential sampling, stratified sampling, systematic sampling,
and non-probability sampling. Each method has its advantages and limitations. Sample size is also
very important to get reliable data.
3. Develop the Questionnaire: The questionnaire is the main instrument for getting information
from the respondents. The effectiveness of the questionnaire depends on its length, the types of
questions, and the wording of questions.
4. Recruit and Train the Field Investigators: Recruiting and training of field investigators must
be planned well. Great care must be taken for recruiting the right kind of investigators and
imparting the proper kind of training to them.
5. Obtain Information as per the Questionnaire: Respondents may be interviewed personally,
telephonically, or by mail for obtaining information. Personal interviews get a high rate of
response. They are expensive and likely to result in biased responses because of the presence of
the interviewer. Mail surveys are economical. The response rate is often low. Telephonic
interviews have very limited applicability in India because telephone tariffs are high.
6. Analyse and Interpret the Information: After gathering the data, it must be edited for
analysing it. For statistical analysis, a variety of methods are available. They may be divided into
two broad categories: parametric methods and nonparametric methods. Analysed data must be
properly interpreted for results.
2. Price: It may be helpful to study the following types of prices: (i) manufacturer’s price quoted
as FOB (free on board) price or CIF (cost, insurance, and freight) price, (ii) price for imported
goods, (iii) wholesale price, and (iv) retail price.
3. Methods of Distribution And Sales Promotion: The methods of distribution may change with
the nature of product. Capital goods, industrial raw materials, and consumer products have
different distribution channels. Similarly, methods used for sales promotion (advertising,
27
4. Consumers: Consumers are of many types in the market. They must be properly analysed.
Consumers may be characterised along two dimensions: demographic and attitudinal;
Demographic Attitudinal
Age Preferences
Sex Intentions
Income Habits
Profession Attitudes
Social background Responses
6. Government Policy:
Government also plays a role in influencing the demand for a product.
Governmental plans, policies, Acts, and orders affect the demand for the product.
Government policies might affect the production targets in national plans, import and
export trade controls, import duties, export incentives, excise duties, sales tax, industrial
licensing, preferential purchases, credit controls, financial regulations, and
subsidies/penalties of various kinds.
DEMAND FORECASTING
Generally, there are two approaches to demand forecasting. The first approach involves
forecasting demand by collecting information regarding the buying behaviour of consumers from
experts or through conducting surveys. On the other hand, the second method is to forecast
demand by using the past data through statistical techniques. Thus, we can say that the techniques
of demand forecasting are divided into qualitative / survey methods and quantitative / statistical
methods. The qualitative method is generally for short-term forecasting, whereas quantitative
methods are used to forecast demand in the long run. These two approaches are shown in Figure-
10 below:
existing products and services and anticipate the future demand accordingly.
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The survey method undertakes three exercises, which are shown in Figure-11 below:
NEW BUSINESS DEVELOPMENT, MBA SEM 2, VNSGU, Surat
Dr. Zakir Patel, Prof, Naran Lala College of Commerce & Management, Navsari
The exercises undertaken in the survey method (as shown in Figure-11) are discussed as follows:
In addition, in this method, each expert is provided information regarding the estimates
made by other experts in the group, so that he/she can revise his/her estimates with respect
to others’ estimates.
In this way, the forecasts are cross checked among experts to reach more accurate decision
making.
Every expert is allowed to react or provide suggestions on other’s estimates. However, the
names of experts are kept anonymous (name is not disclosed) while exchanging estimates
among experts to facilitate fair judgment and reduce halo effect.
Merits
Decisions are enriched with the experience of competent experts.
Firm need not spend time, resources in collection of data by survey.
Very useful when product is absolutely new to all the markets.
Demerits
Experts’ may involve some amount of bias.
With external experts, risk of loss of confidential information to rival firms.
QUANTITATIVE METHODS: These methods depend upon the calculation of demand on the
basis of different formula. Some important demand forecasting methods are;
1. Time series methods: these methods use past data to calculate demand for future.
2. Moving average method
3. Exponential smoothing method
4. Moving average method
5. Leading indicator method.
n
Dn= D
i 1
i ; where Di = demand in the ith period, n= number of periods in the
n moving average
Weighted Moving Average: forecast the future value of sales on the basis of weights
given to the most recent observations. The formula for computing weighted moving
average is given as:
n
Dn=
w D
i 1
i i
where Di= demand in the ith period, wi= weight for the ith period,
************************************************************
TECHNICAL ANALYSIS
MEANING:
Technical analysis is concerned with the detailed study of various requirements of the project. It is
an in-depth study of the following aspects of the project;
1) Materials inputs & utilities
2) Manufacturing process or technology
3) Location and site
4) Project engineering
5) Manpower planning
Technical analysis tries to answer following two questions:
Is the project feasible? (i.e. whether all inputs are available)
Is the formulation of the project optimum? (i.e. whether inputs are of best quality)
1. Raw Material
Raw material processed on semi processed may be classified into 4 types:
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a) Agricultural products.
NEW BUSINESS DEVELOPMENT, MBA SEM 2, VNSGU, Surat
Dr. Zakir Patel, Prof, Naran Lala College of Commerce & Management, Navsari
b) Mineral products.
c) Forest products.
d) Marine products.
The entrepreneur who wants to start the project must study the above types of raw materials in
detail before starting the project. Let us try to study these raw materials in detail as below;
i. Agricultural products:
Certain projects require agriculture products as their raw material. For example, BALAJI
WAFERS require Potatoes as their raw material.
Hence such types of companies must try to analyse the agricultural raw material in detail.
In studying the details about the agricultural products, the quality of it must be first
examined.
Then an analysis must be made about the quantity available (currently and future)
Following questions must be asked while analysing the agricultural products for the
project
What is the present production level of the agricultural product required for the project?
What is the present area under cultivation? (Means area in which the product is grown)
What is the yield per area? (Yield means production)
What shall be the increase in the area of cultivation in future?
What shall be the increase in yield per area in future?
ii.Mineral products:
Certain companies require mineral products as their raw material. For example, TATA
STEEL Company requires IRON ORE as their raw material.
Hence such types of companies must try to analyse the agricultural raw material in detail.
In studying the details about the mineral raw materials, information is required on the
quantity of mineral deposit available in the soil
Information is also required about the qualities of such minerals.
The study should also provide details about the location, size and depth of deposits of
minerals.
In addition information is also required about the impurities in such types of minerals.
Physical, chemical and other properties of minerals must also be analysed.
iii.Forest products:
Certain companies require forest products as their raw material. For example, furniture
manufacturing companies require wood as their raw material.
Wood, Rubber etc. are some of the forest products which are required by the companies as
raw materials.
Hence such types of companies must try to analyse the forest products in detail.
In studying the details about the forest product, Secondary source of data is often required
from government sources.
Information is also required about the availability of such types of products in different
parts of India.
Future availability and governmental controls regarding forest products must be critically
analysed before starting the product
iv.Marine products:
Certain companies require marine products as their raw material. For example, GEMS and
32
Fish, oysters etc. are some of the marine products which are required by the companies as
raw materials.
Hence such types of companies must try to analyse the marine products in detail.
In studying the details about the marine product, secondary source of data is often required
from government sources.
Information is also required about the availability of such types of products in different
parts of sea / ocean.
Future availability, pollution in sea, cost of collection of such marine products etc.
information is required before starting the project
Some companies require fish and other sea animals for producing medicines.
B. Utilities:
Companies also require utilities for their project.
Utilities required for the project are power, water, steam, fuel etc.
Since the successful operation of a project depends on proper availability of utilities.
In analysing the utilities required for the project, following questions must be answered;
What quantities are required in the project?
What would be future availability in case of shortage of utilities?
What is the source of supply?
What measures may be taken to increase supplies if it is required in more quantity in
future?
a) Primary factors:
i. Supply of raw materials - It is necessary to consider the adequate supply of raw material and
the nature of raw materials. If the supply of raw materials is not regular, it may lead to frequent
stoppage and breakages in production. The time and the cost of transporting raw material are
also important. Therefore, industrial units are located near sources of raw materials.
ii. Nearness to market - Nearness to market is important from the point of view of his control
over the market. Nearness to market is important for supplying goods to the customers in a
minimum period of time. Nearness to market reduces the cost of transporting finished goods to
market. Nearness to market is an important factor in the case of industries producing light,
delicate, and perishable goods .e.g. glass, cosmetics, food products.
iii.Transport facilities - Speedy transport facilities are needed for the regular and timely supply of
raw materials at low cost and for transporting finished products on time to the market. A
producer has to choose a speedy and cheap means of transport after making a comparison of
transport e.g. roads, railways, water ways etc.
iv. Supply of labour - The supply of labour at low-cost is important. If the supply of labourers is
not regular, man-hours, and machines hours are lost forever. Producer’s needed to of labourers
by reducing absenteeism and strikes due to unsatisfactory working conditions.
v. Power - Power is necessary for the process of production and for transporting finished goods
and raw materials. Power may be diesel, atomic energy. Power storages lead to be tremendous
losses due to the stoppage of machinery. Therefore, industries must have a sufficient and regular
supply of power. Continuity in production is to be maintained and if industries are to be operate
all the capacity.
vi. Supply of capital - Industries requires capital for initial promotion and expansion. Therefore,
34
a capital market must be developed in industrial centres. Large scale production mechanization
and big industries require large amounts of equity capital and debenture capital for a long
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period. It is therefore necessary that development banks or (like the U.T.I., I.F.C., etc.) are
developed.
b) Secondary factors
i. Natural factors - Land, water, climate, sources of raw materials and agricultural climate are
some natural factors which are important for some industries like cotton, textile, and sugar and
jute. These industries depend on a good climate and source of natural raw materials.
ii. Political factors - The government’s policy of licensing and encouraging the development of
industries in undeveloped regions determines the location of industries such a policy may cause
the dispersal of industries. The location of defense industries depends on the political policy of
the government.
iii. Government subsidies and facilities - The government may encourage the dispersal of
industries in undeveloped areas by making capital, land, water and power available at subsidies
rates. By giving about the development of industries in backward areas and this result in the
regional balancing of industries.
iv. Initial start and goodwill - Some industries get located at a place because some industrialist
the industry at that place at an early stage e.g. Jamshedpur (tats) was developed into an
industrial city the iron and steel industry received its initial start there. The motor car industries
were at a place where MR.FORD started his workshop. Once one industry is started, other
industries also developed at that place.
v. Miscellaneous factors - The following factor also affects the location of the industries unit.
Sufficient water supply, if water is consumed in large quantities in the production processes.
Disposal of waters.
Strategic factors like dangers of air attacks.
Availability of fire fighting’s facilities.
Availability of recreational, medical and educational facilities.
4) PROJECT ENGINEERING:
Project engineering consists of -
a) Building structures and civil works
b) Project charts layouts
Residential buildings
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5) MANPOWER PLANNING
For a better future development, a company must always plan its human resource properly.
Hence before a project is set-up, manpower must be planned properly. Manpower planning
includes planning for skilled and unskilled workers.
There are many factors which affect manpower planning. These factors can be divided into
macro and micro factors;
A. MACRO FACTORS:
All those factors which are not under the control of a single company are known as macro factors.
These factors include the following;
Demographic environment
Social environment
Cultural environment
Technological environment
Economic environment etc.
1. Demographic environment: Demographic environment includes factors like - age, - income, -
36
occupation, - family size, - gender, - education etc. During manpower planning the above factors
are very important to be considered. For example, India has more than 50% of population in the
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age group of less than 24 years. Hence, during manpower planning, if a company requires young
NEW BUSINESS DEVELOPMENT, MBA SEM 2, VNSGU, Surat
Dr. Zakir Patel, Prof, Naran Lala College of Commerce & Management, Navsari
people, India offers an advantage because young population in India is much higher than other
countries. Similarly, gender is also an important factor while planning for manpower. Education is
another important factor while deciding for manpower.
2. Social environment: Every country has its own social environment. Social environment
includes the norms of the people of a particular society. For example Indian social environment is
very different from American society. We prefer to stay more with the family and American
people are more independent in their social behaviour.
3. Cultural environment: Culture means beliefs, values, principles, customs, and traditions of a
particular society. While planning for manpower, it is important to understand the culture of the
people. For example, in Fiji country, people meet their families three times in a day. Hence every
company has to give 3 recesses during the day time. This will allow people to meet their families
3 times a day. Hence culture plays an important role while planning for manpower
4. Technological environment: Technological environment also affects manpower planning. If a
country is technically advanced, then a company will require less number of workers. If a country
is less technically advanced, then it will have to employ more people in the organization.
5. Economic environment: manpower planning is done according to the economic environment
of a country. If economic environment is in recession, then less manpower must be planned and
during the times of prosperity, more manpower can be planned.
B. MICRO FACTORS:
Micro factors are those factors which are more under the control of a company. Some of the
important micro factors are;
- Company’s financial resources, - Plant capacity, - Training facilities, - Management philosophy,
- Type of company etc.
1. Company’s financial resources: While doing manpower planning, it is very important to
consider the financial resources available with the company. If a company is not very strong
financially, then it cannot plan for more manpower. Similarly, if a company is financially strong,
then it can plan more manpower and also quality manpower.
2. Plant capacity: Manpower planning also depends on the plant capacity of the firm. If the
capacity of the plant is more, then more number of manpower is required and if the plant capacity
is not high, then less manpower will be required.
3. Training facilities: If a company has its own training facilities, then it can recruit fresh people
in its organization. Company can train them afterwards. But if a company does not have proper
training facilities, then it must recruit trained staff for its organization.
4. Management philosophy: In some organizations, management philosophy is to recruit enough
manpower according the level of work in the company. Whereas in some other organizations,
management philosophy is to always recruit less people and give them more burden of work.
5. Type of Company: Manpower planning depends on the type of company. If the company is
labour intensive, then it will have to plan more labour for its firm. If the company is capital
intensive, then it will have to plan less labour and skilled labour for its firm.
*******************************************************************************
37
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corporations (SFC), state industrial development corporations etc. conduct studies, prepare reports
and offer suggestions to entrepreneur. These suggestions can also give good ideas for project.
Page
6. Investigate Local materials and resources: A search for project ideas may begin with an
investigation into local resources and skills. This can also give good project ideas.
7. Analysing economic and social trends: A study of economic and social trends is helpful in
getting good project ideas. Changing economic conditions provide new business opportunities.
People nowadays have less time. Hence the demand for time saving products like ready-made
food items, microwave ovens etc. has been increasing. Such change in society creates demands for
different types of products and services.
8. Check the possibility of reviving sick units: Industrial sickness is at very high level in the
country. There are more than 20,000 units which are now sick. These units are either closed or
about to be closed. A large proportion of sick units can be revived once again if proper care is
taken. Buying such types of sick units could also prove to be good project ideas.
9. Identify unfulfilled psychological needs of society: In order to get some project ideas, the
entrepreneur must also try to study and identify if there is any psychological need of the society
which is still not fulfilled. For example, people have a need for fuel saving bikes. So, there is an
opportunity in such types of products.
10. Visit to trade fairs: Attending the National and International trade fairs provides an excellent
opportunity to know about new products and new development.
1. It should match with the personality of entrepreneur i.e. his ability and experience.
2. It should be accessible to the entrepreneur.
3. It has future of fast growth and high profit.
2. Consistent with the governmental priority – the project idea must be matching with the
national goals and government priorities. Following questions must be answered;
1. Is the project matching with national goals and priorities?
2. Are there any environmental hazards of the project?
3. Can the foreign exchange requirement of project be easily obtained?
4. Will there be any difficulty in obtaining license for project?
3. Availability of inputs – the resources and inputs required for the project must be easily
obtained. To analyse this, the following questions should be answered;
1. Is the capital requirement of project manageable?
39
4. Adequate market size - the size of present market must offer enough sales volume for a
profitable return on investment. For this, the following factors have to be examined;
1. Total present domestic market
2. Competitors and their market share
3. Export market
4. Future increase in their consumption level
5. Patent protection
6. Selling and distribution pattern
5. Reasonable cost – the cost structure of the proposed project must have acceptable profit level
with the competitive price. The following structure of cost should be taken into consideration;
1. Cost of labour
2. Cost of material
3. Overhead cost
4. General administrative cost & 5. Service cost etc.
6. Risk level - the selection of the project idea is dependent on the risk bearing capacity of it.
Following factors must be analysed to find out the risk of the project?
1. Will the project be able to bear the change of business cycle?
2. Will the project be able to bear fast changes in technology?
3. What would be the level of competition from imported products?
4. What would be the level of competition from substitute products?
******************************************************************************
MARKET ANALYSIS:
Market analysis is associated primarily with two questions:
o What would be the collective demand of the planned product / service in future?
o What would be the market share of the project under evaluation?
To answer the above questions, the market analyst needs a broad variety of information and
suitable forecasting methods. The kinds of data required are:
o Consumption trends in the past and the present expenditure level
o Past and present supply situation
o Production potential and constraints
o Imports and exports
o Formation of competition
o Cost structure
o Flexibility of demand
o Consumer manners and conduct, intentions, motivations, attitudes, preference, and needs.
o Allocation channels and marketing guidelines in use
o Administrative, technical, and legal constrictions.
TECHNICAL ANALYSIS:
Examination of the technical and engineering characteristics of a project needs to be done
repeatedly when a project is made. Technical analysis seek out to decide whether the
fundamentals for the successful commissioning of the project has been considered and reasonably
good options have been made with respect to location, size, process etc. The important questions
raised in technical analysis are the following
o Whether preliminary tests and studies have been done?
o Whether the availability of raw materials, power, and other inputs has been recognized?
o Whether the production method opted is suitable?
o Whether the equipment and machines chosen are suitable?
o Whether supplementary equipments and auxiliary engineering works have been given for?
o Whether provision has been made for handling of effluents?
o Whether the planned layout of the site, building, and plant is sound?
o Whether work schedules have been reasonably drawn up?
o Whether the technology planned to be employed is suitable from the social plant of view?
FINANCIAL ANALYSIS:
Financial analysis tries to ascertain whether the planned project will be financially feasible in the
sense of being able to meet the saddle of servicing debt and whether the planned project will
convince the return expectations of those who provide the capital. The feature that have to be
looked into while conditioning financial appraisal are the following:
o Investment pay out and cost of o Cash flow of the project
project o Investment worthwhile ness judged in
o Means of financing terms of a variety of standards of
o Cost of capital merit
o Projected profitability o Projected financial position
o Break-even point o Level of risk
ECONOMIC ANALYSIS:
Economic analysis is also referred to as social cost benefit analysis and is concerned with
evaluating a project from the larger social point of view. In such a judgement the focus is on the
social costs and benefits of a project which may usually be different from its economic costs and
benefits. The questions sought to be answered in social benefit analysis are the following
o What are the direct economic benefits and costs of the project measured in terms of
efficiency prices and not in terms of market prices?
o What would be the impact of the project on the allocation of income in the society?
o What would be the outcome of the project on the level of savings and investment in the
society?
o What would be the involvement of the project towards the achievement of certain merit
wants like self-sufficiency, employment, and social order?
ECOLOGICAL ANALYSIS
In recent years, environmental concerns have assumed a great deal of importance – and rightly so.
Ecological analysis should be done particularly for major projects which have significant
ecological inference like plants and irrigation schemes, and environmental – polluting industries
like bulk drugs, chemicals and leather processing. The key questions raised in ecological analysis
are the following
o What is the likely harm caused by the project to the environment?
o What is the cost of reinstatement measures needed to make sure that the damage to the
environment is contained within acceptable limits?
MEANING:
EDP is a programme meant to develop entrepreneurial abilities among the people.
In other words, it refers to inculcation, development, and polishing of entrepreneurial skills
into a person needed to establish and successfully run his / her enterprise.
Thus, the concept of entrepreneurship development programme involves equipping a
person with the required skills and knowledge needed for starting and running the
enterprise.
OBJECTIVES OF ENTREPRENEURIAL DEVELOPMENT PROGRAMMES:
1. To Promote First Generation Businessman and Industrialists
We know that the son of businessman has the tendency to become a businessman as they
are hearing and looking the intricacies of business, since birth, the habit of bearing loss is
in their blood and the nature for making investments in developed, by way of inheritance.
But for persons of such families where the business does not exist, the environment of
business is lacking, who does not know anything about business, then entrepreneurial
development programmes provide inspiration to enter into trade, industry, and business.
2. To Create Awareness about Availability of the Resources
Various and special types of resources, like raw material, labour, techniques, and
technologies are available in all parts of our own country and in foreign countries. But,
due to lack of proper knowledge about them, these remain underutilized or even utilized.
Hence, entrepreneurial development programmes (EDP) aim at providing information to
people about these resources, so that their proper utilization is possible. Intrapreneurship:
Meaning, Concept, Features, Differences.
3. To Promote Small, Cottage & Local Industries
The aim of the entrepreneurial development programme is to provide inspiration to people for
setting up small, local Industries, by utilization of resources available in the nearby areas and
areas of their links. Local resources may be channelized in industrial development.
4. To Encourage Self Employment Tendencies
Persons have two sources of livelihood, either by service or my own business, which are known as
wage employment and self-employment, respectively.
5. To Provide Knowledge about Government Plans and Programmes
The government has introduced various schemes for self-employment. But, they become
significant only when people have sufficient knowledge about them. Hence, entrepreneurial
development programmes (EDP) aimed at dissemination of detailed knowledge and information
about self-employment, like how to make use of the government schemes, where from and how to
obtain the required reliable information, which department will provide information and
assistance about finances, techniques, and technologies, etc.
6. To Make a Successful Entrepreneur
The success of an entrepreneur depends upon certain qualities. Hence, entrepreneurial
development programmes aim at developing all such qualities in them, which may make them a
successful entrepreneur. These qualities include self-confidence, farsightedness, maturity,
Based on this, it was the Gujarat Industrial Investment Corporation (GIIC) which, for the first
time, started a three-month training programmes on entrepreneurship development. Impressed by
the results of GIIC’s this training programme, the Government of India embarked, in 1971, on a
massive programme on entrepreneurship development. Since then, there is no looking back in this
front. By now, there are some 686 all-India and State level institutions engaged in conducting
EDPs in hundreds imparting training to the candidates in thousands.
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SHORT NOTES
Registration Process:
1. To do the registration the small and medium scale industry owner has to fill a single form
which he can do online as well as offline.
2. If a person wants to do registration for more than one industry then also he/she can do
individual registration.
3. To do the registration he/she has to fill a single form which is available at the website
which is listed below.
4. The document required for the registration is Personal Aadhar number, Industry name,
Address, bank account details and some common information.
5. In this, the person can provide self-certified certificates.
6. There are no registration fees required for this process.
7. Once the detail-filled and upload you would be getting the registration number.
Partnership Deed/ MoA and AoA: If the business is a partnership firm, it has to submit its
partnership deed. If the partnership firm is registered, it has to submit registration certificate also.
In case of a company, a copy of Memorandum of Association and Articles of Association, and
certificate of incorporation has to be submitted. With it, a copy of the resolution passed in general
meeting, and the copy of board resolution authorizing a director to sign the MSME application is
also to be submitted.
Copy of Licenses and Bills of Machinery Purchased: In few cases, the applicant has to submit a
copy of industrial license which is to be obtained by giving an application to Govt. of India.
Further, all bills and receipts related to purchase and installation of plant and machinery have to
be kept safe and required to be submitted on demand.
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VENTURE CAPITAL
Meaning:
The term venture capital comprises of two words, namely, ‘venture’ and ‘capital’. The
term venture literally means a course or proceeding, the outcome of which is uncertain and
there is also a risk of ‘loss’. On the other hand, the term capital refers to the resources to
start the enterprise.
According to narrow sense, the capital which is available for financing the new business
ventures is called venture capital.
In the broad sense, venture capital is the investment of long-term equity finance where the
venture capitalist earns his returns primarily in the form of capital gain.
‘Venture Capital’ is an important source of finance for those small and medium- sized
firms, which have very few avenues for raising funds.
1) For New Entrant: Venture Capital investment is generally made in new enterprises that use
new technology to produce new products, in expectation of high gains or good returns.
3) Mode of Investment: Venture capital is basically an equity financing method, the investment
being made in relatively new companies when it is too early to go to the capital market to raise
funds.
4) Long-term Capital: The basic objective of a venture capitalist is to make a capital gain on
equity investment at the time of exit, and regular return on debt financing. It is a long-term
investment in growth- oriented small/medium firms. It is a long-term capital to enable the
business to grow at a rapid pace, mostly from the start-up stage.
5) Hands-On Approach: Venture capital institution take active part in providing value – added
6) High risk- return Ventures: Venture capitalists finance high risk-return ventures. Some of the
ventures yield very high return in order to compensate for the heavy risks related to the ventures.
Venture capitalists usually make hug capital gains at the time of exit.
7) Source of Finance: Venture capitalists usually finance small and medium- sized firms during
the early stages of their development, until they are established and are able to raise finance from
the conventional industrial finance market. Many of these firms are new, high technology-
oriented companies.
8) Liquidity: Liquidity of venture capital investment depends on the success or otherwise of the
new venture or product. Accordingly, there will be higher liquidity where the new ventures are
highly successful.
PROJECT REPORT
Meaning: The project report provides all necessary details of the proposed unit to be established
either from the manufacturing of a product or for a service. It is also used as a tool for anticipating
and solving problem that may arise during the course of running the project a later stage. It is
nothing but a blue print of all those activities that an entrepreneur proposes to work with.
Parties interested in project report: Following are the parties that are originally interested in the
project report;
1. Entrepreneur 2. Banks / Financial Institutions 3. Government
A project report is an important document for obtaining financial assistance from financial
institutions. Therefore the report should provide a complete presentation of all the information
that would be required by financial institution for appraising the project.
1. General information-includes
name and adders of the entrepreneur
qualification ,experience and capabilities of the entrepreneur
profile of the industry to which the project belongs
constitutional and organizational structure of the enterprise whether sole trade or
partnership if partnership then registered or unregistered
registration certificate from directors of industries or DIC, whether obtained or to be
obtained
range of products to be manufactured and their utility
competitive advantage of the proposed product over its substitutes
6. Financial consideration
The proposed project should earn suitable lively hood only when it is financially sound and the
products that should be taken up for production are profitable. For this purpose profit and loss
statements should be prepared.
NABARD
NABARD is a development bank established under statutory provisions. Let us briefly go through
important characteristics of this development bank to get a clear understanding of its role and
functions.
Role of NABARD:
It is an apex institution which has power to deal with all matters concerning policy,
planning as well as operations in giving credit for agriculture and other economic activities
in the rural areas.
it is a refinancing agency for those institutions that provide investment and production
credit for promoting the several developmental programs for rural development.
It is improving the absorptive capacity of the credit delivery system in India, including
monitoring, formulation of rehabilitation schemes, restructuring of credit institutions, and
training of personnel.
It co-ordinates the rural credit financing activities of all sorts of institutions engaged in
developmental work at the field level while maintaining liaison with Government of India,
and State Governments, and also RBI and other national level institutions that are
concerned with policy formulation.
It prepares rural credit plans, annually, for all districts in the country.
It also promotes research in rural banking, and the field of agriculture and rural
development.
Functions of NABARD:
NABARD gives high priority to projects formed under IRDP.
It provides refinance for IRDP accounts in order to give highest share for the support for
poverty alleviation programs run by IRDP.
Other than the activities included under IRDP, it also makes the service area plan, to
provide backward and forward linkages and also infrastructural support.
NABARD also prepares guidelines for promotion of group activities under its programs
and provides 100% refinance support for them.
It is making efforts to establish linkages between Self-help Group(SHG) that are organized
by voluntary agencies for poor and needy in rural areas and other official credit agencies.
It refinances to the complete extent for those projects that are taken under the ‘National
Watershed Development Programme‘ and the ‘National Mission of Wasteland
Development‘.
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SIDBI
Origin of SIDBI
In order to promote small scale industries in the country, a special Act was passed in Parliament in
April 1990 for starting of Small Industries Development Bank of India. SIDBI is a wholly owned
subsidiary of IDBI. It is providing assistance to all those institutions which are promoting small
scale industries.
Capital of SIDBI
SIDBI has an authorised capital of Rs. 1000 crores which can be increased to Rs. 1000 crores. The
RBI has also allocated INR 10,000 Crores to SIDBI for various venture capital activities and
company start-ups in 2015. The entire operations of IDBI connected with small scale industries
are now handed over to SIDBI.
Objectives of SIDBI
1. To promote marketing of products of small scale sector.
2. To upgrade technology and also undertaking modernization of small scale units.
3. To provide more financial assistance to small scale ancillary and tiny sector.
4. To encourage employment oriented industries.
5. To coordinate all the other institutions involved in the promotion of small scale industries.
Refinance to SSI:
Refinancing loans and advances provided by commercial banks to small scale industrial units.
Different types of loans are given to small scale industries and as per the recommendations of
Nayak Committee, additional funds have been given to commercial banks for promoting more
borrowings of small scale industries. In fact, there are commercial banks with separate branches
meant exclusively for small scale industries.
Leasing:
After the increase in the fixed capital limit of Rs. 1 crore to SSI, there has been increasing demand
for leasing equipment. The small scale industries have expanded their activities as lease finance
institutions have enabled them to obtain costly equipment which are otherwise, not possible
HP finance:
Hire purchase financing has also helped small scale industries in acquiring machinery of a higher
value. In fact, certain machinery are even imported from foreign countries on a deferred payment
basis.
Modernization:
The technology development which has taken place in various industries has also spread to small
scale industries and to meet the requirements of technology upgradation, a separate fund has been
set up by SIDBI, through which it provides Technology upgradation equipment finance.
Venture capital:
Venture capital fund for the promotion of new entrepreneurs has been set up. For this purpose,
IDBI, the holding company of SIDBI provides funds. New ventures in different areas with high
technical know-how is encouraged under the scheme. Though this scheme is in the initial stage,
this will promote more new small scale industries.
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EXIM BANK
INTRODUCTION:
Export-Import Bank of India (Exim Bank) was set up by an Act of the Parliament “THE
EXPORT-IMPORT BANK OF INDIA ACT, 1981” for providing financial assistance
(help) to exporters and importers, and for functioning as the main financial institution for
co-ordinating the working of institutions engaged in financing export and import of goods
and services with a view to promoting the country’s international trade.
OBJECTIVES:
EXIM Bank is Export-Import bank of India. The objectives of EXIM bank are;
- To provide financial assistance to exporters and importers
- It helps the exporters in promoting goods in foreign countries.
- It provides services like overseas investment finance, export credit, agriculture finance etc.
- EXIM bank also provides consultancy services to exporters related to international
business.
- EXIM bank also functions as co-ordinator. It co-ordinates with exporters and government
of India in order to provide better services and policies for the exporter
- Hence EXIM bank is financer, co-ordinator, consultant and promoter of India’s foreign
trade.
1. Refinance of export credit: Authorized dealers in foreign exchange can obtain from Exim
Bank 100% refinance of deferred payment loans extended for export of eligible Indian
goods.
2. Guaranteeing of obligations: Exim Bank participates with commercial banks in India in
the issue of guarantees required by Indian companies for the export contracts and for
execution of overseas construction and turnkey projects.
MUDRA BANK
The government will set up the Micro Units Development and Refinance Agency (MUDRA)
Bank through a statutory enactment. It was announced in the Union Budget 2015-16.
Government Finance
A sum of Rs 20,000 crores would be allocated to the MUDRA Bank from the money that
is available from shortfalls of Priority Sector Lending in order to create a Refinance Fund
meant to provide refinance to the Last Mile Financers.
DEFINITION OF SICKNESS
According to Companies (Second Amendment) Act, 2002: "'Sick Industrial Company' means
an industrial company which has -
The Accumulated losses in any financial year equal to 50 per cent or more of its average
net worth during four years immediately preceding such financial year; or
Failed to repay its debts within any three consecutive quarters on demand made in writing
for its repayment by a creditor or creditors of such company".
According to SICA (Sick Industrial Companies Act): “Sick industrial unit is defined as a unit
or a company (having been in existence for not less than five years) which is found at the end of
any financial year to have incurred accumulated losses equal to or exceeding its entire net worth”.
4. TECHNOLOGY UP-GRADATION
Funds may be provided by the financial institutions for adoption of advanced technology.
Similarly, some sort of training may be provided for use of the latest technology to overcome
technological problems. Technological up-gradation can help to overcome technological
obsolescence.
5. MARKETING ASSISTANCE
Marketing assistance may be provided to entrepreneurs for marketing the goods produced by
them. Government must help to market the goods. Government and Non-Government
Organizations (NGOs) can come forward for marketing the goods produced by the SSI sector. The
problem of poor marketing of the products can be solved by coordinated efforts of entrepreneurs
and promotional agencies.
6. LIQUIDATION
It is better to wind up the business when there is no possibility to revive the unit.
7. GOVERNMENT INTERVENTIONS
Interventions must be made by the government to prevent sickness. Periodic review of financial
statements can help to identify and prevent sickness at initial stage.
8. TRAINING
A proper environment must be created where an entrepreneur will be educated and will have a
proper knowledge, skill and experience about internal and external environment of business to
compete with large-scale industries and multinational companies.
REHABILITATION PROGRAMMES
Taking into consideration the many sick micro, small and medium (MSM) industries, the MSM
policy has provided a separate package for rehabilitation of such industries in India.
The policy proposes to set up a rehabilitation fund for sick industries, which will be managed by
the Industries Commissioner and the Director of Industries and Commerce. Funds will be infused
into the committee based on the recommendation of a State-Level Rehabilitation Committee
(SLRC).
The rehabilitation fund will be used for meeting 75 percent of the cost of the cause that made the
industry unviable, and to sanction an interest subsidy of 4 per cent for two years on
rehabilitation/bridge loans up to Rs.15 lakh to the sick MSM industries.
The rehabilitation measures would ensure that most units under lockout would be able to open at
an early date and appealed to MSM units to avail of the facilities the government was providing
them.
The rehabilitation programme involves the following depending upon the nature of sickness.
1. Change of Management
2. Development of a suitable management information system
3. Settlement with the creditors for payment of their dues in a phased manner, taking into
account the expected cash generation as per viability study.
4. Determination of the sources of additional funds needed to refinance.
5. Modernization of plant and equipment or expansion of an existing programme or even
diversification of the products being manufactured.
6. Concession or relief or assistance allowed by the state level corporation, financial
institutions and Central Government.
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GIDC
Gujarat Industrial Development Corporation was set up in the year 1962 under Gujarat
Industrial Development Corporations Act, 1962 for rapid promotion of industries and their
orderly development in the state of Gujarat.
For the purposes of securing and assisting in the rapid and orderly establishment, and
organisation of industries in industrial areas and industrial estates in the state of Gujarat
and for the purpose of establishing commercial centres in connection with the
establishment and organisation of such industries.
The state Government by notification in the official gazette, a corporation by the name of
the Gujarat Industrial Development Corporation was established.
The following are some of the functions of GIDC in brief.
Generally to promote and assist in the rapid and orderly establishment, growth and
development of Industries in the state of Gujarat, and
In particular and without prejudice to the generality to:
(a) Establish and manage industrial estates at places selected by the State Government,
(b) Develop industrial areas selected by the State Government for the purpose and make them
available for understanding to establish themselves,
(c) Develop land on its own account or for the State Government for the purpose of facilitating
the location of industries.
(d) Assist financially by loans to industries to move their factories into estate or areas,
(e) Promote, organise, sponsor or undertake schemes or works, either jointly with other corporate
bodies or institutions, or with Government or local authorities, or on an agency basis.
OBJECTIVES OF GIDC:
The business of corporation's is to achieve following objectives in the field of industrialisation:
To create appropriate and essential requirements to develop land and factory sheds for
setting up industrial units. The developed plots and industrial sheds are provided with
power connection, approach road connecting with highways, water supply, drainage and
other amenities and facilities.
The main objective of corporation is to promote and assist in the rapid and orderly
establishment, growth and development of industries in the state of Gujarat.
To develop industrialisation in backward and tribal areas by setting up industrial estates,
so the balanced growth of industrialisation can be achieved in Gujarat state.
To provide job opportunities to skill, semi skill and unskilled persons to avoid
unemployment.
To develop housing zones within the industrial estates with a view to attracting skilled and
semi-skilled labourers to take up jobs in the industrial estates.
To provide facilities like, fire station, canteens, banks, post offices, housing, schools,
hospitals, shopping centres etc. in major industrial estates. It should also provide
telecommunication system, police-chowkey and security guards. Thus the corporation
bears some social responsibilities also.
To develop functional estates (areas) to fulfil specific needs of certain industries, like
chemical at Ankleshwar, Panoli and Vapi, an exclusive electronic estate at Gandhinagar,
ceramic estates at Thangadh and Kadi and plastic processing zone at Sarigam.
To provide sheds to the potential entrepreneur which will be more helpful to them to start
new industry.
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