Entrepreneurship Development

Unit- 1

Entrepreneurship

Solved Question Papers

1. Define Entrepreneurship

According to Coley “Entrepreneurship“ is the purposeful activity of an individual or a group of

associated individuals undertaken to initiate, maintain and earn profit by production or
distribution of economic goods and services.

2. Who is a Spontaneous Entrepreneur?

These entrepreneurs start their business out of their natural talent. They are persons with
initiative, boldness and confidence in their ability which motivates them to undertake
entrepreneurial activity.

3. Give the meaning of Entrepreneur.

Oxford Dictionary: "A person who sets up a business or businesses, taking on financial risks in
the hope of profit."

4. What is Innovation?

Innovation is commonly defined as the "carrying out of new combinations" that include "the
introduction of new goods, new methods of production, the opening of new markets, the
conquest of new sources of supply and the carrying out of a new organization of any industry"

Section- B

1. State the qualities of an Entrepreneur.

An entrepreneur should possess all such qualities which will help him to successfully start and
carryon a business. Some of the qualities are discussed in detail:

1. Calculated risk-taker: An entrepreneur is a calculated risk taker. He enjoys the excitement of

a challenge but he does not gamble. An entrepreneur avoids low-risk situation because there is
a lack of challenge and he avoids high-risk situation because he wants to succeed. He likes
achievable challenges hence he takes calculated risk.
2. Innovator: An entrepreneur exploits the inventions commercially and produces newer and
better goods which brings him profit and satisfaction. Innovation may occur in the following
forms:

 Introduction of new goods

 Introduction of new methods of production
 Opening of a new market
 Discover a new source of supply of raw materials
3. Organizer: An entrepreneur has to bring together various factors of production, minimize
losses and reduce the cost of production. Initially, he may take all the decisions but as the
enterprise grows, he starts delegating the authority.

4. Creative: Successful innovation depends on creativity and one of the most important
requirements of an entrepreneur is to be creative as it helps him to think out of the box and
bring something to the market.

5. Achievement Motivated: An entrepreneur should be achievement oriented person and not

money hungry. He has to work towards tasks/goals accomplishments which automatically bring
money.

6. Technically competent: An entrepreneur must have reasonable level of technical knowledge.

Technical knowledge is the ability that people can acquire with hard work and education.

7. Self-confident: It is necessary for an entrepreneur to be self-confident. He should have faith

in himself, only then he can trust others. In an expanded business, delegation of authority is a
must and only a confident entrepreneur can delegate his authority and seek cooperation from
his staff.

8. Socially Responsible: The changing environment calls for a socially responsible entrepreneur
who is not threatened by the progress of others. On the contrary he acts in full awareness of
social repercussions of his actions. An entrepreneur should think of projects that have social
significance and of importance to others.

9. Optimistic: An entrepreneur should approach his task with a hope of success and optimistic
attitude. He has to attempt any task with the hope that he will succeed rather than with
pessimistic attitude.

10. Mental ability: An entrepreneur must be intelligent, adaptable and creative. He must be
able to engage in analysis of various problems and situations in order to deal with them.

11. Human Relation Ability: Personality factors such as emotional stability, personal relations,
sociability, kindness and empathy are important contributors to entrepreneur’s success.
12. Communication Ability: An entrepreneur must possess the quality of communicating
effectively, both written and oral.

13. Decision Making: An entrepreneur must be clear, creative and firm when it comes to
decision making. Decisions affect organization’s future and are likely to be irreversible, hence to
be taken with great care.

14. Business Planning: Yet another important quality of an entrepreneur is the knowledge of
writing a business plan. Although he can take help from outsiders, ultimate responsibility lies on
the entrepreneur himself.

15. Courage to face adversities: Entrepreneurs must face the adversities boldly and bravely and
have perseverance.

16. Leadership: This is an essential trait of an entrepreneur, without leadership an organization

would be only a mess of people and machines. Leadership is one of the primary traits of an
entrepreneur by which he can influence others to work towards organisational objectives.

2. List out the objectives of an Entrepreneur.

Some of basic objectives of an entrepreneur are as follows-

1. Creation of Employment- Entrepreneurship generates employment. It provides an

entry-level job, required for gaining experience and training for unskilled workers and
depending on the type of business it also provides employment it skilled and white
collars.
2. Innovation- Entrepreneurship is the hub of innovation which brings new ventures, new
products, explores new market, technology etc., and increase the standard of living of
people.
3. Focus on Society and Community Development- Entrepreneurship brings good changes
in society and promotes quality products and services, quality education, better
sanitation, fewer slums, better income. Therefore, entrepreneur assists the organization
towards a more stable and high quality of community life.
4. Increase Standard of Living- Entrepreneurship helps to improve the standard of living of
a person by increasing the income. The standard of living means, increase in the
consumption of various goods and services by a household for a particular period.
5. Support research and development- New products and services need to be researched
and tested before launching in the market. Therefore, an entrepreneur also dispenses
finance for research and development with research institutions and universities. This
promotes research, general construction and development in the economy.
Section- C

1. Explain the functions of an Entrepreneur.

An entrepreneur performs a series of functions necessary, right from the origin of an idea up to
the establishment and effective operation of an enterprise.

He carries out the whole set of activities of the business for its success.

He recognizes the commercial potential of a product or a service, formulates operating policies

for production, product design, marketing and organizational structure.

According some economists, the functions of an entrepreneur is classified into five broad
categories:

1. Risk-bearing function 2. Organizational function 3. Innovative function

4. Managerial function 5. Decision making function

1. Risk-bearing Function:

The function of an entrepreneur as risk bearer is specific in nature. The entrepreneur assumes
all possible risks of business which emerges due to the possibility of changes in the tastes of
consumers, modern techniques of production and new inventions. Such risks are not insurable
and incalculable. In simple terms such risks are known as uncertainty, which may lead to loss.

Thus, risk bearing or handing uncertainty still remains the most important function of an
entrepreneur he tries to minimise by his initiative, skill, good judgement and pro-active
approach.

2. Organizational Function:

Entrepreneur as an organiser and his organizing function is described by J.B. Say as a function
whereby the entrepreneur brings together various factors of production (Land, Labour, Capital
and Entrepreneurship), ensures continuous management and renders risk-bearing functions as
well.

His definition associates entrepreneur with the functions of coordination, organization and
supervision too.

According to him, an entrepreneur is one who combines the land of one, the labour of another
and the capital of yet another and thus produces a product. By selling the product in the
market, he pays interest on capital, rent on land and wages to labourers and what remains is
his/her profit.
In this way, he describes an entrepreneur as an organizer who alone determines the lines of
business.

3. Innovative Function:

The basic function an entrepreneur performs is to innovate new products, services, ideas and
information for the enterprise. As an innovator, the entrepreneur foresees the potentially
profitable opportunity and tries to exploit it. He is always involved in the process of doing new
things.

According to Peter Drucker, "Innovation is the means by which the entrepreneur either creates
new wealth producing resources or brings out existing resources with enhanced potential for
creating wealth".

Whenever a new idea occurs entrepreneurial efforts are essential to convert the idea into
practical application.

4. Managerial Function:

Entrepreneur also performs a variety of managerial function like determination of business

objectives, formulation of production plans, product analysis & market research, organization
of sales, procuring machine & material, recruitment of men and undertaking of business
operations.

He also undertakes the basic managerial functions of planning, organizing, coordinating,

staffing, directing, motivating and controlling in the enterprise.

In large establishments, these managerial functions of the entrepreneur are delegated to the
paid managers for more effective and efficient execution.

5. Decision Making Function:

The most vital function an entrepreneur discharges refers to decision making in various fields of
the business enterprise. He is the decision maker of all activities of the enterprise.

A. H. Cole described an entrepreneur as a decision maker and attributed the following functions
to him.

 He determines the business objectives suitable for the enterprise.

 He develops an organization and creates an atmosphere for maintaining a cordial
relationship with subordinates and all employees of the organization.
 He decides in securing adequate financial resources for the organization and maintains
good relations with the existing and potential investors and financiers.
  He decides in introducing advanced modern technology in the enterprise to coup up
with changing scenario of manufacturing process.
 He decides the development of a market for his product, develops new product or
modify the existing product in accordance with the changing consumer fashion, taste
and preference.
 He also decides to maintain good relations with the public authorities as well as with the
society at large for improving the firm’s image.

2. Discuss the various problems encountered by women entrepreneurs in India.

Various problems faced by Indian Women Entrepreneurs are as follows:

1. Family restriction: Women are expected to spend more time with their family members.
They do not encourage women to travel extensively for exploiting business opportunities.

2. Financial Problems: Family members do not encourage women entrepreneurs. They hesitate
to invest money in the business venture initiated by women entrepreneurs.

3. Lack of Credit facilities: Bank and other Financial Institutions do not consider Middle Class
Women Entrepreneurs as proper applicants for setting up their projects and they are hesitant
to provide financial assistance to unmarried women or girls as they are unsure as to who will
repay the loan — either their parents or in-laws after their marriage in case of default. This
humiliates unmarried women and they generally leave the idea of setting up their ventures.

4. Lack of Education: Women are generally denied of higher education, especially in rural areas
and under developed countries. Women are not allowed to enrich their knowledge in technical
and research areas to introduce new products.

5. Role Conflict
Marriage and family life are given more importance than career and social life in Indian society.

6. Patriarchal society
The society is dominated by males. Many business men are not interested to have business
relationship with women entrepreneurs. Some male generally do not encourage women
entrepreneurs.

7. Lack of emotional stability

Women generally have sympathy for others. They are very emotional. This nature may not
allow them to carry business professionally and may get easily cheated in business.
8. Lack of Mental strength
Business involves risk. Women entrepreneurs may get upset very easily when loss arises in
business.

9. Lack of Information
Women entrepreneurs are not generally aware of the subsidies and incentives available for
them. Lack of knowledge may prevent them from availing the special schemes.

10. Stiff Competition

Women face lot of competition from men. Due to limited mobility they find difficult to compete
with men in the limited market.

11. Mobility
Moving in and around places to find new a market is again a tough job for Middle Class Women
Entrepreneurs in Indian Social system.

12. Shortage of raw-materials: Women Entrepreneurs encounter the problems of shortage of

raw-materials; it may be difficult for them to travel a lot to have more number of choices of
suppliers.

13. Social barriers: Women entrepreneurs in India are always seen with suspicious eyes,
particularly in rural areas, they face more social barriers. Not only this, so many castes and
religions issues may also hinder women entrepreneurs.

14. Lack of training: Many women become entrepreneurs out of chance and not choice. They
also have to play dual role of business women and a care taker of her family as well. As a result
they often lack access to training that will go long way in helping them in developing business
skills.

3. Briefly explain the classification of entrepreneurs.

Entrepreneurs can be classified on the following basis:

1. Based on the Type of Business

(a) Business Entrepreneur: Business entrepreneurs are those entrepreneurs who conceive the
idea of a new product or service and then translate their ideas into reality. Example: Ritesh
Agarwal of OYO.

(b) Trading Entrepreneur: As the name indicates trading entrepreneur is concerned with the
trading activities and not manufacturing. He has to identify potential market, create demand
through extensive advertisement of his product and thus inspire people to buy his product.
Example: Radhakishan Damani of D-Mart.
(c) Industrial Entrepreneur: Industrial entrepreneur is one who sets up an industrial unit. He
perceives the opportunity to set up his unit, complies with necessary formalities to get license,
power connection, pollution control clearance, arrange initial capital, providing securities and
guarantees to financial institutions and supply necessary technical know-how. Example: T. V.
Sundaram Iyengar of TVS Motor Company.

(d) Corporate Entrepreneur: Corporate entrepreneur is one who plans, develops and manages
a corporate body. He is a promoter, an essential part of board of directors, an owner as well as
an entrepreneur. He gets his corporate body registered under the requisite Act which gives his
company the status of separate legal entity. Example: Narayana Murthy of Infosys.

(e) Agricultural Entrepreneur: Agricultural entrepreneur is one who is engaged in the

agricultural activities. They cover a wide spectrum of agricultural activities like cultivation,
marketing of agricultural produce, irrigation, mechanization, and technology. Example: Kumar
Ramachandran of Farm Tazaa.

2. Based on Motivation:
(a) Pure Entrepreneur: Pure entrepreneur is one who may or may not possess an aptitude for
entrepreneurship but is tempted by the monetary rewards or profits to be earned from the
business venture.

(b) Induced Entrepreneur: Induced entrepreneur is attracted by the various incentives,

subsidies and facilities offered by the government.

(c) Motivated Entrepreneur: New entrepreneurs are motivated by the desire for self-fulfilment.
They get into entrepreneurship for making and marketing some new product for the use of
consumers.

(d) Spontaneous Entrepreneur: These entrepreneurs start their business out of their natural
talent. They are persons with initiative, boldness and confidence in their ability which motivates
them to undertake entrepreneurial activity.

(e) Professional Entrepreneur: Professional entrepreneur means an entrepreneur who is

interested in floating a business but does not want to manage or operate it. Once the business
is established, he sells it out and catches on to float a new business.

3. Based on Use of Technology:

(a) Technical Entrepreneur: The entrepreneurs who establish and run science and technology-
based industries are called ‘technical entrepreneurs.’ They use new and innovative methods of
production in their enterprises.
(b) Non-technical Entrepreneur: Unlike technical entrepreneur, non-technical entrepreneur is
not concerned with the technical aspect of the product rather he spends more time in
developing alternative strategies of the marketing and distribution to promote his business.

4. Based on Stages of Generation:

(a) First Generation Entrepreneur: First generation entrepreneurs are those entrepreneurs who
don’t possess any entrepreneurial background. They start an industrial unit by means of their
own innovative skills.

(b) Second Generation Entrepreneur: Second generation entrepreneurs are those who inherit
the family business firms and pass it from one generation to another.

5. Based on Capital/Ownership:
(a) Private Entrepreneur: When an individual sets up an enterprise, arrange finance, bear the
risk and adopt the latest techniques in the business with the intention to earn profit, he is
called as private entrepreneur.

(b) State Entrepreneur: As the name indicates, the state entrepreneur means the trading or
industrial venture undertaken by the State or the Government itself.

(c) Joint Entrepreneur: When a private entrepreneur and the Government jointly run a business
enterprise, it is called ‘joint entrepreneurs.’

6. Based on Gender:
(a) Men Entrepreneur: When business enterprise is founded, owned, managed and controlled
by men, he is called ‘men entrepreneur.’

(b) Women Entrepreneur: When a woman owns a business she is called Women entrepreneur.

7. Based on Age:
(a) Young Entrepreneur: Entrepreneurs below the age of 25yrs.

(b) Middle-aged Entrepreneur: Entrepreneurs between 25 to 50yrs of age.

(c) Old Entrepreneur: Entrepreneurs above the age o 50yrs.

8. Based on Area:
(a) Urban Entrepreneur: Entrepreneurs who setup their businesses in urban or semi-urban
areas.
(b) Rural Entrepreneur: Entrepreneurs who setup their businesses in rural areas.

9. Based on Scale/size of the enterprise:

(a) Micro/Tiny industry Entrepreneur: A micro enterprise is an enterprise where investment in
plant and machinery does not exceed Rs. 25 lakh.

(b) Small scale Entrepreneur: A small enterprise is an enterprise where the investment in plant
and machinery is > Rs. 25 lakh but does not exceed Rs. 5 crore.

(c) Medium scale Entrepreneur: A medium enterprise is an enterprise where the investment in
plant and machinery is > Rs.5 crore but does not exceed Rs.10 crore.
(d) Large scale Entrepreneur: Large scale enterprise is an enterprise where the investment in
plant and machinery is more than Rs.10 crore. (source: msme.gov.in)

10. Based on Clarence Danhof study:

Clarence Danhof (1949), on the basis of his study of the American Agriculture has classified
entrepreneurs into four types:

1. Innovating Entrepreneurs: Innovating entrepreneurs are one who introduce new goods,
inaugurate new method of production, discover new market and re-organise the enterprise.
These are the industry leaders who contribute significantly towards the economic development
of the country. The innovative entrepreneurs have an unusual foresight to recognize the
demand for goods and services. They are always ready to take a risk because they enjoy the
excitement of a challenge, and every challenge has some risk associated with it.

2. Imitative Entrepreneurs: The imitating entrepreneurs are those who immediately copy the
new inventions made by the innovative entrepreneurs. These do not make any innovations by
themselves; they just imitate the technology, processes, methods pioneered by others. These
entrepreneurs are found in the places where there is a lack of resources or industrial base due
to which no new innovations could be made. Thus, they are suitable for the underdeveloped
regions where they can imitate the combinations of inventions already well established in the
developed regions, in order to bring a boom in their industry.

3. Fabian Entrepreneurs: These types of entrepreneurs are sceptical about the changes to be
made in the organization. They do not initiate any inventions immediately but follow only after
they are satisfied with its success rate. They wait for some time before the innovation becomes
well tested by others and do not result in a huge loss due to its failure.
4. Drone Entrepreneurs: These entrepreneurs are reluctant to change since they are very
conservative and do not want to make any changes in the organization. They are happy with
their present mode of business and do not want to change even if they are suffering the losses.

Thus, this classification is done on the basis of the willingness of an entrepreneur to create and
accept the innovative ideas.

Unit- 2

Small Scale Industries

Section- A

1. What is a cottage industry?

A cottage industry is a small-scale, decentralized manufacturing business often operated out of

a home rather than a purpose-built facility. Cottage industries are defined by the amount of
investment required to start, as well as the number of people employed.

2. What is a tiny industry?

Tiny/ Micro industry is one in which the investment in plant and machinery is less than Rs.25
lakhs irrespective of the location of the unit.
According to the latest circular on 26th June 2020 under MSME act:
A micro enterprise is an enterprise, where the investment in plant and machinery or equipment
does not exceed 1 crore rupees and turnover does not exceed 5 crore rupees.

3. Give the meaning of Venture Capital.

Venture capital is a form of private equity and a type of financing that investors provide to
startup companies and small businesses that are believed to have long-term growth
potential. Venture capital generally comes from well-off investors, investment banks and any
other financial institutions.

Section- B & C

1. List out the advantages of SSIs. (2018) OR

2. What is the role of SSI in stimulating the economic activities? (2018) OR

3. Describe the role of SSIs in Indian economic development. (2019)

Every small-scale industry plays a big role in the Indian economy. Apart from providing
employment to crores of people, it has the added benefit of minimum capital requirements. The
government also offers several tax benefits to SSI for this purpose.
Furthermore, they can exist in urban as well as rural areas. Small Scale Industries have been able
to compete with large-scale industries and multinational corporations due to reasons like these.

The following are some specific roles that SSIs play in the Indian economy:

1. Creation of Employment
 SSI uses labour intensive techniques. Hence, it provides employment opportunities to a
large number of people. Thus, it reduces the unemployment problem to a great extent.
 SSI provides employment to artisans, technically qualified persons and professionals. It
also provides employment opportunities to people engaged in traditional arts in India.
 SSI accounts for majority of employment in rural sector and unorganized sector.

2. Facilitates Women Empowerment

 It provides employment opportunities to women in India.
 It promotes entrepreneurial skills among women as special incentives are given to
women entrepreneurs who setup SSIs.

3. Brings Balanced Regional Development

 SSI promotes decentralized development of industries as most of the small scale
industries are set up in backward and rural areas.
 It removes regional disparities by industrializing rural and backward areas and brings
balanced regional development.
 It helps to reduce the problems of congestion, slums, sanitation and pollution in cities by
providing employment and income to people living in rural areas.
 It helps in improving the standard of living of people residing in suburban and rural
areas in India.

4. Helps in Mobilization of Local Resources

 It helps to mobilize and utilize local resources like raw materials, small savings,
entrepreneurial talent of the entrepreneurs etc., which might otherwise remain idle and
unutilized. Thus it helps in effective utilization of resources.

5. SSI Paves for Optimisation of Capital

 SSI requires less capital per unit of output. It provides quick return on investment due to
shorter gestation period. The pay-back period is quite short in small scale industries.
 SSI functions as a stabilizing force by providing high output capital ratio as well as high
employment capital ratio.
  It encourages the people living in rural areas and small towns to mobilize savings and
channelize them into industrial activities.

6. Promotes Exports
 SSI does not require sophisticated machinery. Hence, it is not necessary to import the
machines from abroad. On the other hand, there is a great demand for goods produced
by small scale sector. Thus it reduces the pressure on the country’s balance of
payments.
 SSI earns valuable foreign exchange through exports from India.

7. Complements Large Scale Industries

 SSI plays a complementary role to large scale sector and supports the large scale
industries.
 SSI provides parts, components, accessories to large scale industries and meets the
requirements of large scale industries by setting up units near such large industries.

8. SSI Meets Domestic Consumer Demands

 SSI produces wide range of products required by consumers in India.
 They meet the demands of the consumers without creating a shortage for goods. Hence,
it serves as an anti-inflationary force by providing goods of daily use.

9. Develops Entrepreneurship
 It helps to develop a class of entrepreneurs in the society. It helps the job seekers to
turn out as job givers.
 It promotes self-employment and spirit of self-reliance in the society.

4. Compare and contrast between private company and public company.

Sl.
Basis of difference Private Company Public Company
No.
1. Formation Formation is not so difficult. Formation is difficult.
Certificate of incorporation is Certificate of incorporation
sufficient for a private company. and Commencement
Certificate must be obtained.
2. Name of the company It must have “Private Limited” in It must have “Limited” in its
its name. name.

3. Membership Minimum is 2 and maximum is Minimum is 7 and there is no

200 as per Companies Act 2013. maximum limit.
 4. Prospectus Filing of prospectus is not Filing of prospectus or
compulsory. statement in lieu of
prospectus is compulsory.
5. Allotment of shares There are no much restrictions They are number of legal
on allotment of shares. restrictions on allotment of
shares.

6. Signing of MOA and Signature of two members is 7 members have to sign.

AOA sufficient.

7. Preparation of articles Compulsory articles will have to It need not prepare articles;
be prepared. instead it can choose to
adopt Table A, which
contains model rules and
regulations.

8. Public issue of capital It cannot invite public to It can invite public to

subscribe for its shares. subscribe for its shares
through prospectus.

9. Transfer of shares Shares are not freely Shares are freely transferable
transferable from one person to from one person to another.
another. They cannot be quoted They can be quoted in the
in the stock exchange. stock exchange.

10. Statutory meeting It need not hold statutory It must hold statutory
meeting, nor file a statutory meeting and must file
report with the registrar. statutory report with the
registrar.
11. Types of shares It can issue deferred shares It cannot issue deferred
equity shares and preference shares. It can issue only
shares. equity and preference shares.
12. Directors At least two directors. At least three directors.
Unit- 3

Formation of Small Scale Industries

Section- A

1. State the importance of market feasibility study.

 Market feasibility study helps in identifying the potential markets,

 It helps in understanding the present market competition.
 It helps in market segmentation.
2. What is feasibility report?

A feasibility report is a document that assesses potential solutions to the business problem or
opportunity, and determines which of these are viable for further analysis. It includes analysis
of Financial, Market, Technical and Social feasibility. Feasibility reports are created to
persuade/help the decision makers to choose between available options.

Section- B

1. Briefly explain the registration procedure of SSIs.

When it comes to registration of SSI, it has two stages- Provisional registration and Permanent
registration.

Provisional Registration Certificate (PRC)

 This is given for the pre-operative period and enables the units to obtain the term loans
and working capital from financial institutions/ banks under priority sector lending.
 Obtain facilities for accommodation, land, other approvals etc.
 Obtain various necessary NOCs and clearances from regulatory bodies such as Pollution
Control Board, Labour Regulations etc.

Permanent Registration Certificate (PeRC)

Enables the unit to get the following incentives/concessions:

 Income-Tax exemption and Sales Tax exemption as per State Govt. Policy.
 Incentives and concessions in power tariff etc.
 Price and purchase preference for goods produced.
 Availability of raw material depending on existing policy.
 Permanent registration of tiny units should be renewed after 5 years.

 Procedure for Registration

Features of the present procedures are as follows:

i. A unit can apply for PRC for any item that does not require industrial license which
means items listed in Schedule-III and items not listed in Schedule-l or Schedule-ll of the
licensing Exemption Notification.
 ii. Unit applies for PRC in prescribed application form. No field enquiry is done and PRC is
issued.
iii. PRC is valid for five years. If the entrepreneur is unable to set up the unit in this period,
he can apply afresh at the end of five years period.
iv. Once the unit commences production, it has to apply for permanent registration on the
prescribed form.
2. What are the aspects to be examined while deciding technical feasibility?

The technical analysis of the proposed SSI establishes whether the project is technically feasible
or not, and whether it offers basis for the estimation of cost. It also reviews the techniques or
processes to be applied in the proposed business.

Some of the important aspects examined while deciding upon a particular manufacturing
technology are as under:

i. The technology should, as far as possible be already established.

ii. If not already established, but expected to be advantageous, the degree of success is to
be assessed and risks to be calculated.
iii. The technology should be based on indigenous raw materials and resources, if raw
materials are not available indigenously, importing raw materials in the light of current
Government Legislation to be evaluated.
iv. The technology should be workable under local conditions, e.g. temperature, humidity,
quality and availability of raw materials, availability of skilled labour, transportation,
power etc.
v. The technology should be tune with the national goals and objectives e.g. employment
potential vis-a-vis (in relation to) social responsibility for creating as much employment
as possible, import substitution, export promotion, maintenance of ecological balance
etc.
vi. In selecting a particular technology, the risk of obsolescence and the scope for
continuous updating of technology is to be examined and kept in view.
vii. Patents, copyrights etc should also be taken into account while adopting a particular
process/technology.
It is possible that the effect of some of the above mentioned factors might be found conflicting.
In such case, each process is separately evaluated keeping in view the other feasibility factors
and the technology with optimum advantages is selected.

Unit- 4

Preparing the Business Plan

Section- A

1. Define Business plan.

Business plan is defined as “A written document describing the nature of the business, the sales
and marketing strategy, and the financial background, and containing a projected profit and
loss statement”.

Section- B

1. Discuss the steps involved in formulation of Business plan.

Preparation of a business plan involves the following steps:

1) Preliminary Investigation
2) Idea Generation
3) Environment Scanning
4) Feasibility analysis
5) Drawing functional plans
6) Project Report Preparation
7) Evaluation, Review and Control
(1) Preliminary Investigation: In order to create an effective plan an entrepreneur must-

a) Review available business plans.

b) Write key business assumptions on which the plan is based.
c) Scan the environment for Strengths, Weaknesses, Opportunities and Threats.
d) Seek professional advice.
(2) Idea Generation: It involves generation of a new concept/product/service or value addition
to an existing Product or Service. The idea must be such that it satisfies the existing demands
and future demands of the market.

Sources of ideas-

 Consumers
 Existing companies
 Research & Development
 Employees
 Dealers/Retailers
Methods of generating ideas

 Brain storming
 Group discussion
  Data collection through questionnaires
 Invitation of ideas from professionals
 Market research
 Importing ideas from products launched abroad
Screening of ideas is done to identify practical one and eliminate impractical ones. The most
feasible and the most promising idea is selected for further investigation.

(3) Environment Scanning: The internal and external environment must be analysed to study
the prospective strengths, weaknesses, opportunities and threats of the business. An
entrepreneur must collect information from all formal and informal sources in order to
understand the supportive and obstructive factors related to the business enterprise.

External Environment

 Socio cultural appraisal: It involves assessment of the values, beliefs and norms of a
particular society in order to understand their perception towards a particular idea or
product.
 Technological appraisal: It involves assessment of existing technical knowhow and
availability of technology necessary to convert an idea into a product.
 Economic appraisal: It assesses the economic environment in terms consumer price
index, inflation, balance of payments, consumption pattern, per-capita income etc.
 Demographic: It involves an assessment of the overall population pattern of a particular
region. Variables like age, education, income pattern, sex, occupation, distribution etc.
help in identifying the size of target market.
 Government appraisal: It assess various grants, legislations, policies, incentives,
subsidies etc. framed by government.
Internal Environment

 Availability of Raw materials.

 Availability of various machines, tools and equipment required for production.
 Means of Finance and assessment of opening, maintaining and operating expenses.
 Assessment of Present, Potential and Future market.
 Assessment of cost, quantity and quality of human resources required.

(4) Feasibility analysis: Feasibility analysis is done to find out whether the proposed project will
be feasible or not. The various variables that are studied includes-

(a) Market Analysis: It is conducted to-

 Estimate the demand of the proposed product in the future.

  Estimate the market share of the proposed product in the future.
(b) Technical or operational analysis: It is conducted to access the operational ability of the
proposed business. It is very important to find out the cost and availability of technology. Under
Technical analysis data is collected on following parameters-

 Material availability
 Plant location and layout
 Plant capacity
 Machinery and Equipment
(c) Financial analysis: A Financial feasibility test is carried out to access the financial issues
related with the proposed business. The following estimates have to be carried out-

 Cost of land and building

 Cost of plant and machinery
 Preliminary cost estimation
 Provision for contingencies
 Working capital estimates
 Cost of production
 Cost of marketing
(5) Drawing functional plans: If the feasibility analysis gives a positive indication a draft
business plan is formulated. It involves preparation of the following functional plans-

(a) Marketing Plan: A marketing plan lays down strategies for marketing a product/service
which can lead to success of business. These strategies are made in terms of marketing mix (4
P’s) i.e. Product, Price, Place and Promotion.

(b) Production/Operation Plan: A production plan is made for a business involved in

manufacturing industry while an operation plan is made for business involved in service
industry. It includes strategies for the following-

 Location and reasons for selecting a location

 Physical layout
 Cost and availability of equipment, machine and raw material
 List of suppliers and distributors
 Cost of manufacturing and running operations
 Quality management
 Production capacity and Inventory management
(c) Organizational Plan: It defines the type of ownership i.e. it could be a single proprietary,
partnership firm, company- private limited or public limited. It also consists of details about the
organization structure and norms guiding the organization culture.

(d) Financial Plan: It indicates the financial requirement of the proposed business and furnishes
the following details-

 Cost incurred in smooth running of business

 Projected cash flows
 Projected income statement
 Projected Breakeven point
 Projected ratios
 Projected balance sheet
(e) Human Resource Plan: It consist the details on the following:

 Manpower requirements
 Recruitment and Selection process
 Compensation/ Remuneration/ Wages and Salaries
 Organization structure
 HR budget etc...
(6) Business Plan Preparation: BP is a written document that describes step by step, the
strategies involved in starting and operating a business. It is prepared when environmental
scanning has been done, feasibility studies have been carried out and departmental plans are
drafted.

(7) Evaluation, Review and Control: In order to keep up with the dynamic environment and
successfully face global competition a business must be continuously evaluated and reviewed. It
is necessary to periodically evaluate, control and review a business to keep up with the
technological changes and introduce changes in the business strategy.

Section- C

1. Explain the importance of Business Plan.

1. Aids financing: Finance is the life blood of any business. Every business needs both owned
fund and borrowed funds. So, for the borrowed fund which is to be taken from any of the
financial institution or bank or venture capitalist, business plan is utmost required document.
2. Instill Confidence in Entrepreneur: The small business launchers want to crystallize and focus
their ideas to achieve a particular target. Business plan will give confidence to them to go ahead
with their pre-planned ideas.

3. Helps in proper planning: Preparation of a business plan is the result of proper planning. A
proper plan helps to overcome uncertainties. The business plan acts as a guideline for
successful planning.

4. Works as Action plan: Venturing a new business is a challenging task. Without a proper plan
of action it becomes very difficult to run a business. As business plan acts as a blueprint, it helps
entrepreneurs to carry on business smoothly.

5. Helps in establishing realistic goals: A Business plan is required not only for a new venture
but also for those which are growing. The business plan will help the entrepreneur to analyse
their current position and make future decisions. A properly analysed and prepared business
plan when help an entrepreneur to set only achievable and realistic goals.

6. Business plan acts as blueprint: Business plan acts as a blueprint for the progress of the
project. Through the blueprint the entrepreneur can foresee the future and help in achieving
the goals of the organisation.

7. Anticipates and predicts challenges: It helps to predict and anticipate the changes that take
place in different macro environment components to certain extent, thereby helping an
entrepreneur to be on a safer side by bringing necessary changes in his organisation.

8. Enables determination of feasibility: Before practically implementing the planned idea into
action, business plan helps an entrepreneur to check the worth of the idea conceived by him. If
the idea chosen by him is not fetching good results, he can drop the idea and pick other
alternative idea which gives him fruitful results.

9. Business plan helps to analyse alternatives: A good business plan helps to analyse various
alternatives and choose the best among the available options.

10. Helps overcome conflicts: In the initial stages of establishing an enterprise an entrepreneur
encounters number of issues to be addressed and find it difficult in balancing his personal and
official matters. The business plan gives him guidelines and emphasizes the important matters
to be handled.
2. What are the stages involved in preparing promotion plan or action plan?

7 Steps to Developing a Promotional Plan

Successful promotional plans or campaigns don’t happen by chance. To realize goals,

promotional products programs must be carefully planned, taking into consideration the
audience, budget and, of course, the ultimate result to be gained.

Here are 7 Steps to Developing a Promotional Plan:

1. Define a specific objective.

Whether the goal is to increase traffic at a tradeshow exhibit or to boost sales with current
clients, the first step in any campaign is to clarify the purpose of the program.

2. Determine a workable distribution plan to a targeted audience.

Distribution of a promotional product is as important as the item itself. Research shows that a
carefully executed distribution plan significantly increases the effectiveness of promotional
products. For example, a pre-show mailing to a select audience delivers more tradeshow traffic
and qualified leads than simply distributing items to passersby at the show.

3. Create a central theme.

Linking a recognizable logo and color to all aspects of a campaign, from promotional products
to sales sheets to product packaging, helps create an instantly recognizable image.

4. Develop a message to support the theme.

Supporting a campaign’s theme with a message helps to solidify a company’s name, service or
products in the target audience’s mind. For instance, to promote its services to small
businesses, a bank created the theme “Are you tired of being treated like a small fish?” and
sent fish-related products to its prospects along with promotional literature.

5. Select a promotional product that bears a natural relationship to your profession or

communications theme.

A good example is a company that developed a magic motif for its conference at Disney World.
Attendees received magic-related products to tie in with the theme “Experience the magic at
Disney®.”

6. Don’t pick an item based solely on uniqueness, price or perceived value.

Don’t fall prey to the latest trends or fads. The most effective promotional products are used in
a cohesive, well-planned campaign.

7. Use a qualified promotional products consultant.

A good promotional products consultant will help you answer all of these questions as well as
offer a variety of value-added services, including unique product ideas, creative distribution
solutions and insight on the different imprinting methods just to name a few. PPAI consultants
have met the highest qualification standards in the industry and display “The Mark of a
Professional.”

Unit- 5

Project Assistance

Section- C

1. State any two objectives of AWAKE.

i. To empower women through entrepreneurship development and to improve their

economic condition.
ii. To work as a team towards shared objective to reach a greater number of women
through the program of AWAKE.
iii. Develop suitable membership program to increase member base.

2. What do you mean by Industrial Estate?

Industrial estates are specific areas zoned for industrial activity in which infrastructure such as
roads, power and other utility services is provided to facilitate the growth of industries and to
minimize impact on the environment.

The infrastructure may include effluent treatment, solid and toxic waste collection, treatment
and disposal of waste; air pollution and effluent monitoring; technical services on pollution
prevention; quality management (quality assurance and control); and laboratory services.

3. Expand TECSOK.

TEchnical Consultancy Services Organization of Karnataka

Section- B

1. What are the advantages of Industrial estate?

1. Economics of Scale: It arises because all the industrial units enjoy common infrastructural
facilities like water, roads etc As the size of the industrial units increases, the costs of estate
development and administration per unit of each facility decrease.

2. External Economies: Several industrial units are clustered together in an industrial estate.
This enable them to enjoy the benefits of agglomeration and external economies like improved
transport facilities, availability of trained labour, repair facilities, power and water etc.

3. Low investment: Even a small entrepreneur can acquire an industrial plot or shed on rent or
hire purchase basis.

4. Less Risks: Since all units enjoy common facilities and low capital investment, risks are
relatively low.

5. Mutual Cooperation: All industrial units located in an industrial estate face common
problems and seek to achieve common objectives.

6. Balanced Regional Development: it is possible to secure a balanced regional development

DY developing industrial estates in industrially backward areas.

7. Saving of Time and Effort: An individual entrepreneur is relieved of trouble of searching for
suitable space.

8 Entrepreneurial Development: industrial estates reduce risks and increase profitability

through internal and external economies.

2. What are the objectives of Industrial Estate?

1. Ensuring well planned and structured industrial development.

2. To provide the necessary infrastructure.
3. To provide common facilities to a number of industries.
4. To promote development of clusters.
5. To enable small units to source products from one another.
6. To enable dispersal of industries.
7. To promote balanced regional development.
8. To ensure development of backward areas.
9. To provide a climate for smooth functioning of industrial enterprises.

3. Explain the objectives of seminars and conventions organized by AWAKE.

i. To empower women through entrepreneurship development and to improve their

economic condition.
ii. To work as a team towards shared objective to reach a greater number of women
through the program of AWAKE.
 iii. Develop suitable membership program to increase member base.
iv. Policy advocacy with strong force of women entrepreneurs to influence policy makers.
v. To provide need based quality services to women entrepreneurs.
vi. To promote entrepreneurship among women and thereby empower them to join the
economic mainstream.
vii. To enhance the status of women in the society, by creating a culture of
entrepreneurship amongst women in both rural and urban areas.
viii. To develop successful models of entrepreneurship for emulation worldwide.
ix. To maintain Transparency, Commitment, Integrity in program and budgeting.

Section- C

1. Explain the role of commercial banks in development of SSIs.

Commercial banks came into the business of supporting small scale industries in a significant
way only after the nationalization of banks in 1969. RBI advised commercial banks to initiate
activities of increase credit flow to the small scale industries. Different schemes implemented
by different banks are as follows:

State Bank of India (SBI) launched entrepreneurship development programme in 1978. This
programme was of one month duration, having three phases.

1. Initiation phase: creating awareness about entrepreneurial opportunities.

2. Development phase: Training in developing motivation and managerial skills

3. Support phase: Counselling, encouragement and infrastructural support for establishing and
running enterprises.

 State Bank of India (SBI) also implemented scheme of financial assistance to technically
qualified or trained entrepreneurs.
 SBI has set up Research and Development Fund for entrepreneurship development.
 SBI introduced deferred payment guarantee scheme for the purchase of big machines.
 SBI through its scheme made available fund and non-fund based facilities.
 SBI provides working capital to Small industries.
Bank of India (BOI) has established entrepreneurial clinic cum guidance services to guide and
assist emerging entrepreneurs.

Bank of India is operating following schemes for entrepreneurship development in the country.

a. Star artisan credit card scheme

b. Small entrepreneur credit card scheme
 c. Star SSI supreme scheme
d. Small entrepreneur trade card scheme
e. Star self-employment credit card scheme
f. Scheme for employment enhancement and poverty eradication.
Punjab National Bank (PNB) through its Merchant Banking division provides number of benefits
to small and middle level entrepreneurs.

Punjab National Bank has following schemes for developing the culture of entrepreneurship in
the country.

i) Credit assistance scheme for tiny enterprises.

ii) Credit assistance scheme for small scale sectors.

iii) It has initiated a “Mahila Udyam Nidhi Scheme" for women entrepreneurs.

Indian Bank has established an Entrepreneurship service cell to provide consultancy services to
prospective entrepreneurs.

In addition to these banks all other commercial banks also assist new entrepreneurs in-

 Selection of enterprise
 Preparation and evaluation of project report.
 Market survey.
 Training at different levels.
 Obtaining government clearance.
 Procurement of machinery and equipment and
 Marketing of products of the enterprises.
 Medium and Long-term loans.
 Working Capital Finance.
 Equity Financing.
 Management of dedicated funds.
 Loan guarantees.
 Business Development Services.
 Lease financing.
 Stock Brokerage.
 Foreign Exchange Dealership etc…
2. List out the institutions offering financial assistance to SSIs.

The various institutions which provide financial assistance are-

i. State Finance Corporation (SFC)

ii. industries Development of India (IDBI)
 iii. Industries Finance Corporation of India (IFCI)
iv. Small Industries Development Corporations (SIDC)
v. Industries Credit and Investment Corporation of India (ICICI)
vi. Industrial Reconstruction Bank of India (IRBI)
vii. Life Insurance Corporation of India (LIC)
viii. Unit Trust of India (UTI)
ix. Export Import Bank of India (EXIM Bank)
x. Small Industries Development Bank Of India (SIDBI)
xi. Commercial Banks.
xii. Mutual funds
xiii. Khadi and Village Industries Corporation (KVIC)
xiv. Karnataka State Small Industries Development Corporation (KSSIDC)
xv. Karnataka state Industrial Investment Development Corporation (KSIIDC)