94397404 Ed Ppt Bba Vi Semester

7/28/2019 94397404 Ed Ppt Bba Vi Semester

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ENTREPRENEURSHIP DEVELOPMENT

PREPARED BY PROF. S.K. DOGRA


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ENTREPRENEURSHIP AND ITS SCOPE

Who is an Entrepreneur?

Person responsible for setting up a Business or an enterprise.

Takes initiative, has skills for innovation and looks for achievement.

Agent of change and work for the good of people.

Opens up employment opportunities, creates wealth and boosts other

sectors.

E.D-2PREPARED BY: PROF. S.K. DOGRA


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Highly self-motivated person, who take risks toachieve goals.

Firm believer in social betterment.

Visionary having outstanding leadership.

Desire to excel, strongly believes in R & D.



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Found in all areas.

Play important role in economic growth.

Aims at high goals.

Person, who identifies an opportunity, gathers thenecessary resources, ultimately responsible for the

performance of the organization.



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A French economist Richard cantillon in 1755, was the

first to use the term Entrepreneur.

He said Entrepreneur is one who buys factors of

production at Certain Prices and sells his Products atuncertain prices, thereby bearing a non-insurable riskthat may arise, due to depressed demand for hisproduct.



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Peter F. Drucker said Entrepreneurs are innovators.Innovation is the specific tool of entrepreneurs, thismeans by which they exploit change as an opportunityfor a different business or a different service. He alwayssearches for changes, responds to it an exploits it as anopportunity



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We can now say that entrepreneur is a person whobears the non-insurable risk, works underuncertainty, combines and manages the factors ofproduction, innovates on all fronts on regular

basis, functions as proprietary capitalist and ismotivated by profit. Associated with threeelements:- Riskbearing, organizing, innovating.



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QUALITIES / TRAITS / CHARACTERISTICS OF AN ENTREPRENEUR

Strong achiever

Self-Reliant & Independent



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Determined and committed

Hungry for success, optimistic

Self confidence and self-faith

Sustained enthusiasm



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Courage & Self-motivated

Ability to survive defeat

Single-Mindedness

Willing to accept responsibility



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Never ending energy

Both thinker and doer

Clear objective & creativity

organization skills

Intelligent and have technical knowledge



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TYPES OF ENTREPRENEURS

1. INNOVATING ENTREPRENEURS:-

Introduces something new into the economy New

technique of production, a new source of material orproduct, opens a new mkt.

Aggressive in experimentation.

Puts attractive possibilities into practice.

Commonly found in developed countries, as peopleof such countries also look for change and progress,extensive research feasible.



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ADOPTIVE OR IMITATIVE ENTREPRENEURS:-

Adopt successful innovations created by innovatingentrepreneurs.

Copy the technology and techniques, knowledge

Commonly found in developing countries as can not affordexpensive research.

Have capacity to start ventures with limited resources.

Face lesser risks.

Very important for developing countries as he bringschange.



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FABIAN ENTREPRENEURS:-

Very cautious and skeptical for change.

Lack the will to adopt new methods.

Shy and lazy for taking risks Dealings determined by customs, traditions, past

practices.

May change only for survival



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DRONE ENTREPRENEURS:-

Conservative and laggards

Resist change, continue past methods.

Struggle to exist, not to grow

May be pushed out of the market, when they loose themarket.



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FUNCTIONS OF AN ENTREPRENEUR

1. INNOVATION:- Conceives / ideas for production ofnew products/services or improvements in the quality ofproduction

For this he considers the economic viability and

technological feasibility. Introduction of different kinds of electronic gadgets

innovation

Includes introduction of new products, creation of new

markets, application of new process of production,discovering new and better sources of Raw-Materials,New form / culture of Industrial organization.

Innovation produces satisfaction & profits as he works on

inventions new knowledge. E.D-16PREPARED BY: PROF. S.K. DOGRA


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2.ASSUMPTION OF RISK OR RISKTAKING:-

Assumes all possible risks of business.

Also involves risks due to changes in tastes/behavior ofconsumers, competition, new inventions and techniques of

production.

For all such risks, he may bear losses as he takes up theresponsibilities.

Invests capital, pays interest to lenders, Wages/ salaries,

rent, working capital expenditures and after all these, maybe left with little or no profits.

Being Enterprising, assumes risks and tries to manage /handle it by his skills, innovation, judgement, planning,

expansion etc. E.D-17PREPARED BY: PROF. S.K. DOGRA


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3. BUSINESS DECISIONS AND ORGANIZATION BUILDING

Decides nature & types of goods/services to be produced.

Crucial decision of entering a particular industry, prospectsof products in future and most profitable methods of

production.

Decides about changes in size of business, its location, newbranches, techniques, ways to develop business.

Organizes and monitors various factors of production,

minimize costs of production.

Takes majority of core decisions himself but delegatesauthority and decision making when business grows anddecisions become complex.



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4. MANAGERIAL FUNCTIONS:-

Also performs managerial functions of planning,directing, controlling, leadership etc.

Formulates plans, arrange finance, procure rawmaterials, arrange production facilities, HRDfunctions.

Large organs:- Delegated to paid managers.



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5. EARNING PROFITS:- As he takes up ventures,takes risks for earning profits. Have strongmotivation to earn profits and have success.

For this exploits opportunities.



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ROLE OF ENTREPRENEURS IN THE ECONOMIC GROWTH OF A COUNTRY

i) AS AN INNOVATOR

They commercialize the inventions made by inventors, toproduce better goods to yield both satisfaction and profits.

They implement inventors ideas as the same product madeby many entrepreneurs.

Converts technical work of the inventor into economicperformance

Assumes the role of a pioneer and an industrial leader.

Innovational activities raise the productive efficiencies of theeconomy resulting in greater output / income.

Have to be innovative for survival and better performance, tosolve all the problems of business.

All the resources combined by him. E.D-20PREPARED BY: PROF. S.K. DOGRA


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II) BALANCED REGIONAL DEVELOPMENT OFINDUSTRIES:-

Growth of Industry and Business leads to large numberof public benefits like road transport, health, education,entertainment.

Rapid Development of Entrepreneurship ensuresbalanced regional development. e.g. builders makingtownships and shopping malls in many places in thecountry.

Competition in big cities force the entrepreneurs tosetup business in small towns, helping development ofbackward areas.

Small scale industries found everywhere requiringmeagre resources.



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III ) FOREX EARNINGS:-

By exports, bring foreign exchange for the country,enabling it to handle imports bills.

Foreign exchange reserves for any country improve thefinancial standing of the economy.



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IV) AUGMENTING AND MEETING LOCAL DEMAND:-

Entrep. help in meeting wide variety of demand forgoods/services.

Need for new goods, products also get created bythem, by many methods of promotion, education etc.

Many times in backward areas and states,entrepreneurs from other places come and start abusiness thus harnessing local resources, foundabundantly and fulfill local as well as nationaldemand.



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INTRAPRENEURSHIP

Also called intra corporate entreps.



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Persons with deep desire of personal achievementswithin organization are internal Entreps.

Creative and innovative people within the

organization, catch hold of new ideas for product,service or process and work to bring their vision intoreality.



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Work independently but do not assume ownership

from employer. They are on the payrolls of thecompany. Incharge for an identifiable activity.

Allowed to reap the full benefit of their creative effort

May leave the company to start their own venture andcompete with the company

Dynamic executive, leads company to greater heightsthats why encouraged

Top Management provide financial and technicalassistance to their ideas.



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Entrepreneur V/s Intrapreneur

Basis Entrepreneur Intrapreneur

1. Status 1. Entrepreneur is the owner of the business. 1. Intrapreneur works as employee of

the company

2. Capital 2. Entrepreneur raises the requisite capital

himself.

2. Intrapreneur does not raise any

capital.

3. Freedom 3. Entrepreneur works independently. 3. Intrapreneur is semi-independent.

4. Risk-taking 4. Entrepreneur is one who bears full risks of

his business

4. Intrapreneur does not bear any

risks of business.

5. Guarantee 5. Entrepreneur guarantees payment to

suppliers of inputs.

5. No such guarantee is required to be

given by the intrapreneur.

6. Norms and Rules 6. Entrepreneur operates independently. He

is the master of his own show as he frames

norms and rules of his business.

6. Intrapreneur operates from within

the organization. He is an

organization man and is bound by

organizational norms and rules.



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DISTINCTION BETWEEN ENTREPRENEUR AND

MANAGERENTREPRENEUR MANAGER

1. Introduces new ideas to increase

profits.

2. Sets up new venture

3. Assumes risks of economic

uncertainties

4. Earns profits which fluctuate.

5. Own boss and independent status.

6. Formal education not essential.

7. Very high amount of commitment,

self-motivation required.

1. Runs the business on established lines.

2. Runs an existing venture.

3. Undertakes no risk

4. Earns salary which remains relatively

fixed and regular

5. An employee and dependent on the

owner.

6. Formal education more important.

7. Commitment and self-motivation may

be relative



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METHODS & PROCEDURE TO START AND

EXPAND ONES OWN BUSINESS

Decide which type of business organization would liketo have

Type of organization determines risk, control,responsibility, decision of profits.

Decision to be taken after due care, clear vision, long

term view.



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VARIOUS FORMS OF BUSINESS

ORGANISATIONS

Sole Proprietorship

Partnership FirmJoint Stock Company

Co-operative Society

Joint Hindu Family Firm



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SOLE TRADER

Oldest form owned, controlled by one

Bears all responsibilities, risks & profits Manages himself, however may take the help of family

members/relatives/paid employees

Simplest and easiest form

No need for any legal formalities



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Features of Sole Proprietorship One persons control

Single ownership Unlimited & undivided risk

No. Govt. regulation / formality

No separate entity of the firm



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ADVANTAGES Easy and simple formations No legal

formalities/approval/licenses required, start, close,expand sole trading concern anytime.

Quick Decision Making:-

Sole authority to decide and no interference quick decisions.

Direct & Exclusive Control:-

Full direct authority to run the business

Exclusively accountable to himself



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Maintenance of secrecy:-

Handles business single-handedly, so business &trade secrets, remain with him

Self-Motivation and direct Incentive for work:-

Direct relation between efforts / rewards. Personal touch with customers:-

Always possible to develop close relations withthe customers, better understanding of thecustomers and better satisfaction provided,goodwill improves.



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Economies in Management:-

As compared to other forms of business,majority of the activities controlled by the soletrader himself. Thus economies of scale do occur

in business Minimum govt. regulation/interventions.

Socially Significant:- Many individuals start withreasonable ease a sole trading concern in many

sectors and places, generates self-employment,livelihood, initiative, confidence levels etc.



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DISADVANTAGES OF SOLE PROP. Limited Financial Resources

Limited Managerial Abilities

Unlimited Liability:- Debts of business relate entireproperty.

Limited Growth:- Lack of capital and managerial skillslead to limited growth.

Uncertainty of continuity:- If dies, there is noguarantee of continuity.



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Suitability of Sole

ProprietorshipWhere capital required is small, limited.

Where limited risk is involved.

Where personal attention to individual customerstastes & fashion required beauty parlors, tailoringshops.

Where demand local seasonal, temp-fruit sellers etc.

Where activities / Operations simple do notrequire skilled management.



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PARTNERSHIP Limitations of sole trader and need to expand the

business lead to the need to create a partnership

firm. Group of persons with different skills, capital,

resources set up a combined business withcommon ownership and Management.

Risks, responsibilities shared



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Sec-4 of Indian Partnership Act, 1932-Partnership is the relation between personswho have agreed to share the profits of a

business carried on by all or any of themacting for all.

Individually called partners & jointly a firm.

Terms / conditions contained in anagreement called Partnership deed.



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FEATURES OF A PARTNERSHIP FIRM More persons required:- Minimum two Max. 10

persons for banking business and 20 for Non-bankingbusiness.

Sharing of profits / losses as per agreement

Unlimited Liability:- if the assets of the firm fall shortto meet firms obligations the private assets of partners

can be used. Contractual Relationship:- Oral or written agreement

among partners.



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Lawful business:- partner to carry on lawful business &

share profits / losses. Utmost good faith and honesty required:-

Principal Agent Relationship:- Business carried by allor anyone of them acting for all. Each partner

represents the firm and other partners whileperforming business. Thus partner is an agent of thefirm and also other partners.

Restrictions on Transfer of share:- No partner cantransfer his share to an outsider without the consent ofother partners.



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PARTNERSHIP DEED

The agreement can be oral or written.

Advisable to have written agreement to avoid

litigations and misunderstandings in future.Agreement in written form called partnership

deed which has to be signed by all the partners,stamped & registered.

Any modification only with mutual consent of allpartners.



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A partnership deed generally contains

the following:- Name of the firm

Nature of the business

Names of the partners

Place of business

Amount of capital contributed by each partner

Salary / Commission payable to each partner



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Ratio of Profit sharing

Loans / Advances from partners &incentives to be paid.

Duties, powers and obligations of partners.Arbitration in case of disputes among

partners.

Accounts settlement in case of dissolutions.Maintenance of Accounts and arrangement

for Audit.



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ADVANTAGES OF PARTNERSHIP

Easy Formation - However some difficulty in selectionof partners.

Enhanced financial resources.

Risks Divided

Flexibility:- Easy to introduce changes likeintroduction of a new partner, raising new capital,

expansion of business. Combined abilities & balanced Judgment:- Brains

ideas, skills, capital of more than two persons pooledtogether for better management of business. Joint

consultatrans may produce better business results. E.D-42PREPARED BY: PROF. S.K. DOGRA


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Business Secrecy Maintained:- No legalrequirement to publish and circulate annualaccounts / Financial statements.

Mutual Trust and Inter-dependence:-

Each partner an agent of other partners

Team sprit and inter-dependence develops

All partners get equal rights & powers.

Easy Dissolution:- Can be dissolved by thepartners merely by expressing to each other theirdesire to do so.



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DISADVANTAGES OF PARTNERSHIP:-

Availability of Limited Resources:-

Unlimited Liability:-

Held personally liable for debts of firm.Lack of Public Confidence

Annual accounts not published & made

public

Hardly any legal control over these firms



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Instability:- Firm dissolved if any partner dies or

become insolvent. Small disputes may lead to dissolution.

Non-Transferability of Interest:- No partner cantransfer the business interest, to an outsider without

the consent of all other partners. Even then it may notcame easily.

Risk of Implied Authority:- Any partner can act asan agent of the firm or other partners. If negligent,

acts carelessly, commits a mistake, other partnersbecame equally liable.

Lack of centralized Authority:- Lack of a supremeand a centralized authority, as all partners enjoy the

power of management. E.D-45PREPARED BY: PROF. S.K. DOGRA


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Registration of Partnership Firm

Not mandatory as per partnership Act.

But desirable to have registration

Registration process Firm applies to the registrar of

firms of the state Govt. in the prescribed applicationsform, signed by all.

Following information filled:-

Name of the firm.

Location of the business place.

Other places, if any where the firm is carrying on thebusiness.



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Date of the commencement of the business. Date of joining of all the partners.

Names and permanent addresses of all thepartners.

Duration of the firm, if applicable.

When the registrar is satisfied with all the above

details, he registers the firm by making an entry inthe Register of firms.



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Dissolution of a Partnership Firm

When a partner ceases to be associated with the business,it is dissolution of partnership.

Winding up of the business dissolution of firm, new

agreement among remaining partners Three ways:-

1. Dissolution by Agreement:- As per P. Deed, compulsorydissolution as per agreement.

2. Dissolution by the court:- if one partner becomes ofunsound mind/ one partner transfers his share to thirdparty without authority.

3. Dissolution due to contingency- completion of firmsventure, expiry of partnership period /death of anypartner. E.D-48PREPARED BY: PROF. S.K. DOGRA


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ENVIRONMENTAL FACTORS AFFECTING

THE SUCCESS OF A NEW BUSINESSEntrps. require conducive social, political

and economic environment to start business

and be successful.Right environment, alongwith their efforts

make them achievers.

Developed countries provide betterenvironment.



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ENVIRONMENT FACTORS AFFECTING

SUCCESSI. ECONOMIC FACTORS:- Availability of Capital

Basic need is capital, to arrange for land, materials,machines, equipments.

Easy availability motivates entrepreneurs to start and grow.

Raw materials Availability

Raw materials required for manufacturing and industrialenterprises.

Easy availability and access to raw-materials encourageentrepreneurs

Labour:- Quality / Quantity of Labour and its cost influencethe entrepreneurship

More flexible and mobile labour motivates. E.D-50PREPARED BY: PROF. S.K. DOGRA


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II. Social Factors

1. Education:- gives knowledge and betterunderstanding for solving day to day problems.

Any country, the system of education has animpact on people to inculcate and developentrepreneurial values.

The knowledge given by education regardinggrowing economy, new business opportunities,

trade on global standards, changing consumerbehaviour influence some people to show theirinitiative and entrepreneurial talent.



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2. Caste Factor :- In every society, there arecertain cultural practices and values that influencethe actions of individuals.

Right from early life, people develop same

inclination towards certain occupations, business global trend.

In Indian society also, certain caste show better

entrepreneurial initiatives.



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3. Family Background :-

Exp. of a family in some business amotivating factor to encourage familymembers. Success factor encourages familymembers.

Expertise, traits, practices available withinthe family



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4. Market:- all the goods and services

produced must get a market with customerswilling to buy and with capacities to pay.

Entrepreneurs feel encouraged if there is

potential in the market. Consumption trends provide encouragement to

the entrepreneurs.

Size of the markets and its composition relatingto number of suppliers, competition, types ofcustomers, their profiles motivate entrepreneursand they look for opportunities to exploit.



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5. Infrastructure:-Availability of requiredinfrastructure encourage entrepreneurs.

Developed communication, transportation,

power facilities big support forentrepreneurs.

With these better infrastructural facilities,

entrepreneurs can develop new businessand also enlarge their markets / supplies.



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III. PSYCHOLOGICAL FACTORS Need Achievement:- Sense of need achievement /

achievement motivation leads to growth of moreentrepreneurs.

Motives:- Motive to earn wealth, seek power, prestige andbe independent.

Entrepreneur thinks he can control his own lifeindependently, does not believe in luck/ fate

Risk taking is quite high, confident of handling businessrisks.

Power of tolerance helps entrepreneurs. They must have acertain amount of tolerance for ambiguity/Uncertainty.

Entrepreneurs have the thinking of achieving more andmore in less and less time. E.D-56PREPARED BY: PROF. S.K. DOGRA


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IV. POLITICAL FACTORS Entrepreneurs function effectively if govt. provides

them support.

Govt must ensure that infrastructure is created,

required resources available and accessible toentrepreneurs.

Various polices of the Govt. relating to prices, capitalavailability, labour, taxation greatly affect

entrepreneurship. Providing incentives/ Subsides/ Tax benefits provide

encouragement.

Stable Govts. Provide required encouragement.



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JOINT STOCK COMPANY Bigger form of business organ.

Most of the limitations of other forms of businesses getremoved here.

Most appropriate for large scale productions, economies ofscale, using advanced technology and arranging largecapital.

A company is a voluntary association of persons,recognized by law, having a distinctive name and acommon seal.

Formed to carry on business for profit with capital divisibleinto transferable shares

Members/ shareholders have limited liability.

Organ has a corporate structure and a perpetualsuccession, a going concern. E.D-58PREPARED BY: PROF. S.K. DOGRA


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FEATURES / MERITS OF A COMPANY Separate legal Entity

Company has a separate legal entity, independent of its members.

Company owns property and enters into contracts in its own name

Can sue and get sued in its own name.

Limited Liability:-

Liability limited to the extent of ownership of shares held. If the company has to pay the creditors, members/shareholders

liable to the extent of shares held or unpaid amount of sharessubscription.

Prepetual Succession :-

Not affected by the death, insolvency of a member or a director.

Services as long as not wound up

Old members may go and new may come but no effect on theexistence of the company.



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Artificial Legal Entity:- as created by law, does notcome into existence through natural birth, called on

artificial entity. Common Seal:- as it is an artificial legal entity, it can

not sign for itself, so as per law, it needs to have acommon seal as a substitute for its signature.

Approves its documents by putting the companyscommon seal which has the companys name engravedon it, alongwith signature of at least two directors orother authorized officials.

Transferability of shares:- Shares of public Ltd. Co. transferable easily

Can be sold, purchased through brokers at the marketprice

Some restrictions in a Pvt. Ltd. Co. E.D-60PREPARED BY: PROF. S.K. DOGRA


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Ownership & Management Separated:-

a public co. may have large no of

shareholders but can not be asked to runthe co. and look after the affairs of thecompany so they choose same

representatives called Directors, to runthe company.



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Incorporated association of Persons:-No single individual can make/run a

company

Is a registered association of persons,requires at least seven persons to start apublic limited company and two to start a

Pvt. Ltd. Co. Procedures to add more persons.



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Availability of Large Financial Resources shares, Debentures, Bonds, Loans, etc.

Professional Management :- Employees Professional Mgrs as has large

financial resources, perpetual succession and

growth path



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Considerable scope for growth andexpansion:- due to large financial management,technical resource very good scope for growth.

Public confidence:- People / shareholders have lot of faith, trust in a Public

ltd. Co. based on its performance, sales, quality, auditedaccounts and since regulated by companies Act., getlisted, trading done liquidity available.


Suitability of a Company


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Suitability of a CompanyAppropriate for large scale business and where:-

Owners want limited liability. Business involves uncertainty / heavy risks, like shipping, mining etc.

Heavy, basic industries requiring huge finances.

Large scale operations crucial for economies of scale manufacturing etc.

CO-OPERATIVE SOCIETY

Profit Motive Substituted with Service Motive. An association of persons, usually of limited means, who have voluntarily

joined together to achieve a common economic end.

Associate together to promote common interest

Generally formed and registered under the co-operative societies Act 1912.

Form of business organizations can be applied to every type of economicactivity.

Members supply the capital by buying the shares of the society.

Each shareholder has one vote in the management of the business,

irrespective of the number of shares held. E.D-65PREPARED BY: PROF. S.K. DOGRA


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FEATURES OF A CO-OPERATIVE

SOCIETYVoluntary association

Democratic style of Management

Equal voting Rights.Service Motive Limited Returns of Capital:-

Limited rate of interest presenting max 10%

is given as capital invested.



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State Control:- Working governed by the Co-

operative societies Act of 1912 or the state co-operative Act of the state

Society to be registered under these Acts andrules, regulations followed

Accounts to be audited and a copy to besubmitted to the registrar.

Separate Legal Entity: - as it has to be registered

can own property, enter into contracts sue andbe sued in its own name.



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Equitable Distributions of surplus:- Equitabledistributions of surplus to its members, irrespective of

the capital contributions. As per co-operative society Act. 25% of its profits, after

meeting its trading expenses and paying a fixed rate ofinterest on capital not exceeding 10% to be transferred

to general reserve. Also, portion of the profit not exceeding 10% to be

utilized for the general welfare of the locality where thesociety is functioning.

Remaining distributed to members, collectively. Suitability:- For small and medium business like

retail stores, building societies, etc.

Few cases of Large Amul kaira dist. Co-operative

society. E.D-68PREPARED BY: PROF. S.K. DOGRA


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JOINT HINDU FAMILY FIRM

Also called Hindu undivided family. Found only in India and governed by the

provisions of Hindu Law.

Family consisting of Grand Parents, parents andsons carry on business.

HUF defined as a form of business organ in whichall the male members of a HUF carry on business

under the Management and control of the Head ofthe family called Karta

This business disappearing due to decline of the

Joint family system. E.D-69PREPARED BY: PROF. S.K. DOGRA


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FEATURES OF HUF Membership for male child by birth. Minors can become full-fledged members

Restrictions on Female Membership (can not Join)

No limit on members minimum two

No need of registration as per Hindu Law.

Management by Karta Senior Most Member.

Liability of Karta is unlimited.

Perpetuality Death of a member or karta is no matter

Rights / Duties governed by Hindu sucession Act 1956.

Fluctuating share due to birth or Death of a Male Member.

Right to Accounts Members can ask details of

A/CS from Karta when leaving or disintegration of family.

E.D-70

PREPARED BY: PROF. S.K. DOGRA


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MOTIVATION OF ENTREPRENEURS

Motivation is something that moves theperson to action and continuous him in the

course of action already initiated.Factors that motivate some people to start

business enterprises are:-



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I. Internal Factors

Educational Background Occupational Experience

Desire to do Something Pioneering and Innovative

Desire to be Free & Independent Family Background

Internal factors lead to do something creative,introduce an entirely new product in the market,place hometown on countrys industrial map,make use of technical skills, give employment



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II.

External Motivating Factors

Assistance from govt.

Financial assistance from institutions

Availability of Technology / Raw MaterialEncouragement from big business units

Others Availability of surplus funds, sick

units available at cheaper price, support offriends / relatives, dissatisfaction of job held



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ACHIEVEMENT MOTIVATIONAchievement Motivation theory developed by DavidMcClelland

An individuals need for achievement (n-ach) refers to

the need for personal accomplishments.A drive to excel and strive for success. Person with high

achievement motives takes calculated risks and wantsto win.

Take personal responsibility for initiatives and solvingproblems. Plus keep on evaluating themselves howwell are they doing and what more required.



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Do something better and more efficiently than others

have done before Not for social recognition but for the inner feeling of

personal accomplishment.

This need for achievement motivate some persons to

take risks and prove themselves. Such persons behave in Entrepreneurial way and take

initiatives.

McClelland considers the need for achievement to bethe most important and critical element for countryseconomic development.



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He termed the need for achievement as inner spirit.Higher it is, more energetic entrepreneur would grow,high need for achievement motivates entrepreneur totake risks, work hard, innovate, save more, reinvestsavings in business.

Said-achievement motivates lower in underdevelopedcountries compared to developed countries lack ofambitions explains the lack of enterprise inunderdeveloped nations. The ambition motivate

people, make them active, broaden success and maketheir life meaningful, builds up achievement pressurein persons.



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Duty of leaders and teachers to build up ambition intothe minds of young people. Ambition nourish theachievement motivates and brings economic growth.

However ambition differs among individuals on thebasis of the environment in which they are born andbrought up.



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Becoming Entrepreneur

Personal and environmental barriersto entrepreneurship

Entrepreneurship is influenced by manypersonal & environmental barriers.

Personal barriers or factors can beQualifications, skills, experience, knowledgeand environmental factors could beeconomic, social, and political factors.



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PERSONAL BARRIERS

Lack of Viable concept

Lack of Market Knowledge

Lack of Technical SkillsLack of Seed Capital

Lack of Business Know-How

Complacency Lack of Motivation



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Social Stigma-Compared to successful ones.

Time pressures

Legal constraints & Regulations (Not inResidential Areas)

First Generation Entrepreneurs

Entrepreneur by Accident since wasunemployed



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ENVIRONMENTAL BARRIERS

Sudden Changes in Government policy

Sudden Political Upsurge

Outbreak of war or regional conflicts e.g. Sons ofthe soil call

Political Instability or hostile govt. attitudetowards industry

Excessive red-tapism and corruption among

government agencies

ENTREPRENEURSHIP IS

ENVIRONMENTALLY ORIENTED



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Ideological and social conflicts

Unreliable supply of power, material,finance, labour and other inputs

Rise in costs of inputsUnfavorable market fluctuations.

Non co-operative attitude of Banks and

Financial InstitutionsCompetition


PROBLEMS IN SETTING UP A NEW


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PROBLEMS IN SETTING UP A NEW

VENTURE

I. Lack of Managerial experience or poorknowledge of the particular line of production:-

All-round knowledge about various aspects of

Production, Processes, Management Not known what, how and when to produce, how to market theproducts, maintenance of accounts, financialtransactions understanding etc.

None of the above areas can be ignored

Changing technology, methods of production notknown.



88/250

II. Lack of Accounting

knowledge/ system Information, Understanding about costs,

gross margins, break-even point,depreciation is lacking, thus decisionmaking may become difficult.

Difficult to maintain proper accountingData etc.


III Wrong / Inadequate Estimate of


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III.Wrong / Inadequate Estimate of

cash requirements or faulty capital

planning / budgeting.

Proper Financial Planning Essential for properfunctioning of the enterprises

New enterprise feels cash crunch when:-

Production does not reach optimum level

Production is below Break-Even Point

Fails to Create and Increase the Demand forproducts. Result wastage of Finance

Delay in various activities will cause need for

additional finance. E.D-85PREPARED BY: PROF. S.K. DOGRA

IV Lack of Knowledge About Tax


90/250

IV. Lack of Knowledge About Tax-

Related Matters May not be Aware of provisions related to Income Tax

/ Sales Tax, Obtaining of Sales Tax Registration at theright Time, Filing Tax Returns.

V. Erratic Shortages of Raw Materials.VI. Flourishing Black market

VII Gaps between official promise and performanceby various deptts.

VIII. Irresponsible attitude of employees.

IX. Rising cost of capital & credit.



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X. Arrogance and Non Co-operativeAttitude of Bankers

XI. Inadequate common services like road,

power, water in the areaXII. Emerging competition

XIII. Lack of knowledge about inventory

management


STAGES FOR SETTING UP A NEW VENTURE


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STAGES FOR SETTING UP A NEW VENTURE

Or

PROMOTION OF A VENTURE Foundation of an enterprise is the project or the venture

Venture is a plan or an idea which is intended to becarried out in the future

Ventures can be industrial, agricultural, Production,Services etc.

Entrepreneur originates the idea, makes a detailed study

of various aspects of project, estimate the profit, finallyimplements it.

Setting a New Business not an easy Task

Various difficulties to be faced in creating the business

and making it successful E.D-88PREPARED BY: PROF. S.K. DOGRA

BASIC CONSIDERATIONS IN SETTING UP A NEW


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BUSINESS UNIT/STAGES

An entrepreneur wanting to start a new venture has to

take decisions with regard to following:-1. SELECTION OF A LINE OF BUSINESS:-

Proposed idea analysed to find out whether the

business would be profitable, including probable risksand the capital required.

Conduct survey of various business opportunities.

Make feasibility reports, surveys

Estimated Costs, Profits, Returns Analysed



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2. CHOICE OF FORM OF OWNERSHIP

Could be sole proprietorship, P.Ship or a Jointstock company

Choice of form will determine the authority of the

entrepreneur Size of business also will determine the form of

organ.

Company form more suitable for large business Sole Trader / P.Ship for Small / Medium

Capital requirements, Managerial Skills, Coveragewill also decide the form


3 SIZE OF BUSINESS


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3. SIZE OF BUSINESS Size of the firm influenced by various factors like

Technical, Managerial, financial and Marketing Some factors favour the large size of business while

others operate to restrict the scale of operation

Wherever Entrepreneurs confident of marketing theirproducts widely and arrange large resources can startlarge business

For new ideas / business beginning can be made on

small / medium scale. Forces of risks and uncertainties can restrict the size of

business

Basic purpose of the optimum size to achieve max.

output at minimum cost E.D-91PREPARED BY: PROF. S.K. DOGRA

4 Fi i h P i i


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4. Financing the Proposition

Adequate amount of capital for starting andrunning the business to be arranged.

Capital to be arranged for fixed as well asworking capital

Large businesses to arrange capital from

various sources.


5 L i f B i


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5. Location of Business

One of the very difficult decisions

Location to be reviewed from the point of

view of access to raw materials, labour,power, Markets and services like banking,Insurance, Transport, communication.

Location has to be optimum to haveminimum costs of production from anddistribution


hi d i


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6. Machines and Equipment

Choice will depend upon availability of capital, size ofproduction, nature of production processes.

Mechanisation needs to be optimum, leading tohigher productivity.

7.Human Resources

Right kind of Skilled, Unskilled and Managerial Staff

necessary to avoid huge losses of time, money andeffort.

Proper Training and Motivation to be provided.


l


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8. Plant Layout

An efficient Plant Layout allows materials tomove through rapidly and the most directway possible.

It reduces Transport, Materials Handling,Clerical and other Costs and increasesinventory turnover.

Experts Services can be used.Must reduce chances of delay and

bottlenecks in the Production Systems.


9 P d l F li i


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9. Procedural Formalities

No formalities in sole Traders and Partnerships. Co. exposed to greater procedural formalities both

at incorporations and during its life.

Incorporation compulsory, documents and feedeposited with the Registrar of cos.

A public co. also obtains certificate ofcommencement.

Co. also required to send periodical returns to theregistrar of cos. and stock exchange authorities.



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10. Tax-Planning

Entrepreneurs to visualize well in advancethe various taxes to be paid.

11. Launching the Business Enterprises:-

Promoter actually arrange men, material,machinery, money and the managerial ability.

Makes organ. Structure, various deptts. Mkg.,Prod., Finance, HR Made to accomplish goals.

Advtg. Sales Promotions to be done.



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ENTREPRENEURIAL INPUTS

Emergence and development of Entrepreneurshipdepends upon many economic, social, political,psychological factors.

Various Entrepreneurial Inputs influencing the

entrepreneurship are as under:-I. ECONOMIC INPUTS

Capital:- Most important Input

Required for arranging Land, Raw Material, and

Machines and finally for production. Additional capital also required for expansion of

business.

Entrepreneurship increases if capital supply increasesE.D-98PREPARED BY: PROF. S.K. DOGRA


103/250

2. Labour:- Quality of Labour more important

than the quantity of Labour for entrepreneurship. Entrepreneurship gets encouraged of flexible and

mobile labour force available

Considerations of economic and emotionalsecurity inhibit Labour Mobility.

Entrepreneurs may find it difficult to securesufficient Labour, at cheap costs.

At times costly arrangements may have to be madeto recruit the necessary labour



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3. Raw-Materials:-

Easy and sufficient availability ofRaw-Materials leads to emergence ofEntrepreneurship

Areas rich in many types of raw-materialsencourage persons to come forward to startenterprise.

Good quality raw-material available is a bigboost to the entrepreneur

Sugarcane as raw material in U.P. has givenrise to many sugar mills in U.P.


4 MARKET:-


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4. MARKET:-

Potential of the Markets becomes a determinant for

entrepreneurial activity and initiatives. From Market will come sale and profit for

entrepreneur

Size and composition of the Market bath are crucial for

entrepreneurs. Monopolistic condition in the market liked by an

Entrepreneur but fact remains that markets arecompetitive.

Competitive Market Condition can be tackled byimproved Quality, innovative techniques, betterservices.

Progressive Markets encourage entrepreneurs E.D-101PREPARED BY: PROF. S.K. DOGRA


106/250

5. Infrastructure

Needed and Required Infrastructure encouragesentrepreneurs

Properly developed Communication, Transportation,Insurance Facilities leads to boost the

Entrepreneurial activity. Good Infrastructure helps in expansion of business

and also for new initiatives.

e.g. Industrial Estates give good push.

Trade Associations, good business schools provideinputs, informations.

Government must take care of good Infrastructuralfacilities if it wants good Industrial Development.


II SOCIAL INPUTS


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II. SOCIAL INPUTS Some social factors do contribute towards

development of Entrepreneurship

1) Family Background:-

Type and Economic status of family, matters.

Wealthy and Landloard families exhibit higher levelsof Entrepreneurship.

History of a family in business lead to entrepreneurialventures.

Background of a family in Manufacturing provides asource of industrial Entrepreneurship

Business families are more venturesome.


2 C t F t


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2. Caste Factor

Many cultural practices and values do encourageentrepreneurship, in each society

These divisions, practices are normally very old

E.g. Hindu Society, prima facie business people were

categorized and majority of businesses emerge fromthere.

Social caste equations, to a great extent providedmonopoly in business ventures

Dominance of entire groups in entrepreneurship global phenomena


3 Education


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3. Education

Education is power to provide skills andknowledge to deal with day to day problems.

In a society, the system of education plays animportant role in developing Entreprenurial

values.

In general in India, our educational system doesnot encourage entrepreneurial initiatives but

prepares for different jobs. However development of vocational courses and

professional course is encouragingentrepreneurship.


4 Cultural Values


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4. Cultural Values

Entrepreneurial Growth requires proper motiveslike profit making, prestige, attaining socialstatus & power.

Persons having such strong motives normally tryto venture out, take business risks & startenterprises.

Culturally wealth accumulations is a way of life will encourage entrepreneurship


III. Psychological Inputs.


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y g p

Many theories of Entrepreneurship indicate towards

some psychological inputs required to beentrepreneurs.

Mental thinking, inner spirit, commitment,outgoing mind, hard work, leadership quality are

also responsible for encouraging entrepreneurialinitiatives.

Need Achievement:-

McClelland talked about need achievement to excel.

Need achievement motivates to take risks andstimulates for taking more efforts.

Other theories talked about Leadership, ManagerialSkills.



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Innovative Mind:-

Creative Minds more likely to be Entrepreneurs. Sense of Achievement:- Personal sense of

achievement motivates some to do something on

their own. Motives:- Seek power, prestige, service to society,

independence encourage Entrepreneurship.

Others:- Non influenced by Luck, fate and take

initiatives and risks, tolerance for ambiguity.


Political Inputs


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Political Inputs Government support required for the success of entrepreneurs

As Entrepreneurs contribute towards the well being of the society,Government must provide required resource to them by taking

various actions.

Government must make appropriate economic policies regardingavailability of capital, Labour, raw-materials, Taxation, incomedistribution, economic growth, infrastructure, transportation etc. asthey affect the growth of entrepreneurs to a large extent.

Incentives, subsidies, Tax benefits by the Government motive themfurther.

Easy Licensing, restriction on monopolies also desirable. Political stability provide consistent growth oriented policies and

support to entrepreneurs.

Opening up of some sectors by the Government for private sector

also encourage many entrepreneurs to show their worth. E.D-109PREPARED BY: PROF. S.K. DOGRA

PROBLEMS OF SMALL BUSINESS


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PROBLEMS OF SMALL BUSINESS1. Shortage of Material & Power:-

Face acute shortage of basic raw materials at times.

Under a handicap in obtaining raw materials ofrequisite Quality at reasonable prices.

Some short supply of raw material may increase theprices and rise in prices puts pressure on these firms toprocure the Materials etc.

Some times few bogus units take away Quota of Scarce

Materials and create shortage.Also face power shortage and are not able to fully

utilize their plant capacity Power not available due tocuts and can not install their own power generating

sets. E.D-110PREPARED BY: PROF. S.K. DOGRA


115/250

2. Lack of Adequate Finance:-

Often unable to procure adequate financial resourcesfor purchase of machinery, equipment, raw materialsdue to their weak financial standing credit may alsonot be available.

3. Competition from Big Players:- Low goodwill and little fixed investment make it

difficult to borrow at reasonable interest or lowerinterest rates.

Largely depend upon internal resources as are not ableto borrow easily from others.



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4. Outdated Technology:-

Most firms use old Techniques of Prod. andoutdated machinery / equipment.

Can not use latest ones Quality suffers

Research & Development not possible on acontinuous basis and thus Productivity /Quality suffers.



117/250

5. Inadequate Marketing Facilities:-

Many difficulties faced in marketing anddistribution do not have their ownMarketing Network.

Find it difficult to sell at remunerative pricesdue to high cost of production and non-standardized quality of products.

Can not afford much advertising, salespersonnel



118/250

6. Weak Organization & Management:-

As generally managed by owners, notqualified.

Lack of Distribution of Labour.7. Lack of Trained Personnel:-

Find it difficult to recruit, retain and

motivate skilled managerial and technicalpeople as they leave for large business.


PREPARATION OF FEASIBILITY


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PREPARATION OF FEASIBILITY

REPORTS(documentation required) Before starting any venture / enterprise, an entrepreneur

must study the feasibility of the project.

Type of Industry / Business to start, where to start and howto start.

Various items / area can be listed, shortlisted which havescope for development

PROJECT FEASIBILITY ANALYSIS

Includes Market analysis

Financial analysis

Technology analysis

Profitability analysis

To study the strengths and weaknesses of the projects. E.D-115PREPARED BY: PROF. S.K. DOGRA

MARKET ANALYSIS INCLUDES


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MARKET ANALYSIS INCLUDES

Market area / size, methods oftransportation, channels of distribution andgeneral trade practices.

Study past and present demand,consumption patterns, major commonpockets, future potential past and presentsupply domestic and imported, extent ofcompetition selling power, quality andmarketing practices of competition.


TECHNICAL ANALYSIS INCLUDES


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TECHNICAL ANALYSIS INCLUDES Whether the project is technically feasible or not, costs

involved.

Study the techniques, processes to be applied.

Description of the product physical, mechanical andchemical specifications, uses of the product.

Processes flow chart justifications for use of a particularprocess.

Plant size and prod. Schedule.

Selection of Machinery, equipment, quotations, suppliers,delivery, terms of payment, spare parts availability.

Location of the plant, raw material.

Cost of setting up building, other infrastructure.

Estimate of the production cost of the product E.D-117PREPARED BY: PROF. S.K. DOGRA

FINANCIAL ANALYSIS INCLUDE


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FINANCIAL ANALYSIS INCLUDE

Capital RequiredSources of Financing

Total Project Cost

Initial Capital Required

Working capital required

Break even point study

Cost Price analysis


PROJECT REPORT


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PROJECT REPORTWhat is a project?

The foundation of an Enterprise is a Project as it willlead to success or failure.

An idea or a plan that is intended to be carried on infuture or is being carried out at present, is a Project.

Has a distinct mission, for the completion of which agroup of activities are carried on.

Every entrepreneur wants to complete the projectsuccessfully.

E.g. Industrial Projects, Construction Projects, Makingof Flyover, running a School.


PRODUCT IDENTIFICATION & PROJECT


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PRODUCT IDENTIFICATION & PROJECT

FORMULATION Entrepreneur comes across many business opportunities &

becomes difficult to identify the most suitable one

Prduct identification involves collection, compilation and analysisof economic data, for the final choosing of the best opportunity for

investment. The success of the Project or venture will depend upon the right

choice made.

The skills, availability of resources, background, and qualifications

play very important role in identifying the right project. Before identifying the right project, study should be made with

respect to raw materials, potential customers.

Also study of environment, Government policies, technology to be

used etc E.D-120PREPARED BY: PROF. S.K. DOGRA

PROJECT FORMULATION


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PROJECT FORMULATION

A process where the entrepreneur makes anobjective & independent assessment of the variousaspects of a project idea to determine its total impact& liability.

Specialists and consultants provide advice. Careful weighing of various components.

Analytical stage where aim is to achieve the project

objectives with the minimum expenditure &adequate resources.

Project formulation leads to making up a projectreport which is very crucial for setting up an

enterprise E.D-121PREPARED BY: PROF. S.K. DOGRA

PROJECT REPORT After selecting a particular project product or service a project


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After selecting a particular project product or service, a projectreport has to be prepared by the entrepreneur.

A project report provides all the necessary information / details ofthe project / unit offering a product or service.

Required by financial Institutions / Development Institutionsoffering finance or other assistance.

A project report will enable the entrepreneur to know:- Money, Manpower, Machines Required

Technology, Location

Economic viability and gains.

Technical Managerial, Financial needs. Project report, prepared by C.A., Management Consultant, Experts.

Entrepreneurs own judgment, views important as it will bring himclose to realities.

His own involvement in making of a project is very crucial. E.D-122PREPARED BY: PROF. S.K. DOGRA

SIGNIFICANCE OF A PROJECT REPORT


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SIGNIFICANCE OF A PROJECT REPORT

The important benefits of a project report are:-1. Helps in procuring suitable developed land or

shed from concerned deptt. of the Govt.

2. Helps in approaching Dist. Industries centre forobtaining provisional or permanent registration.

3. Helps in securing supply of raw-materials, water,power etc.

4. Approaching Bank / F.I. for working capital loans.5. Obtaining term loans from SFCs/Banks/F.I.

6. Preparation of Techno-Economic viability reports ofthe project.


CONTENTS OF A PROJECT REPORT


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CONTENTS OF A PROJECT REPORT No Short cut to prepare a well-prepared business plan or a

project report.

Project report to be prepared with great care and should be aconcrete, complete and clear.

A good project report should have the following contents:-

General Information:- Product / Profile and details of theproduct.

Promoter:- Name full address, educational and otherqualifications, work experience and project related experts.

Location :- Exact location of the project, lease or freehold,locational advantages.

Land & Buildings:- Land area, construction area, type ofconstruction of building, cost of Land, building, plant layout etc


Pl t & hi D t il f hi i d


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Plant & machinery:- Details of machinery required,capacity, suppliers, cost, various alternatives available.

Production Process:- Details of production process,process flow-chart, technical know-how, productionprogrammes, targets etc.

Utilities Required:- Water, power, steam cost

estimates, sources of utilities. Transport & Communications:- Modes of transport /

Communication to be used, various costs involved.

Raw-Materials:- List of raw material required,

Quality-Quantity and source of procurement, costs,supply arrangement etc.


Manpower:- Various types of Labour, to be


130/250

p yp ,employed, sources of Manpower cost of recruitment

/ selection, training etc. Products:- Product Mix Variants estimate of sales,

distribution channels, product standard & quality,competition etc.

Market:- End users of the products, - Type of Mkt-local, domestic or international, trade practices,sales promotions methods, marketing research.

Working capital Requirements:- Sources ofworking capital and amount required, need forcollateral security, nature and extent of creditfacilities which will be available, etc.



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Funds requirement:- Break up of project costin terms of cost of land, building, machinery,preliminary expenses contingencies, totalamount required for setting up the full project.

Cost of Production & Profitability for first 10years.

Break-Even Analysis Point at which noprofit, no loss.

Schedule of Implementations


SELECTION OF A FACTORY LOCATION


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SELECTION OF A FACTORY LOCATION

Multiple locations may be available for locating afactory.

Few sites more suitable

Factors for a suitable location can be rawmaterial, transportation, labour, supply of water,power, and attitude of local Govt. etc.

Different type of business may prioritise the above

factors. A good balance of all these factors maylead to choosing the right location.


THREE STEP PROCESS


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THREE STEP PROCESS

Selection of the region, district, state.

Particular part of the city/district East/West.

Selection of the plant site, plot etc.

One follows the other All are inter-related.The comparisons play very important role.

Lot of information do help.


FACTORS AFFECTING INDUSTRIAL /

FACTORY LOCATION


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FACTORY LOCATION1. FACTORS AFFECTING SELECTION OF A REGION

While keeping in view the nature of business, the following areconsidered when choosing a region:-

1. Availability of Raw Material

Cost of raw materials an important issue for cost of

production. Nearness to the raw-materials very useful.

2. Labour Availability:-

Labour an important factor of Production and it greatly affects the

location Entrepreneurs want easy supply of labour at low wages

Location should attract mobility of labour

More organized Labour in some state may discourage entrepreneur

to located his lant E.D-129PREPARED BY: PROF. S.K. DOGRA

3. Accessibility to Markets:-

S l i f f t i i lli


135/250

Sole aim of manufacturing is selling

Easy, quick access to the markets crucial factor for locations.

Industries whose products are costly to carry, on account offragility, perish ability or bulky may be located in close proximityto the markets.

Nearness to markets have many benefits

Saves time & transportation costs.

4. Fuel, Water, Power Supply:-

For arriving at the final cost of production the cost of power,

water, fuel will have to be considered. Sources of energy / fuel like coal, gas, electricity and their easy

and cheaper availability will help in locations.

If certain industries need lot of water for its processes then a

place with good availability of water must be chosen E.D-130PREPARED BY: PROF. S.K. DOGRA

5. Communication Transport Facilities


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Raw materials to be brought to the factory &

finished products to be dispatched economically. Good transportation facilities including storage,

handling & service facilities in a place will motivate anentrepreneur to locate his factory at an ideal place

Cheap and easy transportation is an importantconsiderations

Sometimes, to save transportation costs, theentrepreneurs may try to locate the factory from where

raw-material may be nearer. Better communication facilities are very useful for the

success of the business. Their easy availability will alsohelp in choosing a right location.



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6. Natural and Climatic Considerations

Topography of a region, level of ground, drainagefacilities, disposal of waste products and theclimate also greatly affect the locations.

Extractive industries like coal, iron ore located inregions where they are available in plenty.

Dry climate is required for flour mills in U.P.

Humid climate required for cotton Mills Mumbai.

Good Climate also encourages employees to workbetter / harder.



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7. Personal choice of the Entrepreneurbeing home town or some otherpersonal preference.

8. Open a factory in a region where allthe facilities are already there, includingan established mkt



139/250

9. Political and strategic considerations. Political stability may also influence setting up

industry in a particular state.

Disturbed area and failure of the Govt. to curb

the disturbances is also a negative factor.

10. Govt. Policy:- Govt. Encourages setting upindustries in backward areas by giving

subsidies, tax-rebate, good transport. Thisattracts entrepreneurs and the state achievesbalanced regional growth.


Financial Facilities:- Finance life blood.

Availability of financial institutions and easy terms for finance also aconsideration for locations


140/250

consideration for locations.

Offices of Financial Institutions.

Locating a factory a long term proposition and so above points to beconsidered wisely

FACTORS AFFECTING SELECTION OF A COMMUNITY, DISTRICTWITHIN THE REGION:-

Adequate labour supply in Quantitative and Qualitative Terms

General attitude of the people should be industry friendly. Should notindulge in frequent strikes.

Prevailing wage-rates be reasonable.

Availability of complementary or supplementary enterprise supplying

various raw-materials etc. Tax burden be moderate and compliance of laws, acts etc.

Living conditions in the place should be favourable so that the employees atall levels get proper social life.

Urban or Rural area to be decided as both have merits / demerits E.D-135PREPARED BY: PROF. S.K. DOGRA

III. FACTORS AFFECTING SELECTION


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OF A SPECIFIC SITE:-

Last stage- for actual plot / site.

Size of plot for present and future needs.

Load-bearing capacity of land for heavybuilding.

Better water and power facilities.

Easy sewage, waste disposal facilities.Easy approachable roads, rail links.

Cost of the land.



142/250

INDUSTRIAL ESTATESSpecially designed area where factories can

be built (a U.K. concept for encouragingindustrial growth in selected area.)

Basic infrastructure & common servicesfacilities created for development ofindustrial units.

Utility services water, power, drainage,transport available to all units low,subsidized rates



143/250

Objectives of Industrial EstatesPromotion of small / medium industries

backward areas.

Removal of congestion in Industrial cities /towns.

Balanced reg. development bydecentralizing industry.

Growth of ancillary industries in thetownships surrounding major industrialunits.


Advantages of an Industrial Estate


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to Entrepreneur Offers industrial sites / plots at reasonable rates

and the decision to buy can be quick

Utility services water, power, drainage and

common services testing center workshops,banks, insurance, courier available at subsidizedrates etc.

Promoters of such estate provide safety, securityand protection.

Combined strength of Entrepreneurs can help theentrepreneurs to bargain


Demand Analysis & Market


145/250

Potential Measurement

Q.1. What is the likely total demand for myproduct / service?

Q.2. What share of the market my productwill enjoy?


While searching answers to above questions


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While searching answers to above questionsdemand analysis get made. (Consumption,competition, substitutes) Demand Analysis is thein-depth study of and assessment of many factorsincluding:-

Patterns of consumption Growth. Composition of the market

Nature of competition

Availability of substitutes Reach of distribution channels

Increase of the consumers

Price elasticity of demandE.D-141PREPARED BY: PROF. S.K. DOGRA

KEY STEPS FOR DEMAND ANALYSIS


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KEY STEPS FOR DEMAND ANALYSIS

1. Situational analysis and specificationof objectives.

Informal talks with customers, competitionmiddlemen, others etc. and details gathered.

Situation analysis generates enough data

Little later, specific objectives, with relation to the

product / service to be stated, questions made.Answers will bring clues for demand of the

product.


2. Collection of Secondary Information


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Secondary Information which is alreadyavailable, as gathered in some other context.

Secondary information provides the base and thestarting point for demand analysis books,

journals. Provides clues for collecting more primary

informations.

Sources can be census reports, economic survey,annual reports, economic survey, annual reports ofMinistries, Journals, Research Reports etc.


3. Conduct of Market Survey


149/250

Primary information in the shape of Marketsurvey supplements secondary information.

Survey can be Product / customers /Segment / Behaviour specific

Costly and time consuming

Population or sample survey


4. Characterization of the market


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Demand for the product / service has to be describedwith respect to:-

Effective demand in past & present

Total demand broken down as per the segments. Competitive Pricing / Competitions.

Methods of distribution & sales promotion methodsrequired.

Consumers behaviour, attitudes, likings Govt. Policy import duties, export incentives excise

duties, import policy etc.


5 Demand Forecasting


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5. Demand Forecasting

Attempt made to forecast future demand

Sale in monetary terms / units to be sold.

Will help greatly the sales deptt.Various methods / intuition used in

forecasting demand computers used



152/250

6. MARKETING PLANNING

An appropriate Market Plan required toenable the product to reach the right

markets.All 4 Ps of Mktg. to be taken care


MARKET POTENTIAL MEASUREMENT


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A market potential is an estimate of the maximumpossible sales opportunities present in a particularmarket segment and open to all sellers of a good or

service during a stated future period. By using the appropriate marketing methods, how

much a particular product can be sold to aparticular segment in a specified future period.

Cell phones, Luxury case, Laptops


STEPS TO MEASURE MKT. POTENTIAL


154/250

Market identification:- Identify the Mkt./Users,market segment, their interests, patterns.

Market Motivation:- Find why customers buythe product today & why potential customers

will buy in future study mind factors ofusers.

Measuring the Market Potential:- Cases not be

done directly straightaway. Market factors to beanalyzed all do not buy LIC Policy to save taxes

E D-149PREPARED BY: PROF. S.K. DOGRA

CAPITAL SAVING & PROJECT COSTING


155/250

Financial analysis most important tool forappraising the real worth of a project.

Looks at capital cost, operations, cost and

operating revenue. Cost of the project concerned with the size of the

funds required.

Every projects cost to be calculated to bringtogether land, labour, assets, machinery, materialsetc.

Wherever possible, capital needs to be saved.E D-150



156/250

Ideal piece of land, right kind of RawMaterial Quantities to be purchased.

Capital to be borrowed at minimumpossible rate of interest.

Cost of borrowings should be minimum.

Incentives / subsidies available as per Acts /Law should be fully utilised.

All tax benefits to be fully utilised.


PROJECT COSTING


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Costing is the calculation to determine how mucheach product or service costs to produce and sell.

Knowing the various costs helps in setting prices,reducing costs and improving profits.

Project Costing

Project Capital Costing Project Operating Costing


Project Capital Costing Sum total of the expenditure expected to be incurred till the date of starting the


158/250

Sum total of the expenditure expected to be incurred till the date of starting thecommercial production of a project.

Includes

All advance expenditure for the project before taking a final investmentdecision.

Cost of fixed assets (land, machinery)

Duties and taxes on imported goods. Consultancy expenses

Pre-operative expenses

Interest charges paid during the construction phase.

Advance expenditure on feasibility report, consultancy charges.

Land charges for basic cost of land plus for its acquisition & development.

Cost of plant & machinery basic & duties if imported.

Training costs, cost of patents, copy rights, trade marks are project capital costs.

Can be some misc. costs also.


Project Operating Costing


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j p g g

Once project started commercial prod. Expensesincurred for day to day operations.

Operating costs generate operating revenues, so veryimportant

Costs vary with the outputs.

The matching of operating costs and revenues result inprofits or losses.

Costs used for making profit & loss A/c, Balance Sheet,Cash flow statements.

Operating costs classified into Direct / Indirect / Fixed/ Variable / Marginal


Main components of operating costs:-


160/250

p p g

Raw Materials costs

Labour Costs

Energy Costs

Plant Maintance Costs.

Supervision Costs

Administrative & Management Costs.

Depreciation Charge and the interest on

borrowings. Selling and distribution costs

Promotion Expenses


WORKING CAPITAL REQUIREMENT Working capital required for day to day successful operation &


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Working capital required for day to day successful operation &continued existence.

Efficient Management of working capital basic necessity forsound operational health.

Basically means Management of current assets, current liabilitiesand interrelationships, between the two

Current assets are:- Advance given for purchase of raw materials etc.

Inventories (raw materials, store, packing materials, spare parts)

Work-in-process

Finished Goods Cash & Bank Balance

Marketable securities.

All current assets (except cash) get converted into cash.

Current liabilities include payment of bills, interest, to creditors etcE D-156


DETERMINANTS OF WORKING CAPITAL


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Many factors influence the working capital needs of a

business. Needs change over different periods of time for the same

firm and also needs are different for different firms.

Total investment in working capital depends upon:-

Nature & Size of Business:- Trading, Financial,Retail Stores More working capital and less infixed assets.

Manufacturing Cycle:-

Larger the manufacturing cycle more working capitalrequired

Minimum time Sh. Be taken in processes


3. Business Fluctuations:-


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Many firms face seasonal and cyclical fluctuations

in the demand for their products.

These variations affect the working capitalrequirements.

Due to upward swing in the economy, the sales willincrease more investment in Inventories will berequired, borrowings made.

4. Production Policy:- Production policy has to be a policy to produce as

per the changing demand and thus the working capitalwill be required and adjusted accordingly



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5. Firms Credit Policy:-

Credit allowed by the company to its customersand its policy of collection also affect the workingcapital requirements. There is also a risk of some

credit turning into bad debts.6. Availability of Credit:-

Liberal credit terms available from the suppliers /creditors will need less working capital as the firm

will have time to pay.


7.Growth and expansion activities:-


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A growing firm needs more working capital, as sales

grow and more production required. More investment needed in current assets to support

enlarged production.

94397404 Ed Ppt Bba Vi Semester

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