Entrepreneurship

Management

University of Mumbai

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Q. Good project report or Business Plan?

It is essential for an entrepreneur & developing agencies since its provides necessary
information about the unit to be set up. It eliminates difficulties encountered during
project setup especially obtaining loans. It is basically an integration of functional plans,
such as marketing, finance, operations & HR to establish company’s goals and objectives.

It basically addresses the questions:

• Where am I now?
• Where am I going?
• How will I go there?

Format of a Business Plan

1. Introductory Page.

a. Name & address of business

b. Name & address of the promoter & partnership if any.
c. Nature of business
d. Treatment of financial need

2. Executive Summary (3 0r 4 pages comprising of complete business plan)

3. Industry analysis
a. Future outlook & trends
b. Analysis of competition
c. Market segmentation
d. Industry forecast

4. Description of venture
a. Products/service
b. Size of business
c. Office equipment & personnel
d. Background of entrepreneur

5. Production plan
a. Manufacturing process
b. Physical plant
c. Machinery & equip.
d. Name of suppliers of RM

6. Mktg. Plan
a. Pricing, distribution, promotion, product forecast & controls

7. Organizational plan
a. From of ownership
b. Identification of partners & principal share holders
c. Authority of principals
d. Mgmt team background
e. Role & responsibility of members

8. Risk Assessment
a. Evaluate weakness of business
b. New technology
c. Contingency plan

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9. Financial plan.
a. Performa income statement & Balance sheet
b. Cash flow projections
c. Break even analysis
d. Sources & applications of funds

10. Appendix (containing backup material)

a. Letters
b. Mkt. research data
c. Leases & contracts
d. Price list for suppliers

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Q. The Executive Summary of the Business Plan:

It is prepared after total plan is written. The executive summary should be two or three
pages in length and should stimulate the interest of the potential investor. It should not
be taken lightly by the entreprenuer since the investors uses the summary to determine
the worth of the business plan. Determining what is important would be difficult since
every business plan is different. A no. of significant issues should be addressed. First,
briefly describe the business concept. Second, data that support the opportunity for this
venture should be stated. E.g. trends and potential growth in the industry, internet
business, growth in no. of I-net users, growth in avg time spent on the net. After
establishing the reallity of the opportunity then state how it will be perused. What is the
mktg strategy and how does it differs from others. Next highlight key financial results
that can be achieved importance experience of entreprenuers, important contracts or
other legal documents that are in place which can assist in selling the business venture
to a potential customer.

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Q Why Business Plan fails?

Generally poorly prepared business plan can be blamed due to one or more of the
following factors,

• Goals set are unreasonable

• Goals are not measurable
• The entrprenure has not made the total commitment to the business or to the family.
• Entrepreneur has no experience in planned business
• Entrepreneur has no sense of potential threats or weaknesses to the business.
• No customer need for the proposed for the product or services.

Setting goals requires information about the type of business and the competitive
environment. Goals should be specific and not so mundane as to lack any business of
control. Entrepreneur may target a specific mkt share, units unsold or revenue. These
goals are measurable and can be monitored overtime. Lenders or investors will not be
inclined toward a venture that does not have full time commitment. Lenders or investors
may expect entrepreneur to make financial commitments even if it means second
mortgage or a depletion of savings. Lack of experience will result in failure unless the
entrepreneur can attend the necessary knowledge or team up with someone. The
entrepreneurs should document customer needs before preparing the plan. This can be
identified from direct experience, letters from customers or mkt research. Clear
understanding of needs and how the entrepreneur will effectively meet them is vital to
the success of the new venture.

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Q. Concessions & Incentives for SSI ?

SSI/ancillary units are the industrial units having an investment of not more than 3 crores
rupees in fixed assets like plant & machinery’s. Whereas tiny units have 25 lac for the
same as on 1998. However recently the govt. has reduced the invt. To 1 crore rupees for
SSI & there has been no change for tiny units.

Following are the concessions /incentives offered by govt. to SSI

1. Investment Limits in P&M :

Govt. has reduced the ceiling of investment from 3 crores to 1 crore in 1999 wit a
view to secure ownership & control of material resource & easing out the problem of
unemployment. This ceiling for tiny units has been retained to 25 lac.

2. Reservation of Items in small scale sector manufactured exclusively:

At present 812 items are listed in this category. These items can be manufactured by
large scale units also but with 50% export obligations

3. Reservation of Items for exclusive SSI purchases:

Director general of supplies & disposal (DGS&D) has listed down 358 items, which are
offered at purchase price preference 15% as compared to large-scale units & other
suppliers. National small industries Corp. Ltd. Does the mktg. Of SSI products to govt.
under preferential purchase policy. This avoids multiplicity of registration with
various agencies.

4. Text Incentives/ concession & deductions from profits & gains:

• If a unit is set up in backward area under factory act (sec 80HH) 20 % for 10 yr.
• Its is 20% for 10 yr. for SSI in rural area (sec 80HHA)
• 20% for industries setup under factories act for 7 to 9 yr., 355 for corp. society’s
for 11 yr., 35% for co.’s for 11 yr.(sec80I)
• 25% for industries under factory act/ 100% for yr. & 25% for next 5 yr. If the unit
is in backward area.

5. Exemptions & preferences from central excise duty:

If an SCI’s has a turnover of more than 3 crore then 2options are available

a. For 1st 1 crore duty in nill, cenvat credit no permissible

b. For 1st one crore 60% normal duty an cenvat credit permissible

Besides this they get relaxation in mode of duty payment & filing of returns

6. Foreign Direct Investment.:

In order to encourage modernization & technological upgradation equity participation

upto 25% of total share holding by offer industrial undertaking or foreign
collaborators in SSI is permissible. Beyond this approval in needed with a
commitment of 75 % to export.

7. Policy of priority credit:

Nationalized commercial banks give priority to SSI’s, out of the 40% banks advances
for priority sector, 15 to 17% goes to SSI’s. out of this 40% goes to tiny units having

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 investment. 5 lac in plant & machinery & 20% for those having investment. between 5
to 25 lacs. The interest rates are also very low for these loans. Prime lending rates
are applicable for loan above 2 lac.

8. Initiative for credit:

Reserve bank of India has directed 370 specialised SSI banks to provide working
capital to SSI upto 20% for annual turnover limit upto 5 crore. Banks are advised to
increase no. of SSI branches. Loan from SIDBI for tiny sector for credit availability has
been increased form 50,000 to 2,00,000 rupees. The branch mangers are empowered
to take the credit decisions at branch level itself to ensure smooth flow of
operations.

9. OTC exchange of India.

Institutions like UTI , IDBI, LIC, GIC, ICICI has setup these exchange to raise resource
from capital mkt. It provides trading mechanism like bought out deals, market
making, sponsorships for convenient assess to capital market. The minimum
requirement for a company to list on the exchange is 30 lac of post issue paid up
capital./ It is helpful for entrepreneur to setup new ventures or expand activities.
Exchange also provides trading in debentures unit of Mutual Funds, bonds. Exchange
has state of art technology to promote transparency for transaction all over the
country.

10. Incentive scheme for acquiring ISO9000

Since ISO is required for quality certifications for exports, SSI are given the incentives
for acquiring the certification to the extent of 70% of cost of subject to the maximum
of 75,000

11. Integrated technology upgradation & management program

Is implemented for energy conservation, pollution control, process mordification.

This program is started for 12 clusters all over India for small scale Units in the 9th 5
year plan with the cost of 6.5 crore.

12.Technological bureau for small enterprises (TBSE)

It is a joint venture of small industries development bank of India (SIDBI) & the asian
pacific centre for transfer of technology. TBSE offers under one roof assistance &
prospecative small enterprises in sphere of technology transfer & fund syndication.
The main objective is to have a speedy assess & transfer of technology. This beareau
identifies willing collabroaters & extend support for financial assistance in terms of
term loans, foreign currencies, venture capital, equity assistance.

13. Small Enterprises information & resource center

This provides data & information for samll enterpreneurs, exporters, market avenues
seekers. It also provides technical knowhow. As on date this network has 21
electronic nodes.

14. Interest on delayed payment act.

This act was brought forward to safe guard the interest of the SSI units. In order to
tackle the problem of settlement of dues from co.s .

a. Change in the penal rate of interest form 5% above the floor rate to 150% of
the prime lending rate (PLR) of SBI
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 b. The agreed date of settlement of dues no to exceed 120 days form the date of
acceptance.
c. Additional alternative Mechanism of arbitration & conciliation to resolve
dispute between SSI suppliers & large scale buyers

15. Relaxation under environmental laws

As per the water & air pollution control the board of environmental pollution gives
grants of approval to SSI’s except 17 categories which are heavily polluting. This
granted consent is valid for 15 years provided there is no change in treatment or
disposal system. However pollution control board can have random checks or call for
any further info.

16. Common effluent treatment plant (CETP)

For cluster of SSI’s financial assistance is provided for above project.

• 25% subsidiary from central & state govt.

• 30% as loan at reduced rate from FI’s
• 20% as contribution from individual units

SSI’s are given some concession for expenditure on effluent disposal system. Training
& awareness for cleaner technology are conducted by Dist. Collectorate SSI. The
main obj. is to launch a campaign for waste minimisation.

17. Export Promotion Council

These are non-profit orgns. under Companies/ Society Registration Act established
to promote SSI’s products in export market by direct mktg., Vendor development or
opening of sales outlet abroad. These councils also take bulk orders from buyers and
pass on to SSI units for deemed export. For this they charge nominal fees. These
councils also decimate info. regarding exim policies, customs & excise duty rules.
The membership charges for these councils are minimum for SSI’s

18. Industry related research institutes

19. SIDBI strategic initiatives

20. Credit guarantees for SSI’s

This is for guaranteeing the loans & advances upto 10 lac rupees without co-lateral
or third party guaranty for SSI’s engaged in IT or software industries for 5 years.

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Q. Who is an Entrepreneur, Define Entrepreneurship, State the Advantages of
Entrepreneurship to an Individual & the nation?

Entrepreneur is a person who undertakes an enterprise with a chance of profit & loss. He
is the person who can take moderate risk. He has the ability to work hard & capitalise on
opportunity and has an urge for achievements & who has a desire for responsibility. He is
the person with skill of organising & has some financial strenght.

Entrepreneurship is the process through which entrepreneur seeks innovative &

employment i.e. doing new things or things in the new way.

Advantage to an individual:

1) It creates a self employment and a sense of self reliance i.e. freedom of idea
adoption
2) It provides prolonged career for next generation i.e. no limited tenure of career
3) It enhances sense of innovativeness and creativeness
4) It provides modes of unlimited and high-retained income
5) It creates a sense of independence/satisfaction
6) It enhances per capita income via increase output
7) It initiates a structural change in society and business

Advantage to a nation:

1) Provides large employment: since entrepreneurial ventures are basically started as

SSI utilizing labour intensive techniques thus generating lot of employment for
regional man power

2) Wider distribution of wealth: increase in wealth output can be divided into various
participants

3) Optimum utilization and mobilisation of regional resources: since entrepreneur relies

more on local resources for production needs i.e. raw material and labour thus
results in optimisation of resource utilization.

4) Closing the demand gap through appropriate opportunity: due to knack of seeking
opportunity in the environment through study of demand gap and utilizing their
venture to meet such demand gap

5) Export potential: since innovativation is an ongoing process for entrepreneurial

venture this creates an export opportunity and hence increase exports potential.

6) Regional development: this is one of the key advantage which can be utilized
disparities in regional development and also accelarate the pace of economic
development

7) Enhance skills and savings

8) Stimulates innovation and efficiency

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Q. Characteristics and guiding factors for successful Entrepreneur:

Personality traits: urge for achievement, determination to win, willingness for moderate
risk, ability to identify and explore opportunity, analytical ability for strategic decision,
perseverance, flexibility/capacity to plan and organise, prepaid for physical and
emotional stress

Guiding factors: clear objectives, hr abilities, communication ability, technical

knowledge, high energy level, motivator, self confidence, problem solver, goal setter.

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Q. Factors affecting growth of Entreprenuership:

Change in attitude, expansion of educational horizon, supportive family structure, role

models, professional support network, growing consumer class, easy access to money,
venture capital availability, good technological access and infrastructure development,
promotional policies and incentive schemes, decision making tools, respect for ethics and
culture, environmental factor i.e. political, socio cultural, technology, legal, economic

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Q. Entrepreneur for Economic Development:

Entrepreneur sets up enterprise wherein entrepreneur devotes resources, time and

efforts to produce goods and services with increase in the productivity output, value
addition, income and employment. Since entrepreneurship is low cost strategy, where
entrepreneur plays a crucial role. The spirit of entrepreneurship is the drive for
achieving higher goals, creativity innovative attitude. Thus spirit spreads like chain
reaction in a dynamic society. In the economic development roles are to be played by
everyone.

• Govt.: promotional i.e. facilitator and incentive oriented, neutral and regulator.

• Corporate: Intrapreneurship i.e. entrepreneur within an orgn.

• Individual: entreprenuership

Intrapreneur: is a person who focused on innovative and creativity who brainstorms

dreams or ideas into profitable venture by operating within the organisational
environment.

Intrapreneur is corporate entrepreneurship whereby an orgn seeks to expand by

exploring new opportunities through new combination of existing resources. It is a tool
for stimulating and capitalizing entrapreneur in and orgn. It is basically to retain
knowledge, revenue generation through innovation, motivation to employee. It gives
managers a freedom to try new idea by employing firm’s resources in a unique way.

Advantage of Intrapreneurship:

• It offers idea to build or improve corporate business.

• Capital required for ideal comes from internal source
• Establish corporate image, enhance the chance of success of Intrapreneur idea.
• It helps corporate in economies of scale in mktg, distribution and service
• It is a multiple disciplinary team activity with job security and prosperity

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Q. Essential of Intrapreneur:

1) Vision: It is the basis of successful venture. Since Intrapreneur has ability to visualise
from idea to actualisation.

2) Motivation: Intrapreneur is self motivated, but response to corporation reward and

recognition, money is measure of success and not incentive for efforts.

3) Bias to act: Intrapreneur is achievement oriented i.e. they want to act to realise
dream rather than entangling in planning cobweb. They look for incremental
achievement.

4) Locus of control: Intrapreneur discourage system, since he is workaholic personality

5) Locus of risk: Intrapreneur are moderate risk takers since risk acceptance depends
on their skills. Wild risk takers are not affordable to corporates.

6) Locus of status: Intrapreneur want to do the work on its own rather than delegating
like managers

7) Failure and mistakes: Intrapreneur hide risky projects and ideas to ensure learning
without political cost and public failure. They develop multi disciplinary team in the
orgn and may beyond orgn boundaries for results.

8) Goal set up: Intrapreneur ourself are determined to do things not even asked for.
They set goals and quality stds.

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Q. Steps for setting Intrapreneurship in organisation:

Secure commitment to Intrapreneurship from top, upper and middle mgmt. without top
mgmt support, orgn cant have necessary culture change for implementation. Sufficient
time to be given to introduce the concept in the whole orgn through seminars.
Intrapreneur is identified to be trained for resource utilisation, opportunity and market
and the success plan is made.

Identified idea should be accessed with financial risk expectation in terms of results has
to be specified in regards to time, volume and profits. There has to be mentor/sponser
system for turning cultural orgn into Intrapreneural one.

Organisation should use technology to be competitive with larger firms through assess to
large data bank.

Org. should have manager who is willing to train employees by experience sharing.
Training should be given to employees for both basic entrepreneurship & co.s activity for
marketable product/service.

Develop customer relations by tapping data base from rivals and helping retailers.

Org. should be more productive with fewer resources, the concept “ Lean & Mean” need
to exist, i.e. control to be given to subordinates and are made well aware of the
procedures so that operation can be run smoothly in the event of middle mgmt.
downsizing.

Org. should have strong support structure because Intrapreneurship is a secondry

activity not affecting the bottom line, so these venture should be flexible, innovative,
authoritative, sufficient fund assessed i.e. over expenditure nor required to be justified.

Performance to be rewarded to encourage & motivate team members because

entrapreneural venture is a part of large org. and not an independent one, so this reward
systems becomes sometime difficult to handle as it may be understood as an disparity
trading process.

Set up an evaluating system for elimination of unsuccessful members & rewarding the
successful ones. Org. expansion should in parlance with mission statement.

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Q. Describe the concept of Venture Capital with specific reference to the to
Entrapreneur. Give the methodology to get venture capital from Venture Capital
providing firms.

Venture capital plays a vital role in financing SSI where growth potential and the risks
are high. This investment could be needed at any stage from start up to commercial
production. Venture capital provider service the business from development, approval of
project/ideas, financial assistance and management expertise.

Salient features:

• It is long term source of investment generally 5 to 10 years

• Venture capital firms opt for equity participation through shares or convertible
securities
• Venture capitalist ensure participation in management of business
• Venture capitalist provide service in terms of mktg, technological mgmt,
developing orgn structure
• It is easier assess to funds than conventional source
• Venture capitalist is not averse to risk only growth potential should be high
• Flow of funds is in phases of production or in initial stages as debts
• Venture capitalist are not permanent equity holders
• Venture capitalist will exit at appropriate time ensuring that entrepreuer’s
interest is not getting disturbed.

Stages of process:

1) Delivery of business plan from an entrepreuer to venture capital provider. This plan
should have mission, objective, mkt analysis, financial statement. While evaluating
business plan venture capitalist ascertains whether the proposal fits his long term
policies and short term needs, appropriateness of his knowledge in the project, ROI.
He also ascertains the capability and credential of entrepreuer.

2) Due diligence: this is an agreement stage between entrepreuer and venture

capitalist prior to commitment in terms of money and efforts. After thorough study of
business plan, resume of promoters and key managers, financial background of
promoters and risk of business are analyzed in this stage.

3) Negotiation: after viability study of project, negotiation takes place in terms of

funds required vis a vis funds made available by the venture capitalist along with
interest rate on loans, securities, equity, right to control the mgmt of business, buy
back arrangement and exit policy.

4) Contract and MOU: considering the above terms agreement is signed with the
consideration of regulatory law.

5) Flow of funds: begins as per MOU, higher degree flexibility is desired from both
parties and periodic review is done at each stage.

6) Exit: since venture capitalist are not permanent equity holders so they may exit at
appropriate time by adopting equity bye back, IPO (initial public offering), mergers
and acquisitions and smooth transition as exit strategy.

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Entrepreuership should take care of:

1) Select venture capitalist carefully

2) Don’t hesitate to get all facts about venture capitalist and his previous activities and
background.
3) Always involve an intermediary for better deal
4) Avoid lawyer, accountant or advisers at initial stage
5) Be careful about projected and promise facts and data’s
6) Disclose your strength and weakness for better relationship
7) Be flexible and patient, always remember performance builds trust.

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Q. Compare Franchising, Ancillarising and Acquisitioning as a start up for an
Entrepreuer:

Franchising:

Also represents an opportunity for an entrepreuer to expand the business with a

franchisee, the entrepreuer will be trained and supported in mktg by the franchiser and
will be using a name that has some established image

It is an alternative for an entrepreuer to expand his or her business by having others pay
for the use of name, process, product, service and so on.

Definition:

“an arrangement where by the manufacturer or sole distributor of a trade mark product
or service gives exclusive right of local distribution to independent retailers in return for
their payments of royalties and conformance to standardize operating procedures.”

The person offering the franchise know as franchiser.

The franchisee is a person who purchase the franchise and is given the opportunity to
enter a new business with better chance to succeed than if he or she where to start a
new business.

There are three types of franchising available:

1) Product franchising: selling of the finished goods with just mere displayed of goods,
which facilitates easy accessibility a product to customer and achieve sale
transaction without any value addition.

2) Process franchising: outlets are granted to use the brand name and process of the
franchiser. The process and recipe are generally patented by the parent company.

3) Business format franchising: name, sale and method of doing business are
transferred with knowledge of conducting the outlet with affective follow up
mechanism by the franchiser.

The most common type of franchising is the type that offers a name, image and method
of doing business such as mcdonalds, subway, KFC, midal, dulkin, donuts, holiday in.

Advantages:

a) of franchising to the franchisee:

1) Product acceptance: the franchisee usually enters into a business that has an
accepted name, product or service. The franchisee does not have to spend resources
trying to establish the credibility of the business.

2) Mgmt expertise: mgmt assistance provided by the franchiser. Each new franchise is
often required to take a training program on all aspects of operating the franchise.
This training could include classes in accounting, personnel mgmt, mktg and
production.

3) Capital requirement: a new venture can be costly both in terms of time and money.
The franchise offers an opportunity to start a new venture with upfront support that
could save the entreprenuer significant time and possibly less capital. In some cases
the franchiser will also finance the initial investment to start the franchise operation.
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 The initial capital required to purchase the franchise generally reflects a fees for the
franchise, construction cost and purchase of equip.. the layout of the facility, control
of stock, inventory and the potential buying power of the entire franchise operation
can save the entreprenuers significant funds.

4) Knowledge of the mkt: any establish franchise business offers the entreprenuer
years of experience in the business and knowledge of the mkt. This knowledge is
usually reflected in a planned offer to the franchise that details the profile of the
target customer and the strategies that should be implemented once the operation
has begun. Most franchiser will be constantly evaluating mkt conditions and
determining the most effective strategies to be communicated to the franchisees.

5) Operating and structural control: two problems that many entreprenures have in
starting a new venture are maintaining quality controls of the product and services
and establishing effective managerial controls. Administrative controls usually involve
financial decisions revolving to cost, inventory, cash flow and personal issues such as
criteria for hiring/firing, scheduling and training to ensure consistent service to the
customer. These controls will usually the outline in a manual supplied to the
franchisee upon competition of the franchisee deal.

b) of franchising to franchiser:

1) Expansion risk: the most obvious advt of franchising for the entreprenuer is that u
can expand a venture quickly with little capital. A franchiser can expand a business
nationally and even internationally by authorising and selling franchise in selected
locations. The capital necessary for this expansion is much less than it should be
without franchising. Operating a franchised business requires fewer employees than
a non-franchised one. Head quarters and regional offices can be slightly **** to
primarily support the needs of the franchises.

2) Cost advt: the franchiser can purchase supplies in large quantities that achieving
economic of scale that would not have been possible otherwise many franchise
business product parts, accessories, packaging and raw material in large quantities
and then in turn sell these to the franchisees.

Disadvantages of franchising

1) the disadvantages to franchise usually centre on the inability of the franchiser to

provide service, advertising & location. When promises made in the franchise
agreement are not kept, the franchisee may be left without any support in important
areas.

2) The franchisee may also face a problem when a franchiser fails or is brought out by
another company. In some case also the franchiser finds it difficult to find quality
franchisee. Poor mgmt can cause individual franchise failure.

Legal aspect of Franchise

Franchising involve many risks to entrepreneur since business such as hiring, scheduling,
buying, accounting and so on are still franchisee’s responsibility. As per the federal trade
commission’s franchise rule, every franchiser has to submit a statement that provides
information about 20 aspects of franchise offering. He must evaluate franchise
alternative from information provided to decide which one is important. Information
disclosed is as follows :

1. identification of franchiser & its affiliates & their business experience

2. Business experience of franchise officers, directors & mgmt personnel responsible for
franchise training, service & other aspects.
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3. Law suit in which the franchiser and its officers, directors & mgmt personnel are
being involved.
4. Any previous bankruptcy in which the franchiser and its officers, directors and mgmt
personnel are being involved.
5. The initial franchisee fee & other initial payments those are required to obtain the
franchise.
6. Continual payments the franchise are required to make after the franchise offer.
7. Any restriction on the quality of goods

FOR MORE POINTS REFER TO PROF. SABOO’s BOOK

ACQUISITION

Entrepreneur can start & expand the venture by acquiring an existing business. An
acquisition is the purchase of a company or a part of it so that the acquired company is
completely absorbed and no longer exists as business entity.

Advantages of acquisition :

1. acquired firm has an established image and track record. If the firm is successful the
entrepreneur needs to continue the existing strategy.
2. Entrepreneur gets a well established customer base from the acquired firm
3. Entrepreneur acquires well established channels and sales structure, suppliers,
retailers, wholesalers, manufacturers by acquiring the firm.
4. Actual cost of acquiring can be lower than methods of expansion.
5. The employees of the existing business can be an important asset & can help the
business to continue its successful mode.
6. Since entrepreneur does not have to find suppliers, channel members, employees or
customers more time can be spent assessing opportunities to expand the business.

Disadvantages of acquisition

1. Most ventures have an erratic, marginally successful or even unprofitable track

record. It is important to review the records to assess future potentials.
2. Entrepreneur may assume he can succeed where others have failed. Self evaluation is
important before agreement. Even though the entrepreneur brings new ideas & mgmt
qualities, the venture may never be successful for reasons that are not possible to
correct.
3. When business changes hands key employees also leave. Loss can be devastating since
value of business is often a reflection of efforts of employees.
4. It is possible that purchase price is inflated due to established customer base,
channel members or suppliers. It is possible that ROI is not acceptable.

Determining the price of an Acquisition :

There are three valuation process – asset, cashflow and earnings. The entrepreneur can
use to determine the fair price of an acquisition. Key factors in evaluating firms are ;

1. one person mgmt

2. poor corporate communication.
3. few mgmt tools being used
4. insufficient financial controls
5. highly leveraged – thinly capitalised
6. variations & poorly prepared financial statements
7. sales growth with no increase in bottom line
8. out dated & poorly managed inventory

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9. aging accounting receivable
10. No change in products & customers.

ANCILLARISATION

An ancillary unit is defined as an Industrial undertakings having investment in fixed

assets, in plant & machinery whether held on ownership or on hire purchase not
exceeding Rs. 100 crore & engaged in ;

1. manufacturer of parts & components, sub-assemblies, tooling or intermediates &

2. rendering of service or proposing to supply or render not less than 50 % of his

production or service to one or more other industrial undertaking for production.

Major difference between SSI & ancillary is that unit setup which can be recognised as a
full fledge large company can be a part of ancillary but under SSI such unit can get
transformed into medium or large scale sectors.

Major benefits of ancillarisation drive to a country is that :

1. growth of employment
2. growth of GDP
3. growth of entrepreneurship

Advantages of Ancillarisation

• Minimise investments of setting up of large units as the required as the required

production can be sourced a lower at rate with same quality through subcontacting
from an ancillary unit
• Ancillary units JITconcept helps the large co.s to bring down the inventory level and
saves a lot of money.
• Sourcing is economical from ancillary units that are normally located near the co.
• Ancillary units work with the parent co.s in the process & product development

Disadvantages of Ancillarisation

1. Delay in payments puts ancillary co.s in big trouble. If the parent co. is big then the
ancillary co. finds it diffucilt to take any legal action
2. When parent co.s revise the specification ancillary units are some times not given the
expected support for adopting the higher technology, not given suficient time to
bring changes in the technology to match that of parent co.
3. Multiplication of suppliers makes the ancillary units operate below BEP(Break evn
point) as a result these units incur losses because of capacity unutilisation.

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Q. Selection criteria for factory site location?

There are certain general factors that influence the selection of the location of an
enterprise. The most impt. Are :

1. Availability of raw materials- the biggest advantage of availability of RM at the

location of industry is that it involves less cost in terms of transportation cost.

2. Markets: If the products are fragile and highly susceptible to spoilage & if the
transportation cost constitutes a substantial portion of the total cost involved the
proximity to mkt conditions assumes added impt in selecting the location of the
enterprise.

3. Infrastructural facility - the easy availability of infrastructutal facilities play a

deciding role in the location selection of an industry. The facilities includes transport
& communication, power, water , banking etc.

4. Govt. Policy - in order to promote the balance regional development the govt. offers
several incentives, concession to attract entrepreneurs to setup industries in
backward areas.

5. Availability of man power

6. Local laws of regulations - certain local laws prohibit the setting up of polluting
industries in particular areas similarily taxation on a higher rate may discourage some
industries form setting up in an area.

7. Ecological & environment factors

8. Competition - in case of some enterprises like retail stores where the revenue of a
particular site depends on the degree of competition from the other competitiors in
the locality, they play a crucial role in selecting the location of the stores.

21
Q. Comparison: Manager v /s Entrepreneur

Managers Entrepreneur
1) primary motives
promotion & other traditional Independence, opportunity to create, &
corporate rewards, such as office staff money
& powers

2) time orientation
short term meeting quotas & budgets, Survival and achieving 5 to 10 yr growth
weekly, monthly & quarterly of business

3) Activity
Delegates & supervises more than Direct involvement
direct involvement

4) Risk
Careful Moderate risk taker

5) Status
Concerned about status symbol No concern about status symbol

6) Failures & mistakes

Tries to avoid mistakes & surprises Deals with mistakes and failures

7) Decisions
usually agrees with those in upper Follows dreams with decisions
mgmt. Positions

8) Service
serves others Serves self & customers

9) Family History
Family members worked for large Entrepreneurial small business,
orgns. professional, or firm background

10) Relationship with others

Hierarchy as basic relationship Transaction & deal making as a basic
relationship

22
Comparison : Male & Female Entrepreneure

Male Entrepreneur Female Entrepreneur

1) Motivation
achievement - strive to make things Achievement – accomplishment of a goal
happen
Independence - to do it alone
personal independence – self image as it
relates to status through their role in
comparison is unimportant
job satisfaction arising from the desire to
be in control

2) Departure point Job frustration, interest in recognition in the

Dissatisfaction with present job sideline area,

In college, sideline to present job, Change in personal circumstances

discharge or lay off , opportunity for
accusation

3) Sources of funds
Personal asset & savings, bank financing, Personal assets & savings, personal loans
investors, loan from friends & family

4) Occupational Background
Experience in the line of work,
recognised specialist or one who has
gained a high level of achievement in the
field, competent in a variety of business
function
Experience in the area of business, middle
mgmt or administrative level experience in
the field, self related occupational
background

5) personality Characteristics
opinionated & persuasive, goal oriented,
innovative & idealistic, high level of self
confidence, Enthusiastic & energetic
must be own boss
Flexible & tolerant, goal oriented, creative
& realistic, medium level of self confidence,
enthusiastic & energetic, ability to deal with
social & economic environment.

6) Background
Age when starting venture :25 to 35 Age when starting venture: 35 to 45 father
father was self employed was self employed

College educated – degree in business or College educated – degree in liberal arts

technical areas usually Engineering

First born child First born

7) support groups
friends,professional acquaintances, Close friends, spouse, family, women
business associates, spouse professional groups, trade associations

8) Types of business started

Manufacturing Or construction Service related – educational service,
consulting or public relations

23
Q) What are prominent institutes imparting Training for Entrepreneurship
Development. Explain their activites and method adopted

There are several organisation engaged in conducting entrepreneurship development

program in India. The lead in the matter was given by the small Industrial Development
Organisation through its service centres. Other organisations that have been actively
conducting entrepreneurship development progammes are State Bank of India; financial
institutes such as IDBI entrepreneurial motivation training centre in northern-eastern
region, Xavier Institute of social services, Ranchi: industrial consultancy organizations in
various states, centre for enterperneurship development, Ahmedabad state financial
corporations, centre of entrepreneurship development, Hubli small industries extension
training institute, Hyderabad, National science& technology enterpreneurship
development Board etc.

The need for a national org. to serve as an apex body to coordinate training program for
various centre’s and organisation in the country, to train trainers & motivators in
entrepreneurship development, to prepare a model syllabis training for varoius target
group & target areas etc. was felt, with a view to evolve & integrated national approach
to this subject

The training program is designed to sub serve the following objectives:

1. To impart basic knowledge about the industry, product & production methods

2. To build the necessary skill for new entrepreneurs & workers

3. To assist the entrepreneur/ worker to function more effectively in his present

position by exposing him to a least concept, technique & info.

4. To build up second line of workers & prepare them to shoulder additional

responsibilities and/or switch on to the production of new products, if the is any
diversification.

5. To expose the entrepreneur to latest the developments which directly or indirectly

effect him.

6. To broaden the vision of entrepreneurs by providing them suitable opportunity for an

inter change of experiences within and outside an industry.

7. To impart customer education

8. To impart knowledge of the mktg. Of good

Methods of Training:

1. The individual instructions : Under this method, a single individual is selected for
training. This mode of training is undertaken where a complicated skill is to be
thought to an individual

2. Group instructions: This mode of training is suitable for a group of individuals with a
similar type of work & where general instruction are applicable to all are to be given.

3. Lecture method: Here the instructor communicates in theory the practice to be

followed by the learners. Under this method, whenever there are any doubts they
may be clarified on the spot.

24
4. Demonstration method : Where the performance of work to be shown practically by
the instructor for better understanding, this method can be followed. This is more
concerned with the practical then theoretical aspects.

5. Written instruction method: The medium of training is followed where a feature

reference is to be made by the learners. This method is mostly followed where a
standardisation production is followed.

6. Conference: conferences are frequently organised wherein experts in the field share
their ideas & bring to the notice of learners new ideas & techniques to increase the
production

7. Meeting: Meetings are a mode of training involving a group of people who discuss the
various problems confronting them, they involve exchanging ideas & views later on
coming to firm conclusion based on the various proposals & alternatives.

25
Q. Product/Project Identification

Product selection: one has to select the right product, it involves research, careful
evaluation & sound judgement. This activity is called the product selection analysis
technique.

This technique consists of following steps:

1. Idea generation
2. Search & screen
3. Evaluation

Product Idea: can be generated in a no. of ways. They are as follows:

1. Observations
2. Foreign publications
3. Brainstorming sessions
4. Talking to various bodies like SISI,SIDC, The national small Industries Corp. Ltd. & The
national Institute for Enterpreneurship & small business development
5. Talking to large scale pvt/public co. can also generate ideas

Product Search & screening

After we come up with product ideas, we look at products presently available & products
related to those products ideas. Then pose the explortoey questions:

1. Are customers satisfied with what they are getting?

2. Can we identify a better method of production?
3. Can the basic design be changed?
4. What is the present demand, future demand likely to be & so on?
5. What are the skills?
6. Can I handle the technical subjects?
7. If not can I hire people easily?
8. Do the product idea generated match my basic interest or do I have to develoe nnew
area of interest?
9. How much knowledge do I have about the markets?
10. Can I dig more info easily?

As a prospective entrepreneur one should know the bent of mind one has by asking the
following questions.

1. Am I comfortable in the room full of strangers?

2. Can I deal efficiently with people in position of power?
3. Can I communicate efficiently & freely with?

If yes, mktg. Is the strong area or may be one has a head for figures an details. Then
finance may be the area of strength. One could be interested in mechanical & technical
matter with flair for conceptualising & design. Then production or product design can be
the areas of strength.

26
Production Evaluation Techniques

These are products, which have to be evaluated objectively & in depth.. This is the
product evaluation. This evaluation is carried on the following factors:

1. Growth
2. Stability
3. Marketability
4. Company position
5. Production

Stability

1. Performance of mkt.
A product for which there is likely to be long lasting demand would enjoy a higher
degree of market permanence than an item likely to become obsolete.

2. Breadth of mkt.
A product used by a variety of customers belonging to various mkt. Segment and
covers greater no. of consumers and is rated very well.

3. Possibility of captive mkt.

A product, which provides a unique and exclusive solution to specific mkt. needs,
would be a very good rating.

4. Difficult of copying.
Products that are highly technical and difficult to copy would be rated very good.

5. Stability in recession
Luxury items are rated poor because they are susceptible to drop in demand levels
during economic recession. On the other and consumer goods having regular demand
may be rated very good.

Growth Factors

1. Uniqueness of product : A product that satisfies mkt. need exclusively or can

replace a more costly product by material substitution or better design possess a high
degree of uniqueness and may be rated very good.

2. Demand supply relationship : If demand is greater than supply, unique or not a good
rating can be given.

3. Rate of technological change : Areas where rapid changes in technology are likely to
occur are risky and deserve poor rating. Such products become obselete faster.

4. export possibilities : those products that enjoy international demand & can be
exported easily demand a good rating.

Marketability

1. ease of distribution : A good rating would be given to a product, which can be

transported from point of manufacture to a point of sale easily, quickly & with
minimum breakage or transmission loss.

2. after sales service : products that have to be provided with after sales service,
specially at customers location are rated poorly.

27
3. average order size / per customer : greater the average order size per customer
better would be the rating. It would be relatively easier & more beneficial to cater to
customer to buy large volumes.

4. freedom from numerous variations : products that have to be made available in a

wide range of grade, size, shape etc. resulting avg. manuf. Economy and inventory
control problem & would be rated poorly.

5. freedom from seasonal fluctuations : products for which demand falls in off season
are rated poorly. Alternative products will have to be thought of to sustain profit
during such lean periods.

Company position factors

1. time required to get established : projects having higher gestation period are more
risky for entrepreneurs as he exposes himself to a greater risk of changes in
technology, competition & economic conditions.

2. Degree of value addition : Greater the value addition better the rating, hence it is
better to carry out the entire manufacturing process yourself rather than sub-
contracting.
3. availability of raw material : if crucial raw material and other materials are
available during varying conditions than a good rating can be assigned

4. general labour atmosphere : the project should be located in a area enjoying a good
labour climate.

Production Factors

1. procurement of equipment : will it be possible to get machinery & equipment easily

& quickly ? are the supplies reliable & convientantly located? If your answer is yes,
rating is good

2. utilities / facilities required : Some projects are highly dependent on clean water,
steam, electricity and good sewage system & if these are not available regularly then
that project would be rated poorly.

3. training of personnel : are technical people easily available ? if yes, can they be
quickly into the company ? Is the training likely to be time consuming.

4. freedom from difficult maintainance problem : Does a project involve a

manufacturing process, which is hazardous, which could affect the well being of the
work place but also the community at large. A poor rating follows.

5. freedom from costly waste – disposal problem : both govt. & society are becoming
more conscious of pollution and its dangers. If your project calls for a larger waste
disposal system to neutralise the effluents than it will be a negative factor.

Conclusion – the list of factors is by no mean exhaustive and can be modified to suit
specific products. A comparision of product profile would help us to decide which
product to pick up.

28
Q Role of SIDBI in devp. Of small scale industries.

A. modernisation & technology upgradation :

For this technology upgradation & modernisation of SSI units, SIDBI has a no. od schemes
of assistance, the major among these are technology development & modernisation
fund (TDMF) scheme. In line with the announcement made by the union finance minister
in union budget 95-96, SIDBI in april 95, had setup its on resources, a technology
development & modernisation fund with an ear mark corpus of 2 billion. The fund aims
at encouraging existing industrial units in small scale sectors to modernise their
production facilities & adopt improved & updated technology so as to strengthen their
export capabilities. Direct assistance by way of term loan or participation in equity or
both is provide to SSI units.

The TDMF scheme has been liberalised to include :

1. Non exporting SSI/Ancillary units

2. SSI/Ancillary units which are graduating out of SSI sectors on implementation of
modernisation programs as eligible units of assistance under this scheme.

Under TDMF scheme direct assistance is provided at the prime lending rate of SIDBI with
no up front fee.

B. Marketing finance:

To assist SSI in mktg. Of their products, SIDBI had created a mktg. Development
assistance fund(MDAF) in 1995-96 by appropriating a sum of rupees 100 million out of net
profit. The corpus of the fund has been expanded to rupees 350 million. Out of this a
sum of rupees 25 million has been specially year mark for providing mktg assistance to
women entrepreneurs. MDAF provides for financing innovative mktg projects through a
suitable mix of instruments like loans, conditional loans, grant & equity. Under the mktg.
Scheme assistance ins also available for intangibles like marketing research, R&R,
product upgradation & standardisation, preparation of strategic mktg plans, advertising,
branding, catalogue preparation, production of audio/visual aids, participation in trade
fairs/ exhibitions, undertaking sales promotion tours, establishing distribution networks,
retail outlets & warehousing facilities etc. besides this assistance is available for
development for infrastructure. Working capital term loan requireents & bills discounting
facilities for service providers are also covered under the scheme.

C. Development of Industrial Infra-structure:

Laying special emphasis on the development of infrastructure of the SSI sector SIDBI
launched an improved scheme “of direct assistance for development of industrial
infrastructure for the SSI sector”. The range of assistance covers the setting up of
industrial estates /development of industrial areas, strengthening of existing industrial
estates & clusters setting up of common facilities centre’s, warehousing & container
services, electronic & software technology parks, permanent exhibition cum sales
outlets, mktg outlets etc. wherever the benficieries are predominantly SSI’s. SIDBI also
operates scheme for integrated infrastructural development (IID), under which financial
assistance is provided for the setting up of IID centre’s .

D. Bill Discounting & Factoring Services :

In order to promote a bill culture and to mitigate the problem of dealyed payment of
reciveables by SSIs, SIDBI operates two schemes, viz.; Direct discounting of bills
(Components) and Direct Discounting of Bills (Equipment). DDS (Components) covers

29
arising out of purchase of indigenous components parts / subassemblies / intermediates
manufactures by SSI units, primarily targeted to help SSIs realize their payments quickly.

E. National Venture Fund for Software and IT Industry :

• A national level venture fund, viz; National venture fund for software and IT Industry
was launched on December 10,1999 by Hon’ble Prime Minister of India.
• Main objective of the fund is to meet the total fund requirement of software and IT
companies.
• The fund would also develop international networking and enable assisted units to
attract co-investment from international venture capitalists in subsequent round of
financing.
• NVFSIT is closed ended 10year fund with an initial corpus of Re.1 billion promoted by
SIDBI.
• The fund is being managed by SIDBI Venture capital Limited a wholly subsidary of
SIDBI.

F. Credit Rating for Exporting SSI units:

SIDBI has an arrangement with Dun & Bradstreet information services (I) pvt.Ltd. (D&B)
to provide credit rating and allied services to SSI units.

G. Incubating Centres:

SIDBI launched National Program on Innovation and incubation for small Industrial under
which incubator facilities are provided to the project, which are at seed stage, and
having high research and development content and are technology focused to reach the
pre-commercial stage, has been initiated.

30
Q. Explain the Role of Entrepreneurship in the Role of Economic Development of a
country?

the role of entrepreneurship in economic development involves more than just increasing
per capita output & income; it involves initiating & constituting changes in the structure
of business & society. This change is accompanied by growth & increase output which
allows more wealth to be divided by various participants. Entrepreneurship is presently
the most effective method for bridging the gap between science & the mkt. place.,
creating new enterprises & bridging new products & service to the market. These
activities significantly effect the economy of an area by building the economic base &
providing jobs given its impact on bot the overall economy & the employment of an area.

Following roles are played by entrepreneurs in economic development of the country:

1. Raises productivity
2. Powerful tool for job creation
3. Transfer of technology
4. Strategic role in commercialising new invention
5. Crucial role in restructuring & transfer of economy
6. Reduce concentration of economic power
7. Support growth to organised sector
8. Make market more competitive
9. Stimulate a redistribution of wealth, income & political power
10. Improve social welfare
11. Create new market- expansion into international market
12. Is low cost strategy of economic development, job creation & technical innovation

31
Q. Why Enterprenureship Mgmt is a compulsory subject for mgmt study?

The overall for a course in Enterprenuership:

1. Understand the role of new and smaller firm in the economy

2. Understand the relative strengths and weaknesses of the different type of enterprise
3. Know the general characteristics of the entreprenurial process
4. Assess the students own entreprenuership process
5. Understand the entrepreneurial process and the product planning and development
process
6. Known alternatives, methods for identifying and evaluating business opportunities
and the fact is that support and inhabit creativity
7. It develop an ability to form, organise and work in interdisciplinary teams
8. Know the general correlates of success and failure in innovation and new venture
creation
9. Know generic entry strategies for new venture creation
10. Understand the aspects of creating and presenting a new venture business plan
11. Know-how to identify, evaluate and obtain resource
12. Know the essentials of: mktg plan, financial planning, operation planning, orgn
planning, venture launch planning.
13. Know how to manage and grow a new venture
14. Know the managerial challenges and demands of a new venture launch
15. Understand the role of entreprenuership in existing orgn

32
Q. What is the Entriprenurial Decision Process?

Many individuals have difficulty bringing their ideas to the mkt and creating a new
venture. Yet, entreprenuership and the actual entreprenurial decision hv resulted in
several million new businesses being started throughout the world. Altough no one knows
the exact no., in the united states estimates indicate that 1.1 to 1.9 million new
companies hv been formed each year in recent years. Indeed millions of ventures are
formed despite recession, inflation, high interest rate, lack of infrastructure, ecnomic in
certainty and the high probability of failure. Each of these ventures are formed to a very
personal human processes that, although unique, has some characterstic common to all.
Like all processes the entreprenurial decision process initiates the movement, from
something to something - a moment from a present life style to forming a new
entreprises, as indicated.

1. Change from present life style: the decision to leave a career or life style is not
an easy one. It take a great deal of energy to change and do something new and
different. Although individual tend to start business in area that are familier, two
work environments hv been particular good for spawning new entreprises, r&d,
individuals development, new product ideas or processes and often leave to form
their own companies, when this new ideas are not accepted by their employers.
Perhaps and even stronger incentive to overcome the inertia and leave a present
life style to create something new come from a negative force – disruption.

A significant no. of companies and formed by people who hv retired, who are
reallocated due to a move by other members in a dual – career family, or who hv
been fired. There is probably not greater force than personal dislocation.

The decision to start a new company occurs when an individual perceives that
forming a new entreprise is both desiable and possible.

Work environment, disruption:

2. Desireability of a new venture formation : the perception that starting a co. is

desirable results form an individuals culture, sub culture, family, teachers &
peers. A culture that values an individual who successfully creates a new business
will spawn more venture formation that one that does note. Countries with
cultures that more closely emulate this attitude do not have as high a business
formation rate. It will be interesting to watch which of the once – controlled
economies will develop a pro-entrepreneur culture. No culture is totally for or
against entrepreneurship. Many sub cultures that shape value systems operates
within a cultural framework.
There are pockets of entrepreneur subculture in the united states. This sub
culture supports & even promotes enterpreneurship – forming a new co. – as one
of the best occupation. No wonder more individuals actively plan new enterprises
in this supportive environments. There are also variations within this subculture
caused by family traits. A very high percentage of the founders of co.s had
fathers or mothers who valued independence. The independence achieved by co.
owners, professional, artists, professors or farmers permits their entire family
life, giving encouragement & value to their children’s co. – formation activity.

Encouragement to form a co. is further stimulated by teachers, who can

sinificantly influence individuals regarding enterpreneurship as a good possible
career path. Schools with exciting course in enterpreneurship & innovations tend
to develop entrepreneurs & can actually drive the entrepreneur environment in
an economical area. An area having a strong education base is a strong support
factor for entreprenural activity & co. formation. Peers are very impt. In the
decision to form a co. an area with an entrepreneur pool & a meeting place

33
 where entrepreneurs & potential entrepreneurs can discuss ideas, problems &
solution spawns more new co.’s than an area where these are not available.

3. Possibility of new venture formation: Several factors- govt., background, mktg,

role models & finances – contribute to a creation of new venture. The govt
contributes by providing the infrastructure to help & support a new
venture.countries that have a repressive tax rate on business or individuals can
suppress company formation, since companies will not have the money to start &
grow & monetary gain cannot be achieved. However the social, psychological &
financial risk are still present. Formal education & previous business experience
gives a potential entrepreneur the skills needed in forming & managing a new
enterprise. Although education systems are important in providing the needed
business knowledge, individual will tend to be more successful in forming business
in fields in which they have worked. Mktg also plays a critical role in forming a
new company.

In addition to the presence of market of sufficient size, there must also be a level
of mktg know-how to put together the best total package of product, price,
distribution & promoting needed for successful product launching. A co. is more
easily formed where the driving force is from market demand than a technology
push. A role model can be one of the most powerful influence in making co.
formation seem possible. To see someone else succeed makes it easier to picture
yourself engaged in similar activities-of course, even more successful. Finally
resource must be readily available. Risk capital availability plays an initial role in
the development & growth of

34
Q What is the Importance of International Entrepreunership in developing a
country like India . Please give your suggestion in building an Indian MNC. Mention in
brief factors you consider favourable as well as barriers.?

India is a developing nation which needs to utilise its natural resources in an optimal
fashion in order to create wealth for the nation . As a nation our major strenghts are
skilled manpower , technical skills , access to modern technology & ecenomical costs of
labour . However we also have certain inherent weaknesses like poor infrastructure ,
lack of literacy & a great number of people living below the poverty line.

International Entrepreunership will benefit our country in the following ways

• It will develop industrially with some infrastructure a part of India where the
project will be set up.
• It will aim to generate employment amongst the local people & the functioning of
this firm will benefit the community at large.
• Its products & services will add to the GNP /GDP & will be a source of tax
collection for the government besides contributing to increasing the basic standard
of living & per capita income.
• It will earn valuable foreign exchange will India badly needs to reduce its balance of
payment position . The future commercial strength of India will depend on the
ability of its entrepreuners & other established companies to take advantage of
markets outside the countrys borders.

Suggestions for building Indian MNC

Before an entrepreunership organisation thinks of doing buisness on foreign soil it should

first consolidate & have preferably leadership foot hold in the domestic market. It
should have encountered any of the following conditions

• Saturation in local market

• Declining market size in India ie de-growing markets for its products
• Has core competency in existing field of business with spare capacity & hence
looking to expand in terms of geographical boundaries .

Under such conditions a producer of goods & services should look forward to cross
boundaries into other nations to sell his goods & services . They should start off by
tapping neighbouring countries before expanding to further areas.

Before an Indian entrepreuner thinks of doing business abroad he must understand how
international business differs from his local business . The key to his success lies in being
able to understand the above & respond accordingly. International entreprenuerial
decisions are more complex due to the following factors

• Economics – Creating a business strategy for a multi country area means dealing with
differences with levels of Economic development, currency valuations , government
regulations , banking , systems as well as market /distribution systems . The extent
of the quality of these factors significantly impacts the ability to succesfully engage
in international business .

• The countries balance of payment (BOP)- differenec between imports versus

exports effects the valuation of its currency & hence effects its ability to do
business with developed countries.

• Political enviornment – The difference in political & legal environments across

international markets pose different cahllenges in doing business in foreign

35
 markets.Each element of the business strategy of the inmternational entreprenuer
can be effected by political/legal environments.

• Culture – The impact of culture on Entrepreuners is significant with respect to the

strategies that they intend to employ. Each element of the business plan has to have
some degree of congruence with local culture . Understanding local culture is
essential to development of the entrepreuners worlwide strategy plan, the degree of
adaptation & standardisation would vary in each country.

• Technology – Like culture varies significantly across countries & industyr standards
vary from country to country .

Hence the major steps should be

• Stage 1 – make initial movements into international business following a highly

centralised decision making process. Tread carefully & start up operations through
direct or Indirect exports. In this stage the entreprenuer & his organisation undergo
the learning & experience curve effects which will help in the long run

• Stage- 2 – Once the business is succesful & the organisation ahs managed to transfer
its competencies across borders into many countries, the decision making process
has to get de-centralised. The firm could employ a multi country strategy by
tailoring its producst to suit each countries preferences & culture or go in for high
degree of Integration & standardisation.

• Stage 3 - Once decentalisation is carried out the HQ should retain tight control overr
strategic decisions & tactical implementation of corporate strategy.

Trade barriers

• Import quotas particularly imposed by developed nations on goods allowed from

developing nations .
• Local tariffs / import duty in developed nation making indian goods non-competitive.
• Subsidies to local manufacturers makes imports unviable
• Trade blocks & free trade areas between developed nations & their neighbours
encourages trade between them For e g EU countries , NAFTA etc. which reduces
indias chances of doing business in these sectors.

Trade barriers increase an entrepreuners cost of exporting products & hence such
incrased cost will force entrepreuner to establish the manufacturing base in those
countries to surmount such barriers .

Favourable Conditions

The indian government is encouraging international entrepreunership by offering the

following initiatives.

• Tax sops on export earnings

• Setting up of export processing zones close to ports
• Waiver of import duties on essential RM meant for processing export goods
• Waiver of sale tax, octroi & other govt. levies on export goods
• Providing for cheaper land to 100 % EOUs

36
Q. Characteristic of a successful Entrepreneur.
Qualities
1. Administrative
ability
2. Mental ability
3. Clear Objectives
4. Business secrecy
5. Human relation ability
6. Communication ability
7. Technical knowledge
8. Learning from experience
9. Need for Independence
10. Hope for success
11. Time orientation
12. High expectations from employees - Drive employees hard to achieve.
13. Competition
14. Social Change
15. Social Consciousness
16. Dignity of labour
Skills/ Competencies
- Art of getting things done by other people
- Strong motivation towards achievement
- Exert considerable efforts
- Intelligence/analytical approach creative thinking
& Anticipate changes
- To establish the product
- make profit
- Render social service
- No charity at, Input level only at, o/p level
-
- No leakage of business secrets to competitors
- with customers/ employees/ suppliers/ creditors/
bureaucrats.
- with customers/ employees/ suppliers/ creditors/
bureaucrats.
- Necessary for risk taking.
- modify their goals on feedback from enviroment
- Capabilities testing when opportunities arise.
- Open to feedback
- Prefer not to be controlled
- Motivation and self-confidence for success
- Attempt task than fear of failure
- Works for the present
- Quote their past failure with pride
- Indicate confidence
- High goals for themselves.
- Collaborate with other when to their advantage
- Create jobs for others
- New products/ new mfg. Methods
- Social implications of block mkt hoarding
- Work himself with his hands.
37
Q. Describe the process the of scanning the environment to start an entrepreneurial
venture, please give a scheme to short- list a few good business idea?

For a new venture to be set up an initial environment analysis has to be carried out in
order to identity trends, changes accruing at national and international level, gather
knowledge about the government polices in terms of financial and commercial impacts of
the policies, knowledge raw material ability, infrastructure and utility ability at the
propose site. The major environment factors, which may affect the entrepreneurial, set
up, are:

1. Economic - One should consider the trends in terms off unemployment disposable
income, GNP and so on.

2. Cultural - The cultural changes has to be keenly evaluated as it may effect the
business plan, because the cultural changes may have change the attitude to wards
safety health and nutrition.

3. Technology - In this perdition is difficult in terms of advance due rapid

developmental changes. So entrepreneur has to make short terms mkt. decision and
contingency plan, since these advances effect the product and services. There is
major risk like competitor’s reaction mkt. Weakness product obsolesces.

Business ideas would be short listed using various idea-generating schemes such as:

• Brainstorming
• Focus group
• Problem inventory analysis
• Check list

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Q Innovation and Entrepreneurship.

An innovation is investing of resource to create new wealth or investing of wealth to

cerate a new resource. Innovations is the specific function of Entrepreneurship, whether
in an existing business, public service institution, or a new venture started by a lone
individual in a family.

Innovation is needed for following reasons:

1. To face competition.
2. To stand out in a clutter.
3. To survive recession
4. To solve certain problems.

Installing attitude for innovation :

1. Encourage creative conflict

2. Big ideas from small teams
3. Learning happens from the desk
4. Understand the product users
5. Live in the future
6. Failure sometime produces innovation
7. Joint prototyping to brain storming for fast track innovation

Different sources of Innovation:

1. Unexpected occurrences
2. Process needs
3. Incongruities
4. Industry & market changes

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Q. Creativity & its role in developing business ideas

Creativity is showing imagination & originality. It is basically an innovation generated by

entrepreneur in business to solve or generate ideas to serve the market better.
Creativity can decline due to age, education, idleness, perceptual, cultural, emotional &
organisational factors. Creative thinking is basically a process of searching screening &
connecting thoughts. Creativity can be used for development of better business ideas in
terms of product, process, market development aspects.

The various creativity oriented problem solving & idea generating techniques are as
follows:

1. Brainstorming
2. Reverse Brainstorming
3. Synectics
4. Gordon method
5. Checklist method
6. Free association
7. Forced relationship
8. Collective notebook method
9. Heuristics
10. Scientific Method
11. Kemper-Tregoe Method
12. Value analysis
13. Attribute listing method
14. Morphological analysis
15. Matrix charting
16. Modification matrix
17. Inspired Approach
18. Parameter Analysis

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