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Unit 3 & 4 Answers
Unit 3 Entrepreneurship & Micro, Small, Medium Enterprises (MSME)
3.1 Types of entrepreneurship
3.2 Entrepreneurship & Small Business Difference
3.3 Life cycle of a small company
3.4 Government initiatives for MSMEs
3.5 Government schemes for small sector Businesses
Unit 4 Idea & Opportunity Identification
4.1 Idea generation Sources
4.2 Methods of Idea generation
4.3 Opportunity identification 4.4 Characteristics of IDEAL Business.
Unit 3
3.1 Types of Entrepreneurship
Answer- Entrepreneurship is an innovative process that involves multifaceted and diversified
activities for providing new things to society and civilization.
1. Administrative Entrepreneurship
The entrepreneurial activity under this category is centered around administrative techniques and
functions. It gives a new option to handle prevailing or future situations in a more effective way that
provides advantages and a competitive edge.Total Quality Management, job redesigning, new
techniques of doing things, participative management or management by consensus are a few of the
examples of administrative entrepreneurship that increase overall organizational efficiency and that
nukes the firm successful and sustainable in the competitive market environment. The old-age
pension scheme is such administrative entrepreneurship of the government.
2. Opportunistic entrepreneurship
There is a proverb “Hit! While the iron is hot”. It is the best exhibit of the characteristic of this
category of entrepreneurship. Environmental changes always offer new opportunities. But
everybody is not equally capable of identifying and to utilize that opportunity on time.The
entrepreneurship that identifies exploits and executes the opportunity in the first hand regarded as
opportunistic entrepreneurship.
3. Acquisitive entrepreneurship
The entrepreneurship that learns from other competencies is called acquisitive entrepreneurship. It
acquires something new of value front, the competitive environment or achieves the competitors’
technical capacities. It keeps entrepreneurship sustainable in a competitive environment.The failure
never restraints them from acquisition but motivates them further to discover such a thing with a
new visitor.
4. Incubative entrepreneurship
This category of entrepreneurship generates and nurses new ideas and ventures within the
organization. It productively executes them and ensures material gain for the organization.They
pursue and help to get differentiated technologies to promote creations and innovations Microsoft,
Nokia, etc. always incubates new varieties types of product and creates product differentiation in
the market.
5. Imitative entrepreneurship
The entrepreneurship that imitates a good or service operating in the market under a franchise
agreement is the imitative entrepreneurship. It is the medium that spread technology over the
world.It adopts an existing technology in countries over the world. It also adopts an existing
technology with minor modifications appropriate to the local condition
6. Private Entrepreneurship
The entrepreneurship that is initiated under the private sector is private
entrepreneurship.The government gives various support services through private and public
concerns that encourage private initiative in taking entrepreneurial ventures.A layer and mutual
relationship between private and public sectors would make economic development speedy and
balanced.
7. Public entrepreneurship
The entrepreneurship that is undertaken by the government through its various development
agencies is defined as public entrepreneurship.All countries, developed or underdeveloped, take a
public initiative in venture ideas to fulfill the initial deficiency of private entrepreneurs.
8. Individual entrepreneurship
The entrepreneurship that is undertaken by an individual or a family with his initiative is called
individual entrepreneurship.
9. Mass Entrepreneurship
“Mass entrepreneurship" refers to the millions of ordinary local businesses that typically hire five or
more people, use local inputs and serve local needs in every community.This type of
entrepreneurship emerges in an economy where a favorable climate of motivation and
encouragement exists for developing a wide range of entrepreneurship among general mass is mass
entrepreneurship.It increases small and medium enterprises in a country.
3.2 Entrepreneurship and small business difference
Answer-
3.3 Life cycle of a small company
Answer-Introduction - In the small business life cycle not every business will go through every stage,
and not all small businesses will succeed as a result of these stages. However, they are proven stages
or small business that are an important part of running a small business, whether from home or
from a formal office.
Stage One- The first stage of any small business is obvious – establishment. At this stage, the
business is being created, planned and the early days of its operations take place. For some, this is
the only stage that a small business may see, as it is by far one of the most difficult to survive. Many
things can go wrong at this stage; thus, good business planning a crucial and necessary part of it.
Without a good business plan, it is impossible to get a small business off the ground, running and
eventually moving through to the next stages of its life cycle.
Stage Two The second stage of small business in the small business life cycle is the growth
period.During this stage, a business has an initial time of negative profit until it breaks even and
begins to show increased revenues that allow it to truly grow. This is also the stage that the real test
of a business comes into play.How the business is managed and how it is able to compete within its
designated market will determine whether it will survive, heading to the next stage – or whether it
will decline and reach the last stage of its life.
Stage Three The third stage of small business is about expansion. This is the point at which a
business gets to the point where there is sufficient revenue being brought in so that there are no
doubts of its survival and it can expand its horizons.This includes taking on staff, expanding the office
space of the business or even investing in equipment to deal with a larger base of clientele. This
stage also entails producing more products if necessary.
Stage Four The fourth stage of small or other business is about maturity.The business is now stable
enough to survive most unforeseen circumstances. It has enough backing, capital and support to
ensure that even if the market becomes unstable, it can pull through.This may be accomplished by
rearranging its management plan, getting rid of one product to replace another or adding an
additional product to an already existing product line.However, if the market declines, it may
survive, though its profits may take a temporary slide backwards.
Stage Five In the small business life cycle the fifth stage of small business, is about decline. In fact, it
is the easiest stage to reach for any business because it is the point where a starting business will
fail.An existing business, even a mature one, can decline in profits, take heavy losses and eventually
either fail or cease operations to avoid further losses.
As any small business owner can attest to, the stages of business are necessary and a normal part of
the small business life cycle.
3.4 Government initiatives for MSME
Answer- Indian Government has taken following initiative for MSME-All activities related to small
scale industry is directed by this Ministry of Micro, Small and Medium Enterprises. In accordance
with the provision of Micro,Small, and Medium Enterprises Development(MSMED) Act, 2006 the
Micro, Small ,and Medium Enterprises (MSME) are classified in two classes, which are as follows:
a. Manufacturing Enterprises
b. Service Enterprises
a. Manufacturing Enterprises:
i. A micro enterprise is where the investment in plant and machinery is not more than 25 lakh.
ii. A small enterprise is where the investment in plant and machinery is more than 25 lakh but does
not exceed 5 crore.
iii. A medium enterprise is where the investment in plant and machinery is more than 5 crore but
does not exceed 10 crore.
b. Service Enterprises:
i. A micro enterprise is where the investment in equipment does not exceed 10 lakh.
ii. A small enterprise is, where the investment in more than 10 lakh but does not exceed 2 crore.
iii. A medium enterprise is, where the investment in equipment more than 2 crore but does not
exceed 5 crore.
Other Government Initiatives (in forms of policy)
1) Reservation Policy
2) Purchase and Price Preference Policy
3) Licensing Policy
4) Trade Policy
5) Foreign Direct Investment Approval Policy
6) Labor Policies
7) Credit Policy
i. Priority Sector Lending
ii. Institutional Arrangement
3.45Government Schemes for small sector Businesses
Answers - Following are government schemes for Small sector Businesses-
1) Udyog Aadhaar Memorandum-
Aadhaar card is a 12 digit number given to all individuals by the government. In this, the Aadhaar
card is a mandatory requirement. The benefit of registering in this scheme is the ease in availing
credit, loans, and subsidies from the government. Registration can be done both ways in the online
mode or the offline mode.
2)Quality Management Standards & Quality Technology Tools -
Registering in this scheme will help the micro, small and medium enterprises to understand and
implement the quality standards that are required to be maintained along with the new technology.
In this scheme, activities are conducted to sensitize the businesses about the new technology
available through various seminars, campaigns, activities etc.
3)Grievance Monitoring System -
Registering under this scheme is beneficial in terms of getting the complaints of the business owners
addressed. In this, the business owners can check the status of their complaints, open them if they
are not satisfied with the outcome.
4)Incubation -
This scheme helps innovators with the implementation of their new design, ideas or products. Under
this from 75% to 80% of the project cost can be financed by the government. This scheme promotes
new ideas, designs, products etc.
5)Credit Linked Capital Subsidy Scheme-
Under this scheme, new technology is provided to the business owners to replace their old and
obsolete technology. The capital subsidy is given to the business to upgrade and have better means
to do their business. These small, micro and medium enterprises can directly approach the banks for
these subsidies.
6)Women Entrepreneurship -
This scheme is especially started for women who want to start their own business. The government
provides capital, counselling, training and delivery techniques to these women so that they manage
their business and expand it.The government has launched a number of more schemes and support
system for these enterprises,
7) Other Schemes -
—Pradhan Mantri Mudra Yojana (PMMY)
.Prime Minister’s Employment Generation Programme (PMEGP)
. Credit Guarantee Trust Fund for Micro & Small Enterprises (CGT MSE)
. Credit Linked Capital Subsidy Scheme (CLCSS)
. Equity Infusion for MSMEs through Fund of Funds
.Credit Guarantee Scheme for Subordinate Debt (CGSSD)
.MSME Business Loan for Startups in 59 Minutes
.MSME Loan Scheme by Banks
Unit 4
4.1 Idea generation sources
Answer-
Sources of idea generation are :
1.Consumers
2.The existing Products
3.Distribution Channel
4.Govt.
5.R & D
6.Personal Interest & Hobby
7.Entrepreneurs Experiences, skills & Ability
8.Produts & services currently available
9.Unexpected occurrences (Success or Failures)
4.2 Methods of idea generation
Answer - Important methods of idea generation are :
1.Brainstorming
2.Attribute Listing
3.Who, what, where, when, why, how
4.Assumption Smashing
5.Discontinuity
Methods of Generating New Business Ideas include: Group brainstorming/lateral thinking exercises
Research – observation, enquiry, play, prototype, experiment Focus groups Surveys Analysis of and
reflection on trends: Economy Society – social trends Technology Science Political and regulatory
changes There is opportunity in change, chaos, complacency and even boredom.
4.3 Opportunity identification
Answer -
Business opportunities may be defined as a business proposal an entrepreneur would like to pursue
considering risk and the reward involved in the proposal which may be manufacturing or servicing or
trading.
Business opportunities refers to as favourable circumstance or environment created in production ,
commercial , service of financial activities that may occupy someone’s time , attention , labour , and
other resources ,the more of which is to make profit.
4.4 Characteristics of a ideal bussiness
Answer -
Characteristics of a ideal bussiness are:
1. Identified market need or gap – the idea must meet a clearly identified market need to be
commercially viable.
2. No or few existing competitors – the more innovative the product/service and markets, the fewer
competitors, and the higher the price you are normally able to charge. However, remember it is
always possible that there are no competitors because there is no viable market for the
product/service.
3.Growing market – it is always easier to launch a business into a new or growing rather than
declining market. Of course it may be that you are launching a business that will create a completely
new market.
4.Clearly identified customers and a viable business model – if a business does not know who it is
selling to it won’t know how to sell to them, which means it probably will not succeed. And
remember it may be selling to more than one market segment. The business model should be built
up systematically to appeal to these target customers.
5. Low funding requirements – the lower the funding requirement, the easier it is to start-up and the
less you have to lose if the idea does not work.
6. Sustainable – the business must be built on solid foundations so that it has longevity.
7. High profit margins – the more innovative the product/service and its target market, the higher
the margin is likely to be.
8. Effective communications strategy – once you know who you are selling to, and why they should
buy from you, you need to be able to communicate a persuasive message to them and build a loyal
customer base.
9. Not easily copied – if it can be, protect intellectual property. However, often getting to the market
quickly and developing a brand reputation is the best safeguard.
10. Low fixed costs – low fixed costs mean lower risk, should volume reduce. It gives you flexibility.
A combination of high profit margin and low fixed costs (high profit, low risk) is always very
attractive.
11. Controllable – putting in robust operating and financial controls increase the chances of survival
and success and ultimately will add value to the firm. The major imperative in the early years is to
monitor and manage cash flow.
12. Management skills that can be leveraged – the entrepreneur needs to have the appropriate
management skills and, if they do not, they need to acquire them or recruit or partner with others
with the appropriate skills.
13.Scalable – small projects can usually get off the ground easily but bigger projects can be
problematic because they are just ‘too big’. In which case, you need to see whether the project can
be broken down into smaller projects that can be implemented when the original idea is proved –
scalability. The idea is to avoid as much risk as possible for as long as possible – but to make sure you
do not miss the window of opportunity completely. This is all a question of judgement and changing
market conditions, so you need to remain flexible and think through how you might scale-up the
project when it proves successful.
14.Financeable – if you do not have sufficient resources yourself, the project needs to be able to
attract finance.
