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Einstein College of Engineering ENTREPRENEURSHIP DEVELOPMENT Unit -1: Entrepreneurship concept- Entrepreneurship as a Career- Entrepreneur-Personality Characteristics of Successful. Entrepreneur- Knowledge and Skills required for an Entrepreneur. What Is Entrepreneurship? Entrepreneurship can be defined by describing what entrepreneurs do. For example: "Entrepreneurs use personal initiative, and engage in calculated risk-taking, to create new business ventures by raising resources to apply innovative new ideas that solve problems, meet challenges, or satisfy the needs of a clearly defined market." But as the following definitions state, entrepreneurship is not restricted to business and profit: "Entrepreneurship involves bringing about change to achieve some benefit. This benefit may be financial but it also involves the satisfaction of knowing you have changed something for the better. "Entrepreneurship is essentially the act of creation requiring the ability to recognize an opportunity, shape a goal, and take advantage of a situation. Entrepreneurs plan, persuade, raise resources, and give birth to new ventures." Who Are Entrepreneurs? The word „Entrepreneur‟ has been taken from the French word. It means Between Takers. Entrepreneur is another name of Risk Taker. An entrepreneur is an individual who takes moderate risks and brings innovation. Entrepreneur is a person who organises/ manages the risks in his/her enterprise. “Entrepreneur is a individual who takes risks and starts something new” Definition According to J.B.say, “Entrepreneur is an Economic agent to unites all the means of production” An entrepreneur is an individual who takes moderate risks and brings innovation. An entrepreneur is a person who has possession of a new enterprise, venture or idea and assumes significant accountability for the inherent risks and the outcome. An entrepreneur is "one who undertakes an enterprise, especially a contractor, acting as intermediately between capital and labour." Some facts about entrepreneurs and entrepreneurship: E:xamine needs, wants, and problems to see how they can improve the way needs and wants are met and problems overcome. N: arrow the possible opportunities to one specific "best" opportunity. T:hink of innovative ideas and narrow them to the "best" idea. 1 Einstein College of Engineering R:esearch the opportunity and idea thoroughly. E:nlist the best sources of advice and assistance that they can find. P:lan their ventures and look for possible problems that might arise. R:ank the risks and the possible rewards. E:valuate the risks and possible rewards and make their decision to act or not to act. N:ever hang on to an idea, no matter how much they may love it, if research shows it won't work. E:mploy the resources necessary for the venture to succeed. U:nderstand that they will have to work long and hard to make their venture succeed. R:ealize a sense of accomplishment from their successful ventures and learn from their failures to help them achieve success in the future. Characteristics of Successful Entrepreneurs Entrepreneurs are different from each other, but successful entrepreneurs tend to share certain characteristics. Not all of them have developed each of the following to the same degree, but they tend to have developed most of them to some degree. Here are some common characteristics of successful entrepreneurs. Entrepreneurs tend to: be passionate about achieving their goals have a spirit of adventure (in fact, the word "adventure" is derived from the Latin word meaning "to venture") have a strong need to achieve and seek personal accomplishment be self-confident and self-reliant be goal-oriented be innovative, creative, and versatile be persistent be hardworking and energetic have a positive attitude be willing to take initiative have a strong sense of commitment An eye for opportunity: Many entrepreneurs start by finding a need and quickly satisfying it. Independence: Even though most entrepreneurs know how to work within the framework for the sake of profits, they enjoy being their own boss. An appetite for hard work: Most entrepreneurs start out working long, hard hours with little pay. Self-confidence: Entrepreneurs must demonstrate extreme self-confidence in order to cope with all the risks of operating their own business. Discipline: Successful entrepreneurs resist the temptation to do what is unimportant or the easiest but have the ability to think through to what is the most essential. Judgment: Successful entrepreneurs have the ability to think quickly and make a wise decision. 2 Einstein College of Engineering Ability to accept change: Change occurs frequently when you own your own business, the entrepreneur thrives on changes and their businesses grow. Make stress work for them: On the roller coaster to business success the entrepreneur often copes by focusing on the end result and not the process of getting there. Need to achieve: Although they keep an "eye" on profits, this is often secondary to the drive toward personal success. Focus on profits: Successful entrepreneurs always have the profit margin in sight and know that their business success is measured by profits. Is this your profile or would you rather do your job, pick up your paycheck and leave the headaches to someone else? Most of us, quite easily, choose the later. Entrepreneurship as a Career. Positive aspects of entrepreneurship Being the boss if his own business, he enjoys unlimited powers. He can do things in his own way and he need not take orders from someone else. He can make his own decisions and act on them. There are numerous opportunities for his self- development. Working on one‟s own and thus getting rewards yields immense satisfaction and pleasure for more than what he can get in a job. Monetary rewards can be more than commensurate with his capacity and capabilities. He can command deference and respect of his immediate family and friends. It is a kind of intangible reward. Instead of depending on others, he generates employment for others. He can make significant contribution to the development of the country and be proud of taking part in nation building activities. He can be a great achiever realising his goals and proving his achievements to the world. He can be recognised for his outstanding efforts. Negative aspects Though an entrepreneur is his own boss, in some respects he is not. It is so because he is constrained by various people like his financiers, labourers, suppliers, customers and so on. He may have to face frustration since the scope of his operations is limited by his limited resources. He has to work long and hard hours from morning to dusk and his venture tends to absorb all his energy and time. This may affect his social and family life. At times he may have to face disappointments and frustrations since everything in his venture may not always work the way he would like it to. He has to always work with tension since there is always the risk of failure. 3 Einstein College of Engineering 7 key Qualities of Entrepreneur Being an entrepreneur is about more than just starting a business or two, it is about having attitude and the drive to succeed in business. All successful Entrepreneurs have a similar way of thinking and posses several key personal qualities that make them so successful in business. Successful entrepreneurs like the ambitious Richard Branson have an inner drive to succeed and grow their business, rather than having a Harvard Business degree or technical knowledge in a particular field. All successful entrepreneurs have the following qualities: Inner Drive to Succeed Entrepreneurs are driven to succeed and expand their business. They see the bigger picture and are often very ambitious. Entrepreneurs set massive goals for themselves and stay committed to achieving them regardless of the obstacles that get in the way. Strong Belief in themselves Successful entrepreneurs have a healthy opinion of themselves and often have a strong and assertive personality. They are focused and determined to achieve their goals and believe completely in their ability to achieve them. Their self optimism can often been seen by others as flamboyance or arrogance but entrepreneurs are just too focused to spend too much time thinking about un-constructive criticism. Search for New Ideas and Innovation All entrepreneurs have a passionate desire to do things better and to improve their products or service. They are constantly looking for ways to improve. They're creative, innovative and resourceful. Openness to Change If something is not working for them they simply change. Entrepreneurs know the importance of keeping on top of their industry and the only way to being number one is to evolve and change with the times. They're up to date with the latest technology or service techniques and are always ready to change if they see a new opportunity arise. Competitive by Nature Successful entrepreneurs thrive on competition. The only way to reach their goals and live up to their self imposed high standards is to compete with other successful businesses. Highly Motivated and Energetic Entrepreneurs are always on the move, full of energy and highly motivated. They are driven to succeed and have an abundance of self motivation. The high standards and ambition of many entrepreneurs demand that they have to be motivated! Accepting of Constructive Criticism and Rejection Innovative entrepreneurs are often at the forefront of their industry so they hear the words "it can't be done" quite a bit. They readjust their path if the criticism is constructive and useful to their overall plan, otherwise they will simply disregard the comments as pessimism. Also, the best entrepreneurs know that rejection and obstacles are a part of any leading business and they deal with them appropriately. 4 Einstein College of Engineering True entrepreneurs are resourceful, passionate and driven to succeed and improve. They're pioneers and are comfortable fighting on the frontline The great ones are ready to be laughed at and criticized in the beginning because they can see their path ahead and are too busy working towards their dream. WOMEN ENTREPRENEUR IN INDIA: The Indian sociological set up has been traditionally a male dominate done. Women are considered as weaker sex and always to depend on men folk in their family and outside, throughout their life. They are left with lesser commitments and kept as a dormant force for a quite long time. The Indian culture made them only subordinates and executors of the decisions made by other male members, in the basic family structure. The traditional set up is changing in the modern era. The transformation of social fabric of the Indian society, in terms of increased educational status of women and varied aspirations for better living, necessitated a change in the life style of Indian women. Indian families do have the privilege of being envied by the westerners, since women here are taking more responsibilities in bringing up children and maintaining a better home with love and affection. At the family level, the task of coordinating various activities in a much effective manner, without feeling the pinch of inconveniences, is being carried out by the women folk. Thus, the Indian women have basic characters in themselves in the present sociological and cultural setup as follows. Indian women are considered as Sakthi, which means source of power. Effectively coordinating the available factors and resources. Efficient execution of decisions imposed on them Clear vision and ambition on the improvement of family and children. Patience and bearing the sufferings on behalf of others and Ability to work physically more at any age. NEED OF THE HOUR: Women sector occupies nearly 45% of the Indian population. The literary and educational status of women improved considerably during the past few decades. More and more higher educational and research institutions are imparting knowledge and specialisation. At this juncture, effective steps are needed to provide entrepreneurial awareness, orientation and skill development programmes to women. The institutions available at present are very limited. Moreover, their functions and opportunities available with them are not popularised much. QUALITIES REQUIRED FOR AN ENTREPRENEUR: An effective entrepreneur requires certain basic qualities, which can be listed as follows. Innovative thinking and farsightedness. Quick and effective decision making skill. Ability to mobilise and marshal resources. Strong determination and self confidence. Preparedness to take risks. Accepting changes in right time. Access and alertness to latest scientific and technological information. Matching the basic qualities required for entrepreneurs and the basic characters of Indian women reveal that, much potential is available among the Indian women on their entrepreneurial ability. This potential is to be recognized, brought out and exposed for utilisation in productive and service sectors for the development of the nation. 5 Einstein College of Engineering Factors affecting Entrepreneurship growth: 1. Economic factors 2. Social factors 3. Cultural factors 4. Personality factors 5. Psychological and sociological factors. Economic Factors: Lack of adequate basic facilities Non- availability of capital Non- availability of raw materials and finished goods. Greater risk involved in business Non- availability of skilled labour Social factors Customs and traditions Rationality of the society Social system Social set-up Personality Factors Suspect personality Emergence of planning ********* Unit-2 Business Environment- Role of Family and Society- Entrepreneurship Development Training and Other Support Organisational services- Central and state Government Industrial Policies and Regulations- International Business. EDPs – Entrepreneurship Development Programmes Objective of EDPs Develop and strength their entrepreneurial quality. Analysis environmental set up relating to small industry and small business. Select product 6 Einstein College of Engineering Formulate project for the product Know pros and cons in becoming an entrepreneurs Develop a broad vision about the business. Course contents and curriculum of EDPs 1. General instruction to Entrepreneurship 2. Motivation Training 3. Management Skills 4. Support system and procedure 5. Fundamentals of project feasibility study 6. Plant visits Phases of EDPs 1) Pre- training Phase a) Selection of entrepreneurs b) Arrangement of infrastructure c) Tie-up of guest faculty for the training purpose. Like that 2) Training Phase a) Purpose of training is to develop „need for achievement‟ b) Role play as like entrepreneur 3) Post-training Phases a) Follow- up b) Review the pre- training work c) Review the process of training programmes and d) Review past training approach ACTION PLAN: Proper planning and execution are required at all levels. Proper training in right direction is to be planned meticulously. The steps to be taken can be listed as follows: Identifying entrepreneurs with different literary levels in proper groups and to create awareness about entrepreneurship and its importance as job providing avenues rather than job seeking ventures. Skills to be provided to selected group are to be identified. Making them to realise the income generation and social status and recognition. Giving orientation and skill training on selected trades on their choice and suitability. 7 Einstein College of Engineering Assisting them in preparation of project reports for their own proposed units and helping them to follow up the venture to start the new enterprise. Providing consultancy and guidance, continuously. A training capsule of around 15 days may be provided by expert institutions, voluntary agencies and Govt., departments. The financial resources are to be mobilised to provide this type of programmes, by the government organizations like banks, public sector organizations and voluntary agencies... The higher education institutions, which are spreading throughout the country, may conduct programmes like this, regularly in addition to their academic programmes, with or without govt., aid. Young graduates of that area and the final year students of U.G/P.G courses may also be provided with such training. Normally, infrastructures are available with such institutions. Getting expertise and mobilizing other requirements will also be easier for such institutions, since they are already having good establishment facilities. Voluntary agencies like Rotary clubs, Lions clubs, and etc. Govt., sponsored institutions like UGC, Science and technology Councils may interact with the colleges/universities, through financial assistance, to carry out the programmes. With proper financial assistance and effectively using them, each college/university may train 300 to 1000 youths, in the area of entrepreneurship development. When women are going to be the target groups, the benefit will reach a larger section of the society. Thus ED culture is to be developed gradually among the prospective individuals, in addition to providing educational facilities to use the vibrant individual force in right direction. Thus programmes combining, technical skill and entrepreneurship skill, to selected groups, will make the Indian people more self reliant and confident and would lead them to be envied by people at the international level. TRAINING COMPONENTS: Even though there are very efficient institutions at the national level, like EDI Ahmadabad, NSTED BOARD, New Delhi, NISIE, Hyderabad and at State level, CED in Madurai and Chennai, TANSTIA in Chennai such programmes are to be conducted at regional level, at the residential area of the women, in their vernacular language and to the specific requirement of the people of that area. The essential components of such training may be listed as follows. 1. Awareness, career building and attitudinal change towards enterprise formation. 2. Effective training on building up self-confidence and communication skills. 3. Skill training on specific trades suitable to their option. 4. Training on quick and effective decision making techniques and managerial skills. 5. Training on marketing strategies. 6. Training on effective financial management. 7. Training on project formulation and implementation. 8. Scope for increasing access to new technologies and scientific knowledge. 9. Information on persons/offices to be contacted. 10. Interaction with successful entrepreneurs for sharing their experiences Training in such areas is not going to have much financial burden to the govt., when compared to other developmental projects. This type of programmes can be conducted in all the parts of the country. A consistent and continuous effort in this project will add more dimensions Indian youths and their empowerment and to the economic development of the nation as a whole. 8 Einstein College of Engineering APPENDIX-2 STEPS FOR STARTING SMALL-SCALE INDUSTRIES. Steps to be taken Agency to be contacted 1. Product selection and preparation of Project District Industries Centres/Small Industries report. service Institutes/Technical consultancy agencies like CECRI at Karaikudi, for specialised products. 2. Obtaining provisional or permanent District Industries centre/Department of registration Industries and commerce. 3. For obtaining developed plots for construction District Industries centres. of a factory for obtaining sheds in Industrial Estates on ownership/rental basis 4. If agricultural land is to be used for industrial Small Scale Industries Development Corporation. purpose and permission from Thasildar, to conclude lease deed. 5. Obtaining licenses for the plan,etc. Respective Corporation / Municipality / Punchait, where the unit is to be set up 6. No objection certificate from pollution Respective State pollution control Boards. 7. Registration under the Factories Chief Inspector of factories and Boilers. Act 8. Finance Commercial banks/Industrial co- State finance Corporations-for term loans op.banks. 9. Registration for sales tax State Commercial Tax Office 10. Water supply Water supply and sewage Board. 9 Einstein College of Engineering 11. Power connection State Electricity Board 12. Processing controlled raw material Joint Director(SSI) 13. For imported raw materials/machinery and The Joint Chief Controller of imports and components exports 14. Obtaining machinery on hire purchase National Small Industries Corporation (NSIC)- Regional offices. 15. Foreign collaboration The Foreign Investment Promotion Board, Ministry of Industrial Development, Govt. of India. 16. ISI Certificate Bureau of Indian Standards Institution, New Delhi. 17. Patent Right The Controller of Patent and Designs. 18. Registration of Trade Marks Registrar of Trade Marks. 19. Marketing Assistance a) Internal Marketing Respective State Small Industries Marketing corporations. b) Export Marketing Export Promotion Council/Cells; Trade Development Authority; State Trading corporation; Export credit Guarantee Corporation and Export Inspection Agency. 20. Testing, Training and other extension Small Industries Service Institutes and Regional facilities Testing Laboratories. 10 Einstein College of Engineering 21. Product development Assistance Project and product development Financial Institutions: Commercial banks IDBI IFCI ICICI LIC UTI SFCs SIDBI EXIM BANK Support Institutions NSIC SIDO SSIB SSIDC SISIs DICS INDUSTRIAL ESTATES Entrepreneurial Initiatives in India- “Top Incubation Center” 11 Einstein College of Engineering 1. Centre for Innovation, Incubation& Entrepreneurship (CIIE) - IIM Ahmedabad Set up in 2001 Since inception CIIE has 15-odd innovations grow out of the incubation centre in varied technologies 2. Society for Innovation and Entrepreneurship (SINE)- IIT Bombay Set up in 2004 It currently has 16 companies under its incubation programme 3. Cell for Tech Innovation, Development & entrepreneurship support- IIT Chennai Set up in 2000 Organises national level competitions, „Breakthrough‟ (general business plan competition) and „Genesis‟ (social entrepreneurship plan competition) 4. Society for Innovation and Development (SID) - IISc, Bangalore Set up in 2006 The investigator is given a seed capital for Rs 20 lakh a year for two years as soft loan for the approved plan 5. The SP Jain Centre for Entrepreneurship Development- SPJIMR 16-week 'Start Your Own Business' programme-a public programme held every six months. 6. Technology Business Incubator (TBI) - BITS Pilani In association with DST, BITS has established Technology Business Incubator in the area of embedded systems and VLSI design back in 2004 So far, TBI has helped spawn ten companies. 7. Technology Incubation and Entrepreneurial Training Society (TIETS) – IIT Kharagpur Set up in 2005, So far, the institute has been able to incubate two companies through „Concipio‟ over the last three years. Besides, an in house panel has helped 11-12 ventures take wing 8. Nirma Labs, Nirma University, Ahmedabad Established in 2004, Nirma Labs used to pride itself in a three-step model for students who were interested to start their own businesses-training, incubation and funding. Month long „Igniting Minds and Ideas‟-IEEE certification programme by the Delhi based ISO certified strategy consulting firm „Total Solutions Incorporation‟ (TSI) and „Total Resource Academy of India (TRAIN)‟ a knowledge management , training and development organisation held for students of Delhi Public School (DPS), R K Puram. The National Geographic Channel recently announced a Nationwide contest „shaping the future‟ with the collaboration of the Foundation for Information & Technology Transfer at IIT-Delhi; Society for Innovation & Entrepreneur at IIT-B, Nedathur S Raghvan Centre for entrepreneurial Learning (NSR- CEL) at IIM-B and the Technopreneur Promotion Programme at the Department of Scientific and Industrial Research DSIR Entrepreneurial Initiatives in India- “Government and Non Government Support” Delhi Technical University announced the setting up of water technology and management centre with the support of UNESCO. The Entrepreneurship Development Cell (EDC) of University School of management Studies, Guru Gobind Singh Indraprastha University (GGSIPU) has launched a one month business skill development programme in association with the Ministry of Micro, Small and Medium Enterprises. Representatives from KVIC, NABARD will share their knowledge. 12 Einstein College of Engineering NASSCOM has signed a Memorandum of Understanding (MoU) with University Grants Commission (UGC), for Faculty Development Programme (FDP) Re-skilling the faculty in IT Framework for co-operation to catalyze industry-academia interface What is a Micro, Small or Medium Enterprise? The earlier concept of „Industries‟ has been changed to „Enterprises‟ • Enterprises have been classified broadly into: (i) Enterprises engaged in the Manufacture / production of Goods pertaining to any industry; & (ii) Enterprises engaged in providing / Rendering of services. Manufacturing enterprises have been defined in terms of investment in plant and machinery (excluding land & buildings) and further classified into : - Micro Enterprises - investment up to Rs.25 lakh. - Small Enterprises - investment above Rs.25 lakh & up to Rs. 5 crore - Medium Enterprises - investment above Rs. 5 crore & up to Rs.10 crore. • Service enterprises have been defined in terms of their investment in equipment (excluding land & buildings) and further classified into: - Micro Enterprises – investment up to Rs.10 lakh. - Small Enterprises – investment above Rs.10 lakh & up to Rs.2 crore. - Medium Enterprises–investment above Rs. 2 crore & up to Rs. 5 crore It is not necessary to engage in manufacturing activity for self-employment. One can set up service enterprises as well . THE ROLE OF GOVERNMENT IN SUPPORTING ENTREPRENEURSHIP Small and Medium-sized Enterprises (SMEs) in market economies are the engine of economic development. Owing to their private ownership, entrepreneurial spirit, their flexibility and adaptability as well as their potential to react to challenges and changing environments, SMEs contribute to sustainable growth and employment generation in a significant manner. SMEs have strategic importance for each national economy due a wide range of reasons. Logically, the government shows such an interest in supporting entrepreneurship and SMEs. There is no simpler way to create new job positions, increasing GDP and rising standard of population than supporting entrepreneurship and encouraging and supporting people who dare to start their own business. Every surviving and successful business means new jobs and growth of GDP. Therefore, designing a comprehensive, coherent and consistent approach of Council of Ministers and entity governments to entrepreneurship and SMEs in the form of government support strategy to entrepreneurship and SMEs is an absolute priority. A comprehensive government approach to entrepreneurship and SMEs would provide for a full coordination of activities of numerous governmental institutions (chambers of commerce, employment bureaus, etc.) and NGOs dealing with entrepreneurship and SMEs. With no pretension of defining the role of government in supporting entrepreneurship and SMEs, we believe that apart from designing a comprehensive entrepreneurship and SMEs strategy, the development of national SME support institutions and networks is one of key condition for success. There are no doubts that governments should create different types of support institutions: 13 Einstein College of Engineering i) To provide information on regulations, standards, taxation, customs duties, marketing issues; ii) To advise on business planning, marketing and accountancy, quality control and assurance; iii) To create incubator units providing the space and infrastructure for business beginners and innovative companies, and helping them to solve technological problems, and to search for know-how and promote innovation; and iv) To help in looking for partners. In order to stimulate entrepreneurship and improve the business environment for small enterprises. Training Basic training differs from product to product but will necessary involve sharpening of entrepreneurial skills. Need based technical training is provided by the Govt. & State Govt. technical Institutions. There are a number of Government organisations as well as NGOs who conduct EDPs and MDPs. These EDPs and MDPs and are conducted by MSME's, NIESBUD, NSIC, IIE, NISIET, Entrepreneurship Development Institutes and other state government developmental agencies. Marketing Assistance There are Governmental and non-governmental specialised agencies which provide marketing assistance. Besides promotion of MSME products through exhibitions, NSIC directly market the MSME produce in the domestic and overseas market. NSIC also manages a single point registration scheme for manufacturers for Govt. purchase. Units registered under this scheme get the benefits of free tender documents and exemption from earnest money deposit and performance guarantee. Promotional Schemes Government accords the highest preference to development of MSME by framing and implementing suitable policies and promotional schemes. Besides providing developed land and sheds to the entrepreneurs on actual cost basis with appropriate infrastructure, special schemes have been designed for specific purposes like quality upgradation, common facilities, entrepreneurship development and consultancy services at nominal charges. Government of India has been executing the incentive scheme for providing reimbursement of charges for acquiring ISO 9000 certification to the extent of 75% of the cost subject to a maximum of Rs. 75,000/- in each case. ISO 9000 is a mechanism to facilitate adoption of consistent management practices and production technique as decided by the entrepreneur himself. This facilitates achievement of desired level of quality while keeping check on production process and management of the enterprise. Concession on Excise Duty MSME units with a turnover of Rs. 1 crore or less per year have been exempted from payment of Excise Duty. Moreover there is a general scheme of excise exemption for MSME brought out by the Ministry of Finance which covers most of the items. Under this, units having turnover of less than Rs. 3 crores are eligible for concessional rate of Excise Duty. Moreover, there is an exemption from Excise Duty for MSME units producing branded goods in rural areas Credit Facility to MSME 14 Einstein College of Engineering Credit to micro, small and medium scale sector has been covered under priority sector lending by banks. Small Industries Development Bank of India (SIDBI) has been established as the apex institution for financing the MSME. Specific schemes have been designed for implementation through SIDBI, SFCs, Scheduled Banks, SIDCs and NSIC etc. Loans upto Rs. 5 lakhs are made available by the banks without insisting on collaterals. Further Credit Guarantee Fund for micro, small and medium enterprises has been set up to provide guarantee for loans to MSME up to Rs. 25 lakhs extended by Commercial Banks and some Regional Rural Bank. Policies And Schemes For Promotion Of MSME Implemented By State Governments All the State Governments provide technical and other support services to small units through their Directorates of Industries, and District Industries Centres. Although the details of the scheme vary from state to state, the following are the common areas of support. 1. Development and management of industrial estates 2. Suspension/deferment of Sales Tax 3. Power subsidies 4. Capital investment subsidies for new units set up in a particular district 5. Seed Capital/Margin Money Assistance Scheme 6. Priority in allotment of power connection, water connection. 7. Consultancy and technical support Government of India runs a scheme for giving National Awards to micro, small and medium scale entrepreneurs providing quality products in 11 selected industry groups of consumer interest. The winners are given trophy, certificate and a cash price of Rs. 25000/- each. Government accords the highest preference to development of MSME by framing and implementing suitable policies and promotional schemes like policies and promotional schemes, providing incentives for quality upgradation, concession on excise duty and provides technical supportive services. Thus Government play supportive role in developing entrepreneurs. STATE GOVERNMENTS INCENTIVES FOR INVESTORS Many state governments are offering incentives to attract investment in their states. Many state governments in India offer attractive incentive packages which include incentives such as: Land at subsidized prices or Industrial sheds to set up small scale industrial units. Tax concessions for a number of years. These may include exemption from sales tax etc for a set period of time. Electric power supply at a reduced tariff. Loans and subsidies at very attractive rates of interest. INCENTIVES FOR SETTING UP BUSINESS IN BACKWARD AREAS The Government of India as well as several State Governments provides several benefits and incentives to promote industrialization of backward areas. Both the central and state governments share the cost of some of the incentives provided. The purposes of such incentives are to develop backward areas and increase employment for local inhabitants of such areas. The bulk of new industries prefer areas with an established infrastructure and this is why incentives are offered to entice new ventures to start up in areas that need development. Incentives offered depend on the specific area chosen. Some of the incentives offered are: 15 Einstein College of Engineering Transportation subsidies to promote industries in areas that are not easily accessible, like remote hilly areas. A subsidy of 50% to 90% on transportation costs is available under this scheme. A Subsidy at the rate of 15% of the investment amount in plant and machinery is given under the capital investment subsidy scheme. A subsidy for interest relief is also provided at a rate of 3% for new industrial units in some areas. While in the past setting up an industry in India was not an easy task because of bureaucratic requirements that needed to be fulfilled. However both the central and state governments have now made efforts to improve some things. Industrial Unit Startup Information for NRIs For Non Resident Indians returning to India to start up industrial units. They will find that there is plenty of talent available in India. Hiring the right kind of person can make things quite easy to go through the maze of Indian regulations. While the government no doubt is trying to bring out reforms to make things easier for foreign investors, the attitude of some officials is difficult to change. Those who encounter problems should use the several channels available now to report clerks use delaying tactics for personal gain. Returning NRI's who can tolerate the initial adjustment setbacks in establishing themselves when they return to India will ultimately find the rewards well worth the effort. India offers investors tremendous opportunities and is presently one of the most sought locations for industrial investment. Loans available for starting Industrial venture in India There are two main financial institutions available for loans for entrepreneurs on the (federal/ all India level). 1. Industrial Development Bank of India(IDBI) 2. Industrial Finance Corporation of India (IFCI) The Industrial Development Bank of India is the head institution in the area of long term industrial finance. It was established under the IDBI Act 1964 as a wholly owned subsidiary of RBI and started functioning on July 01, 1964. Under Public Financial Institutions Laws (Amendment) Act 1976, it was delinked from RBI. IDBI is engaged in direct financing of the industrial activities The objectives of the Industrial development bank of India are to create a principal institution for long term finance, to coordinate the institutions working in this field for planned development of industrial sector, to provide technical and administrative support to the industries and to conduct research and development activities for the benefit of industrial sector. On the State level finance is available loans can be availed from 1. State Financial Corporation (SFC) 2. State Industrial Development Corporation (SIDC). 16 Einstein College of Engineering Criteria for Business loans: √ Technical assessment of project √ Experience of the entrepreneurs √ Financial & commercial practicality of the project √ Conformity to environmental laws √ Economic viability of the project How to apply for business loans in India – Loan application procedure The first step is to submit a detailed project report (business plan)to the financial institution to IDBI, IFCI or any other financial institution from where the loan sanction is sought. In case a license is a requirement for the project, the license should be provided with the project report. The financial institution after scrutinizing the project report. If the financial institution requires additional information or clarifications, they usually ask for this in a few days of receipt of project report. Representative from the financial institution will arrange to inspect the site etc to make certain the suitability of the project. At this stage discussions on various aspects of the project are discussed and final project costs are calculated. The financial institution gives its approval if they find the project feasible. Loans provided for business ventures can be for equipment and fixed assets as well as working capital. While there is no hard and fast rule that is revealed by financial institutions. I would say that if a project is viable and the entrepreneur has approximately 25% of his own funds. Then 75% can be financed. In addition to this loans can be availed for working capital also. In case you can provide proof of your expertise in the project there is always the possibility that your loans may be sanctioned with a lesser amount of cash investment on your part. Projects costing up to Rupees 5 crores can normally be financed on the state level. Financial institutions follow guidelines such as debt-equity ratio, entrepreneur‟s contribution to the project etc when deciding on loans. It is not uncommon for applicants to inflate their contributions in an attempt to invest the least amount of their own funds. ****************** Unit-3 Sources of Product for business- Prefeasibility Study- Criteria for Selection of Product- Ownership- Capital- Budgeting Project profile Preparation- Matching Entrepreneur with the Project- Feasibility Report Preparation and Evaluation Criteria. Project Identification Project: It is defined as a typically has a distinct mission that it is designed to achieve and a clear termination point, the achievement of the mission. 17 Einstein College of Engineering Idea Generation Project selection process starts with the generation of a product idea. The project ideas can be discovered from various internal and external sources. They may be 1. Knowledge of potential customer needs 2. Watching emerging trends in demand for certain products 3. Scope for producing substitute product 4. Going through certain professional magazines catering to specific interest like electronics, computers etc., 5. Success stories of known entrepreneurs or friends or relatives. 6. A new product introduced by the competitor. Project Selection It starts from where project identification ends. After having some project ideas, these are analysed in the light of existing economic conditions, the government policy and so on. A tool generally used for this purpose is, what is called the managerial jargon, SWOT analysis. On the basis of this analysis, the most suitable idea is finally selected to convert it into an enterprise. SWOT Analysis Introduction It has always been important for a business to know and understand how it fits in and interacts with the surrounding environment on both an internal (office/factory/shop environment) and external view (how your business operates with the outside world). Researching your environment will benefit you and/or your management team by putting you in a position to develop a strategy for both the long and short term. Analyzing the Business The most influential way of doing this is to perform a SWOT analysis of the company. It is a common phrase used to abbreviate Strengths, Weaknesses, Opportunities and Threats. Each term is a heading for a separate analysis of the business but they can be related as seen below: Strengths provide an insight to your business opportunities & weaknesses in your business can cause immediate threats A guideline of how to carry out the analysis is explained in the next section, but it is important to know that the SWOT analysis is only based upon information that is known by the assessors (you), and is seen as perhaps the more basic approach of analyzing a business‟ position: but SWOT is still a powerful tool when looking for immediate benefits. Performing SWOT 18 Einstein College of Engineering Recognizing the Strengths and Weaknesses before tackling the Opportunities and Threats is the best way to approach the analysis: the more Strengths and Opportunities the better they can both be seen as the bigger influences for the success of your company. You need to be aware that the most important rule is not to leave anything out no matter how small the issue may be. There is no fixed way of doing a SWOT analysis, but it should be done in a way that you feel most comfortable with, and more importantly that you understand it. The objective is to be in a position where you can determine a strategy for the future to improve your company‟s overall performance (or maintain it if you are happy with your final analysis). Strengths The Strengths can be considered as anything that is favourable towards the business for example: 1. Currently in a good financial position (few debts, etc) 2. Skilled workforce (little training required) 3. Company name recognized on a National/Regional/Local level 4. Latest machinery installed 5. Own premises (no additional costs for renting) 6. Excellent transport links (ease of access to/from the Company) 7. Little/non-threatening competition Weaknesses Recognizing the Weaknesses will require you being honest and realistic. Don‟t leave anything out as this is an important part as to realize what needs to be done to minimize this list in the future. Here are a few examples: 1. Currently in a poor financial position (large debts, etc) 2. Un-Skilled workforce (training required) 3. Company name not recognized on a National/Regional/Local level 4. Machinery not up to date (Inefficient) 5. Rented premises (Adding to costs) 6. Poor location for business needs (Lack of transport links etc) 7. Stock problems (currently holding too much/too little) 8. Too much waste Opportunities Keeping in mind what you have listed as your Company Strengths, SWOT Analysis can now influence the Opportunities for the business. These can be seen as targets to achieve and exploit in the future for example: 1. Good financial position creating a good reputation for future bank loans and borrowings 2. Skilled workforce means that they can be moved and trained into other areas of the business 3. Competitor going bankrupt (Takeover opportunity?) 4. Broadband technology has been installed in the area (useful for Internet users) 5. Increased spending power in the Local/National economy 6. Moving a product into a new market sector Threats 19 Einstein College of Engineering The final part of the analysis will also be seen as the most feared- the Threats. It has to be done and therefore taking into account what you have listed as your weaknesses, the threats will now all seem too clear. Examples 1. Large and increasing competition 2. Rising cost of Wages (Basic wage, etc) 3. Possible relocation costs due to poor location currently held 4. Local authority refusing plans for future building expansion 5. Increasing interest rates (increases borrowing repayments, etc) 6. End of season approaching (if you depend on hot weather, etc) 7. Existing product becoming unfashionable or unpopular Using the Analysis Once the SWOT analysis is complete, it will then be time to put it all together and look closely to form a strategy. This will involve how you can exploit the Opportunities and how to eliminate or deal with the Threats. This may well depend on your company‟s original objectives and goals but the whole process will certainly give an overall look at the current position of your business. You might argue that you can make a list in your head about the areas that make up your analysis and that no benefit can be derived from a SWOT exercise. Try a quick list with the four areas and identify where one area impacts on another. If you find one instance that is a current issue, you would then have cause to complete the full analysis. Summary As previously stated, SWOT analysis is used primarily to evaluate the current position of your business to determine a Management strategy for the future. It should also help you to look at how you may do this by looking closely at your Weaknesses and Threats that you have identified. Great care needs to be taken when planning a strategy not to disturb the balance of your Strengths as you could find that your Strengths suddenly become a Weakness if you don‟t use them. The way that SWOT has been introduced to you is the simplest way that it can be found. It can be used further to analyze your business (depending on its size) on a Local, National and Global level. This is done by splitting up the Strengths, Weaknesses, Opportunities and Threats of your business into the appropriate category (e.g. High Unemployment in the area- Local Threat because of less spending). It cannot be stressed enough that the analysis is carried out fairly and thoroughly. This will then put you in a position to forecast and prepare for the future accurately to give realistic objectives and tasks. Project Appraisal It means the assessment of a project. Project appraisal is made both proposed and executed projects. Methods of Project Appraisal 1. Economic Analysis. ( requirement of raw material, level of capacity, utilization, anticipated sales, anticipated expenses and the probable profits) 2. Financial Analysis. (working capital, fixed capital, fixed asset and current asset) 3. Market Analysis. 20 Einstein College of Engineering i) Opinion Polling Method a) Complete Enumeration Survey b) Sample Survey c) Sales Experience Method d) Vicarious Method ii) Life Cycle Segmentation Analysis a) Introduction b) Growth c) Maturity d) Saturation e) Decline 4. Technical Feasibility i) Availability of land and site ii) Availability of other inputs like water, power, communication facility. iii) Copying-with anti-pollution law 5. Managerial Competence Pre-feasibility Studies Pre-feasibility studies are well researched yet generic due diligence reports that facilitate potential entrepreneurs in project identification for investment The main objective of the pre-feasibility studies prepared by SMEDA is to provide information about investment opportunities to the small & medium enterprises (SME‟s). A typical pre-feasibility study provides: 1. Comprehensive information for investment opportunity in a business. 2. Specific information regarding different business areas like, marketing, technical, industrial information etc. for the existing entrepreneurs to improve their exiting setup. 3. Project investment information and financial projections to support viability of the business. Ownership Structure Proprietorship Partnership firm Company 21 Einstein College of Engineering Co-operative society Selection of an appropriate form of ownership structure Nature of business- if business require pooling of capital and skill are generally run as partnership Areas of operation- local operation require proprietorship. National and international businesses require company ownership structure. Degree of control – direct control over business operation is required suitable ownership may be proprietorship. Capital requirement- if capital requirement is more so it is better to choose partnership firm. Duration of business – if business have a definite period of time it suitable for proprietorship or partnership. Government regulation- if the owner not like much more government involvement so he can choose partnership or proprietorship. Business Plan General Guidelines for writing plan As much as your plan represents your dream and is very important to you, it may not be as high on the agendas of the people who read it. When you sit down to write your plan, think of who will be reading it and put yourself into their shoes as much as possible. In most cases, the people who will read your plan are going to be potential investors, bankers, and/or potential partners. Your readers have likely seen dozens, and perhaps even hundreds, of plans. These people do not often have a great deal of time, so prepare your plan accordingly. In general you should: Write the plan yourself. Get help if you need it, but do not let your accountant, bookkeeper, or other professional write your plan for you. You may let them help you with the financial plan, for example, but you need to know your plan inside and out-and the best way to ensure that is to write it yourself. Back up every claim you make with supporting evidence. Include surveys and detailed market research as an addendum or appendix to your plan. Write clearly and to the point, keeping your prose to a minimum. Avoid hyperbole: don't overstate your case. Similarly, avoid unnecessary adjectives such as "fantastic," "amazing," "astounding," "irresistible," and so on. Let the reader form his or her own opinion. Ensure that your writing is error-free and edited for proper form and syntax. Choose a simple, common font such as Times New Roman, and stick with it throughout the document. Use professionally produced drawings, photographs, and graphs. Unless you are a professional, your own attempts at art will look amateurish. The same is true for videos, if you're using them, or a computer-based demo. Bind the pages simply. Cerlox or its equivalent is likely sufficient. Make sure you include your contact information right on the cover. This is one of the most common mistakes entrepreneurs make. 22 Einstein College of Engineering Section of the plan The first two sections should appear at the beginning of your plan. It is not as critical that the others follow in the order given, but this sequence will likely work well. Executive Summary This is by far the most important part of your plan. It should be no more than two pages in length, or less. State the idea, the opportunity, how much money you need, where you hope to get it, how it will be spent, and how you will pay it back. Readers who are interested may then go on to read the rest of your plan. Be warned, if your executive summary is more than three pages long, it will likely not be read. Your Planned Venture Describe your idea as clearly as possible, with diagrams, photographs or any other medium necessary to communicate it to the reader. Back up the idea with a description of the target market, tell why the opportunity exists, and why your idea will capture that market. Market Research Explain how you determined the product or service was appropriate to the market. Include explanations of the "four P's" (price, product, promotion, placement). Background and History Tell who you are, what experience and skills you bring to this venture, and whether or not you've run your own businesses in the past. Describe and explain their successes or failures. Include your own, short, biography here. Management Team Provide the names, and short bios, of the people you will use to fill the key positions in the business. Start-up Plan Tell when and where you plan to start the business and why you chose this time frame and location. Operational Plan Describe, in detail, how your business will operate. Include diagrams of production or service areas if appropriate. Marketing Plan Describe, in detail, how you will attract customers or clients and how you will deliver your product or service to them. Financial Plan Provide a detailed financial plan, including a cash-flow projection, that accounts for the money you will need (borrow) and the repayment plan and return on investment to investors. 23 Einstein College of Engineering Appendix Include your own and your team's detailed biographies here as well as additional market research and any other information that is too detailed to be included in the body of the plan. Most entrepreneurs have to come up with their own start-up money – either from their own savings or from relatives who know and trust them. But there are other sources of capital out there that you might tap into. Nothing is easy or straightforward about raising start-up capital for your venture. Here are some typical potential sources of start-up money. *************** Unit-4 Finance and Human Resource Mobilization – Operations Planning- Market and Channel Selection – Growth Strategies – Product Launching. MARKETING MANAGEMENT Before any production/ service is offered for sale to market, several decision need to taken in regarding marketing. Ex: price of product has to determined, the methods of marketing has been identified and the channels of distribution have to be worked out. Marketing Market : it is a place where the sellers and buyers assemble to exchange their products for money and vice versa.Concept has been change time to time. Traditional concepts: Early days, „marketing‟ includes activities involved in the flow of goods and services from production to consumption. Modern Concepts: Due to changes of customers, behaviour concepts are also changed customers started to buy the goods or services that were more beneficial to them in terms of quality, price, satisfaction, durability, look and so on. The benefits to the consumers may be tangible and intangible. The new approach relies on to produce the goods or offer services that satisfy the customers‟ demands. Traditional approach focus on the needs of the sellers (Buyers Beware). Modern approach focus on the needs of the buyers. (sellers beware). Problems of Marketing of small industries: Competition with modern section Lack of sales promotion 24 Einstein College of Engineering Weak in bargaining power Market Assessment: Demand forecasting Demand refers to willingness and ability of customers to buy products or services. When we consider this definition for all the potential customers having both willingness and ability to buy a product it is termed as “total Market” There are number of techniques available for forecasting dmand. Survey Method Statistical method Leading indicator method Market Segmentation: Market segmentation is the sub- dividing of a market into homogeneous subsets of customers, where any subset may conceivable be selected on a market target to be reached with a distinct marketing mix. Basic of Market segmentation Geographic variable Demographic variable Education variable Income variable Marketing Mix: Marketing mix classified the four factor under 4 P‟s vie Product, Price, Promotion, Place. “Marketing mix is the tailoring the product its price, its promotion and distribution to reach the target customers”. Brand A brand is a name, term, sign, symbol or design or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors. Brand mark is a symbol or mark used fr the purpose of identification of the product. Packaging Packaging is an art science and technology of preparing goods for transport and sales. Pricing Policy Price is the money that customers must pay for a product or services. Pricing the product is something different from its price. Salient features: Pricing cover all marketing aspect like the item- goods and service. Mode of payment, methods of distribution, currency used etc. pricing may carry with it certain benefits to the customers like free delivery, guarantee, installation from after sales servicing. 25 Einstein College of Engineering Pricing refers to
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