Contents

Definition of ...........................................................................................................................................................2 a. b. c. d. e. f. g. 2) 3) 4) 5) 6) 7) 8) 9) 10) 11) 12) 13) 14) Entrepreneurship .....................................................................................................................................2 Qualities of Entrepreneur.......................................................................................................................2 Role of Entrepreneurship in development of the country ..................................................................4 Social Entrepreneur .................................................................................................................................5 Women Entrepreneur ..............................................................................................................................5 Techno-preneur........................................................................................................................................7 Opportunity based Entrepreneurship ....................................................................................................8 Differences & similarities between Entrepreneurs and Managers .......................................................8 Intrapreneurship ........................................................................................................................................ 11 Indian family Business ............................................................................................................................. 13 Cross-cultural trends in Entrepreneurship ............................................................................................ 13 Various steps involved in Business Idea development ....................................................................... 15 Business plan ............................................................................................................................................ 18 Mantras of business plan ......................................................................................................................... 21 Why do some business plan fails ........................................................................................................... 25 Quick-start route to Entrepreneurship ............................................................................................... 29 Small Scale Industries & their problems ........................................................................................... 29 Gov. concessions and incentives to SSI ........................................................................................... 34 Support Organizations ......................................................................................................................... 35 Venture Capital...................................................................................................................................... 36

15) Discuss PESTEL factors that make or mar the entrepreneurial climate w.r.t. contemporary India 40

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Definition of a. Entrepreneurship

Enterprise: Place where with joint efforts of land, labour, capital and management production is undertaken for commercial gain or profit. Entrepreneur: The word has French origin and it means risk bearer, organizer and innovator. Richard Cantillon was the first person to coin this French word in the 18th century. He defined them as agents who buys factors of production at certain prices and combines them into a product with a view of selling it at an uncertain price in future. The term entrepreneur is often interchanged with entrepreneurship yet they are conceptually different. The relationship between the two are just like the two sides of the same coin. What is entrepreneurship? Doing new things or doing things that are already being done in a new way is the simple definition of entrepreneurship. The idea of new products and services often originate from unexpected quarters. The entrepreneurs are quick the possibilities for achievement or in other words entrepreneurs are the first ones to embark on innovative ideas. b. Qualities of Entrepreneur (http://ezinearticles.com/?Essential-Qualities-Of-An-Entrepreneur&id=398886) Qualities of a Successful Entrepreneur: Entrepreneurs are persevering, are lovers of challenges, are action oriented and are quick to learn, and adopt techniques to perform better as well as improve their business. They are independent extroverts who have the ability to lead people, manage them effectively, and steer their business toward its success. They are intelligent and able to utilize their skills, time, resources, and energy effectively. They set reasonable, realistic goals and determine the ways to achieve the goals without fuss, have good communication skills as well as the ability to judge people and trust them accordingly. They have business acumen even without attending any business school and have the right instinct to make the right decision at the right time. They have the ability to make maximum use of the available resources and do not fear failure and are able to solve problems and seek solutions to existing problems easily. Some Other Traits of Entrepreneurs: Leadership: An entrepreneur is a natural leader with the vision and the drive to do things right and steer his company toward success with ease.

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Confidence: He has to be self-confident, confident in his plans as he has carefully researched them and has mastered the skills necessary to implement them carefully. Energetic: They have amazing capacity for hard work and are energetic, motivating those that come in contact with them on account of their drive and determination. Creative And Innovative: This will be an essential criterion to design and sell products that are interesting which offer several benefits and have a competitive edge, making sure they capture the target market on launch without much difficulty. Organized: Entrepreneurs have to be highly organized and systematic, making it possible to achieve things in a much shorter time. The ability to deliver anything that has been promised on time and the ability to stick to schedules are necessary for a person to be a successful entrepreneur. Have Trouble Being Subordinates: They usually are strong-willed and have trouble working under someone else. Highly Competitive: They are very competitive and will strive offer better services and products than the competition. Will Not Hesitate To Take Risks: Risks are part of any business, and a successful entrepreneur will have the knack of taking calculated risks that will only benefit the business. Will Not Hesitate To Seek Help When Necessary: They will hire necessary staff to help them in areas where they are not very confident. These are some of the traits of entrepreneurs, which can be used as a checklist to determine if someone has the capability to be an entrepreneur. If you do start your own business, be sure to use the services as well as products offered by some firms to help new entrepreneurs like you succeed.

Characteristics and attributes essential for a successful entrepreneur: 1) Risk taking 2) Innovator 3) Organiser 4) Hard working 5) Independence of thoughts and action 6) Ability to perceive or spot opportunities and threats 7) Realistic approach to planning 8) High level of motivation 9) Self confident with positive self image 10) Good business acumen, foresight and vision 11) Excellent leadership qualities 12) Managerial competence 13) Problem solving attitude 14) Flexibility and adaptability
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Essential duties and functions of entrepreneur: 1) Idea generation and scanning for best suitable idea for his enterprise 2) Determination of business objectives 3) Product analysis and market research 4) Determination of the form of ownership/ organization 5) Raising necessary funds 6) Procuring materials and raw materials 7) Recruitment of men and personnel 8) Undertaking of business operation c. Role of Entrepreneurship in development of the country

Developing and encouraging entrepreneurship is very vital for the growth and economic advancement of any country. Hence it becomes important and mandatory for all countries to encourage entrepreneurs for economic advancement. 1) Employment generation: These ventures are started in a small scale using labour intensive techniques. Thus, generating a lot of employment for regional manpower. 2) Distribution of economic power: Small scale businesses help in equitable distribution of economic power instead of getting concentrated in few pockets by big industrialist. Therefore, the government provides land and other facilities in the backward districts of the country for economic development of the place. 3) The entrepreneur meets the demand gap by seizing appropriate business opportunities, thereby helping the government. 4) Innovative entrepreneurs can make country technologically more advanced. 5) Entrepreneurs promote capital formation by mobilizing the idle savings of the public. e.g.: Dhirubhai Ambani approaching Indian Public for share capital (1977) 6) It induces backward and forward integration which stimulates the process of economic development of the country. 7) It promotes the countrys export trade which is important ingredient for economic development. 8) It encourages optimum utilization of manpower, finance, engineering and management which otherwise would have remained unutilized and idle.

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d. Social Entrepreneur e. Women Entrepreneur Weakness of Women Entrepreneurs / Problem of Women Entrepreneurs Women lack certain skills that limit their abilities as entrepreneurs. There are two sets of problems namely general problems and problems specific to women entrepreneurs. 1) Emotional in business decisions become emotional while taking decisions, cannot be ruthless enough which may be required while taking business decisions. 2) Lack of exposure (early in life, shielded from decisions/unpleasantness, etc) 3) Lack of assertiveness women lack assertiveness and this hinders their ability to market and sell new ideas. This leads to failures. The cultures prevailing in our country the women from childhood are brought up to be submissive and hence they do not exhibit assertive characteristics. 4) Limited understanding on legal issues 5) Male dominated society 6) Women have limited mobility compared to men 7) Problem with finance (Eg when women approach a bank, they do not lend that freely, women are not seen at par with men entrepreneurs by the banks) Woman Entrepreneur Dohad But the Indian women entrepreneurs are facing some major constraints

like

a) Lack of confidence In general, women lack confidence in their strength and competence. The family members and the society are reluctant to stand beside their entrepreneurial growth. To a certain extent, this situation is changing among Indian women and yet to face a tremendous change to increase the rate of growth in entrepreneurship.

b) Socio-cultural barriers Womens family and personal obligations are sometimes a great barrier for succeeding in business career. Only few women are able to manage both home and business efficiently, devoting enough time to perform all their responsibilities in priority. c) Market-oriented risks Stiff competition in the market and lack of mobility of women make the dependence of women entrepreneurs on middleman indispensable. Many business women find it difficult to capture the market and make their products popular. They are not fully aware of the changing market conditions and hence can effectively utilize the services of media and internet.

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d) Motivational factors Self motivation can be realized through a mind set for a successful business, attitude to take up risk and behavior towards the business society by shouldering the social responsibilities. Other factors are family support, Government policies, financial assistance from public and private institutions and also the environment suitable for women to establish business units.

e) Knowledge in Business Administration Women must be educated and trained constantly to acquire the skills and knowledge in all the functional areas of business management. This can facilitate women to excel in decision making process and develop a good business network. f) Awareness about the financial assistance Various institutions in the financial sector extend their maximum support in the form of incentives, loans, schemes etc. Even then every woman entrepreneur may not be aware of all the assistance provided by the institutions. So the sincere efforts taken towards women entrepreneurs may not reach the entrepreneurs in rural and backward areas.

g) Exposed to the training programs - Training programs and workshops for every type of entrepreneur is available through the social and welfare associations, based on duration, skill and the purpose of the training program. Such programs are really useful to new, rural and young entrepreneurs who want to set up a small and medium scale unit on their own. h) Identifying the available resources Women are hesitant to find out the access to cater their needs in the financial and marketing areas. In spite of the mushrooming growth of associations, institutions, and the schemes from the government side, women are not enterprising and dynamic to optimize the resources in the form of reserves, assets mankind or business volunteers.

Highly educated, technically sound and professionally qualified women should be encouraged for managing their own business, rather than dependent on wage employment outlets. The unexplored talents of young women can be identified, trained and used for various types of industries to increase the productivity in the industrial sector. A desirable environment is necessary for every woman to inculcate entrepreneurial values and involve greatly in business
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dealings. The additional business opportunities that are recently approaching for women entrepreneurs are:

Eco-friendly technology, Bio-technology, IT enabled enterprises, Event Management, Tourism industry, Telecommunication, Plastic materials, Vermiculture, Mineral water, Sericulture, Floriculture, Herbal & health care, Food, fruits & vegetable processing

Empowering women entrepreneurs is essential for achieving the goals of sustainable development and the bottlenecks hindering their growth must be eradicated to entitle full participation in the business. Apart from training programs, Newsletters, mentoring, trade fairs and exhibitions also can be a source for entrepreneurial development. As a result, the desired outcomes of the business are quickly achieved and more of remunerative business opportunities are found. Henceforth, promoting entrepreneurship among women is certainly a short-cut to rapid economic growth and development. Let us try to eliminate all forms of gender discrimination and thus allow women to be an entrepreneur at par with men.

f. Techno-preneur

Technopreneur is come from 2 words Technologhy and Entrepreneur. It means a business that using technology as their business model.This term only use by Asian countries especially Malaysia and Singapore. The difference is that technopreneurship is either involved in delivering an innovative hi-tech product (e.g. Intel) or makes use of hi-tech in an innovative way to deliver its product to the consumer (e.g. eBay), or both (e.g. most pharmaceutical companies). What is Technopreneurship? It is the process and formation of a new business that involves technology. Technopreneurs use technological innovations and translate such technology into successful produces or services. Starting a Technopreneurial Venture: Before you start a technological business, you need to assess your understanding of the business as well as your readiness and ability to manage the proposed venture. It is important to possess the following: a. Some previous work experience or skills appropriate to your business.
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b. Knowledge of your products/service and the market for it. c. Understanding of the relationship between product knowledge of technological goods and the disciplines of marketing, production, finance and administration. g. Opportunity based Entrepreneurship

Apparently, it can be said that the starting point of entrepreneurship would define its type. The two types of entrepreneurship may be classified as: 1. Opportunity-based entrepreneurship- an entrepreneur perceives a business opportunity and chooses to pursue this as an active career choice. 2. Necessity-based entrepreneurship- an entrepreneur is left with no other viable option to earn a living. It is not the choice but compulsion, which makes him/her, choose entrepreneurship as a career. Opportunity-based entrepreneurship involves those who choose to start their own business by taking advantage of an entrepreneurial opportunity. Necessity-based entrepreneurship involves people who start a business because other employment options are either absent or unsatisfactory. The opportunity entrepreneurs are more prevalent in high-income countries (such as France, the United Kingdom and the United States), while necessity entrepreneurs are more common in the low-income countries (such as Hungary and Poland). Accordingly, it may be argued that in developed countries opportunity entrepreneurship is linked to economic growth, while in most developing countries necessity entrepreneurship exists because of low growth. It may be that because richer countries are characterized by a more developed labor market or access to stronger safety nets (social welfare), there is a lower need for starting up a business and that therefore these countries exhibit lower necessity based entrepreneurial activity rates Opportunity entrepreneurs are influenced by pull factors to start a business, while necessity entrepreneurs are affected by push factors

2) Differences & similarities between Entrepreneurs and Managers Differences: 1. Entrepreneur Will perceive an opportunity, assemble a team, locate resources for his new business idea, raise the needed capital and start the business Manager Comes in only after the foundation has been laid and the business established. What this mean in essence is; without entrepreneurs, the managers will have no business to manage More concerned with the launching and More concerned with the effective and sustainability of a business in the face of efficient operation of an ongoing business uncertainty Managers are business management Entrepreneurs are generalist. Product
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2.

3.

specialist. 4. Entrepreneurs are street smarts. They learn everything by trial and error, they learn from their own mistakes and the mistakes of others. Freedom is their utmost priority - to do what they want, to live the kind of life they love. An entrepreneur owns the business

5. 6. 7.

Reward - capital gain, asset acquisition, cash flow, dividends and excessive cash 8. Entrepreneurs thrive on risk and uncertainty. 9. Entrepreneurs learn more from mistakes Managers avoid mistakes because it will cost them their job. They are being paid to avoid mistakes. 10. Entrepreneurs come together to pool When managers who are usually resources or network, they form a team. employees come together, they form a union 11. Entrepreneurs are committed to the Managers are committed till the next business from its launching till they achieve paycheck. Their time frame is usually 25 their goal. The time frame may be 5 15 30 years. years. Parameter Entrepreneur Being the owner of enterprise assumes all the risk and uncertainty involved in running the enterprise Reward for bearing the risk involved is the profit generated Company executive / manager Being servant of a company does not bear any risk involved in the enterprise

development and design, law, mktg, raising finance, etc Managers are school smarts. They are mainly degree holders, MBAs to be precise. Managers go to school to become professionals Security is their utmost priority - steady paycheck, bonus and entitlements. A manager owns a job. A manager is paid to run the entrepreneurs business Reward - salaries, pay offs, promotion, job title, bonus and incentives Managers detest risk. They simply avoid it

Risk bearing

Reward Status

Motive

Innovation

Qualification

Gets salary as reward for his services. The salary of executive is certain and fixed He is the servant of the enterprise He is the owner of the enterprise owned by the entrepreneur To start the venture by setting To render his services in an up the enterprise. Entrepreneur enterprise already setup by the understands the venture for entrepreneur personal gratification Entrepreneurs themselves think He is just to simply execute the over on how to produce goods plans prepared by the owner of to meet the changing demand of the company i.e. to translate the the customers. They act as entrepreneurs idea into practice innovators or change agents. Needs to possess qualities and Needs academic qualifications in qualifications like risk bearing, addition to sound knowledge in organizing, vision, foresight, management theory and
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motivation Similarities:

practices for senior level positions

When you compare managers and entrepreneurs you need to first look at the definitions of both titles. A manager is someone who directs a team and an entrepreneur is someone who organizes, manages, and assumes the risks of a business or enterprise. Both management and entrepreneurship are brought about as a necessity of a means to an end, not an end in themselves. Managers try in their quest to turn around a distressed company whilst entrepreneurs try to use problems either in their own lives, environment or the current market situation to turn around their own lives or meet a need in the market so to speak. Again both managers and entrepreneurs are characterised and motivated by the fact that everything can be done and do not easily take failure as an answer. This does not mean that entrepreneurs always chalk successes or that everything they touch turn gold, but experience shows that managers and entrepreneurs try to always look at the bright side of things and persevere to see their dreams come true. Entrepreneurs face personal financial risk whereas managers also face career risk in the event of failure. Managers and entrepreneurs take moderate risks. They are willing to go every length to achieve results than with gaining influence in society. All entrepreneurs must be managers, even if the only person they are managing is themselves. They are the ones who must make the schedules, see that they are implemented, co-ordinate staff, and deal with every little problem that comes up. Both managers and entrepreneurs can be expected to be available 24/7 to address the needs of their business, and a manager's earning potential is often tied so directly to the company's performance that it's tantamount to having an ownership stake in the first place. Both managers and entrepreneurs want and need autonomy and freedom, but the manager must work within the existing corporate hierarchy.

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3) Intrapreneurship

Intrapreneurship is development of entrepreneurs within a large corporation to produce new products, new markets, new technology by employing the enterprise resources in a unique way. Intrapreneurship gives professional managers of the corporation the freedom to take initiatives and try out new ideas hence is it entrepreneurship within an existing business. Big companies and corporations recognize that individuals can make major contributions without becoming entrepreneur or by investing in the company financially. Intrapreneurship has brought major transformation in developed countries of the world. E.g. DuPont, 3M, Xerox, GE, Apple Computers. Indian corporate like Ranbaxy, Dr. Reddys, Mahindra and Mahindra, Arvind Mills, TCS, Godrej, Infosys encourage intrapreneurship. Intrapreneuship is therefore corporate entrepreneurship. Advantages of intrapreneurship: An intrapreneur is a person focusing on innovation and creativity. He transforms a dream r an idea into a profit venture by operating within the organizational environment. The entrepreneur does the same outside the organizational setting. 1) Intrapreneurs ideas often help to build or improve the corporate business. 2) Capital for ideas is easy to come from internal sources within the corporate identity. 3) The established corporate image helps to boost the chances of success of an intrapreneurship idea. 4) Intrapreneurship activies make the organization technology to stay competitive. 5) Intrapreneurs get the boost as corporate offer unique advantages of multidisciplinary teamwork. The intrapreneur retains the job security and also enjoys freedom and prosperity. Profile / Characteristics of an intrapreneur: 1) Vision: Intrapreneurs possess the ability to visualize the steps form idea generation to actualization (commercialization). They ride to the discovery of successful ventures on the strength of their vision. 2) Motivation: Intrapreneurs want freedom. They are self motivated but respond to corporate rewards and recognition. Money is not the only incentive for their efforts but the measure of their success. 3) Business skills: Intrapreneurs understand the business intimately. They have technology or marketing background and in the role of intrapreneurship, they take the responsibility of all aspects of business. 4) Action Oriented: All intrapreneurs are action-oriented. 5) Risk: They are moderate risk-takers. They dislike uncontrolled risk and avoid as far as possible. Because of self-confidence, they are willing to accept that risk which depends directly on their skill. They are sensitive to the needs to appear orderly in the organization. They risk their career and reputation if they fail in their mission. 6) Status:
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Intrapreneurs do mundane jobs that is a part of every new project. Instead of delegation they often do things by themselves. (Eg: they will do every little things themselves like applying stamps, going to post office etc, because they want to be 100% assured; they do not like delegation). Comparison between entrepreneurs and intrapreneurs: Parameter Primary Motives Entrepreneurs They want freedom. They are goal-oriented, self-reliant and self-motivated. Entrepreneurs accept higher risk, has money and is not worried about reputation at least in the initial stages. Entrepreneurs are willing to accept long periods of low status. Entrepreneurs, they make their own decisions and are not willing to compromise. (Not worried about what others say or think about him) Intrapreneurs They have access corporate resources they are proactive Intrapreneurs accept moderate risk. They put their careers, job and reputation on the line of fire. Intrapreneurs considers corporate symbols (Eg: designation VP, CEO, MD, etc) Intrapreneurs need to get others to share their vision. They are willing to accept compromise. (he needs to pull people towards and along with him) Intrapreneurs utilizes the resources available within the organization. Intrapreneurs dislikes the system but has learnt to deal with and later on starts manipulating it. Intrapreneurs are sensitive to corporate attitudes. Often attempts to hide errors. They learn from their mistakes. For both of them it is same

Risk Preference

Attitude to Status

Decision

Resources

It is acquired and assembled from the market or families of the entrepreneurs. Attitudes toward Entrepreneurs may have done bureaucracy well in the system but has left the organization to start his own individual enterprise. Failures and Entrepreneurs learn from mistakes mistakes but have to pay for the errors committed. All the errors are visible and public. Skill and For both of them it is same experience

Intrapreneurship is the practice of entrepreneurship by employees within an organization. An intrapreneur is an individual employed by an organization for remuneration, which is based on the financial success of the unit he is responsible for. Intrapreneurs share the same traits as entrepreneurs such as conviction, zeal and insight. As the intrapreneur continues to expresses his ideas vigorously, it will reveal the gap between the philosophy of the organization and the
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employee. If the organization supports him in pursuing his ideas, he succeeds. If not, he is likely to leave the organization and set up his own business. Features of Intrapreneurship: An intrapreneur thinks like an entrepreneur looking out for opportunities, which profit the organization. Intrapreneurship is a novel way of making organizations more profitable where imaginative employees entertain entrepreneurial thoughts. It is in the interest of an organization to encourage intrapreneurs. Intrapreneurship is a significant method for companies to reinvent themselves and improve performance. Another important factor that led to the choice between entrepreneurship and intrapreneurship was age. The study found that people who launched their own companies were in their 30s and 40s. People from older and younger age groups were risk averse or felt they have no opportunities, which makes them the ideal candidates if an organization is on the lookout for employees with new ideas that can be pursued. Entrepreneurship appeals to people who possess natural traits that find start ups arousing their interest. Intrapreneurs appear to be those who generally would not like to get entangled in start ups but are tempted to do so for a number of reasons. Managers would do well to take employees who do not appear entrepreneurial but can turn out to be good intrapreneurial choices.

4) Indian family Business 5) Cross-cultural trends in Entrepreneurship

An entrepreneur would like to set up in another country because of Push factor or pull factor. Eg: Africa higher margins, here margins lower hence would want to set up a plant in Africa; similar in case of a region where sales registered will be significantly higher; attracted to business opportunities seen there Pull Factor Push Factor forced to go international / global. If I dont go outside the country, my business will get killed. // The concept of international or global entrepreneurship Global entrepreneurship is a process in which the entrepreneur conducts business activities across national boundaries. This activity of identifying and satisfying the needs and wants of target customers in more than one country is called global entrepreneurship. Entrepreneurs willing to expand their business globally are motivated by two factors 1. Pull Factor they are motivated to internationalise their business because of the attractiveness of the foreign market (proactive factors)
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2. Push Factor the push factors are reactive reasons for going global because of compulsion and rigidity in the domestic market. Entrepreneurs decide to go global for the following reasons. 1. To expand sale (top line) 2. Profit advantage (bottom line) 3. Domestic market constraints 4. Minimize competitive risk (Eg: saturated markets, too much competitions, etc) 5. Government policies and regulation 6. Spin-off benefits 7. it may be a strategic mission of the company the stimulus for globalization comes from the urge to grow, the need to become competitive, the need to diversify and finally to gain strategic advantage of globalization. The factors entrepreneurs should consider before going global Political & Legal Environment 1. Stability of the country / government 2. Fear of military invasion (Eg: Uganda where Idli Amin took over) 3. Existing laws for contract 4. Taxation Rate 5. Favoured Trading Partners (MFN Most Favoured Nation) 6. Wages, Legislation & Employment Rules minimum wages, etc 7. Intellectual Property Rights 8. Industrial Safety Regulation 9. Product Labelling Requirements eg: labelling products for calories contained Technological Environment 1. Impact of technology on product offering a new technology can make your products obsolete 2. Impact on cost structure Eg: watches from China sold at Rs 50 each but bought at Rs. 10 / kg 3. Impact on value chain Social Environment 1. Demographics Age, etc 2. Education 3. Culture 4. Attitude & Leisure interests Economic Environment 1. Type of economic system in operation 2. Government intervention level of interference 3. Advantages of business to the host country 4. Exchange Rate and stability of currency 5. Efficiency of financial market - liquidity, ability to sell and move out 6. Economic growth rate 7. Inflation rate
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6) Various steps involved in Business Idea development

Opportunity is a business concept. Which when turned into a tangible product or service by the enterprise results into profits. Opportunity assessment is a continuous process of gathering data, reviewing the proposition and reformulating the business concept. Sources of New Ideas The frequently used sources of ideas are 1. Employees 2. Dissatisfied customers - he can be a source for new products. People who are in the habit of expecting more and complain will be a source for new ideas. 3. Improvements in existing products and services 4. Distribution channels 5. R&D of the company, they also make new technology 6. Government of the company the laws and regulations stated by the country, government protects certain ideas which are then called patents.

Methods of Generating Ideas Several methods are used by entrepreneurs to generate and test ideas: 1. Focus Group a moderator leads a group of individuals (8,10,12,14) through an open, in-depth discussion rather than simply asking questions to understand responses in a structured format. It leads to conceptualising and developing a new product idea to fulfil a market need. Besides generating ideas, the focus group is an excellent method for screening ideas and concepts. 2. Brainstorming normally conducted in far away location to avoid distractions like phone calls, etc. the brainstorming method allows a group to be stimulated to greater creativity by meeting and participating in organised group experiences focussing on parameters. 3. Reverse brainstorming the process usually involves identification of everything wrong of an idea (focussing only on the negative) followed by discussion of the ways to overcome these expected troubles. 4. Brain writing brain writing is a form of written brainstorming. The method 6-3-5 is very popular. 6 persons, 3 ideas, 5 minutes. Can be done by email or on internet and need not be physically present, saving airfare and is convenient. 5. Problem Inventory Analysis //it is very similar to dissatisfied customer. The problems are listed (inventory of problems) and you try to solve the problem from which you get new ideas.// A method for obtaining new ideas and solutions by focussing on the problems encountered. The Product Selection A product is capable of satisfying the needs and wants of customers. Every products renders some service.
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How does one select the right product? It involves research, careful evaluation and sound judgement. This activity is called product selection analysis technique and consists of te following eight well defined steps: 1. Idea Generation (Already described in introduction) The following parameters should however be kept in mind. a. understanding the changing needs and expectations of the customer. b. Visualising the emerging trends in society. c. Good understanding of the economy. //(new products can be found in magazines, trade fairs, discussions with people, interacting with trade/distribution channels, power of observation, exhibitions, retailers, reading books, journals, newspapers, publications of research organisations)// 2. Idea Screening The following exploratory questions should be asked: a. Are the customers satisfied with what they are getting presently? b. Can we identify a better alternative? c. Can the basic design be changed? d. Is it agreeable with the companys objective, strategies and resources of the company? //this is an elimination round to cut out ideas// 3. Idea Evaluation (Concept development & testing) //Comparing the pros and cons/ positives and negatives of the ideas left after idea screening// The product evaluation is done objectively on the following factors: a. b. c. d. e. Stability Growth factor Marketability Company position Production facilities

a. Stability i. Permanence of Market the demand for that product will always be there for a significant period of time (10-15 years) ii. Breadth of Market iii. Difficult to copy difficult to copy by others iv. Stability in recession similar situation as to what exists just now when there is a greater demand for white goods
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b. Growth Factor i. Demand Supply Relationship ii. Export possibilities causing increasing in sales c. Marketability i. Ease of distribution ii. Freedom of seasonal fluctuation iii. Minimum after sales service requirement d. Company Position / Enterprise Factors i. to get established gestation period ii. availability of raw materials iii. availability of skilled labour iv. transportation facilities

4. Marketing Strategy Development i. to find a cost effective and affordable marketing strategy //Fredrick Smith air cargo passenger aircraft - space 5. Preliminary Business Analysis a. estimating total sales b. estimating total profit c. estimating total market growth 6. Product Development The product till now existed as a word description, drawing or prototype. In this step the product idea is translated into a technically and commercially feasible product inside the enterprise. 7. Test Marketing and Formal Business Planning Controlled Test Marketing Test markets a. How many cities for test marketing (2,4,6,8; minimum 2) ? b. Which cities? (Select cities like Baroda, Indore, Pune where it is easy to get the feedback) c. Length of test / How long is the test? (No of weeks, months, quarters) d. What information (usage, attitude, satisfaction is to be gathered) ? e. What action needs to be taken? Formal Business Planning a. Controlling the product in the introductory Stage b. Using critical path method (CPM) c. Program evaluation and review technique (PERT) 8. Commercialisation 1. When Timing is critical
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a. first entry (first mover advantage) b. parallel entry (coinciding with competition) c. late entry (Saves cost of educating customers, rectifying mistakes and faults of the first mover and parallel entry) 2. Where (geographical location single, multiple, national, international) 3. To whom (target / potential customers identified) 4. How (marketing strategy adopted for the purpose) 7) Business plan

The business plan is often criticised (perhaps this is supposed to read described instead of criticised, but he stuck to his guns on the basis that every plan or idea need not result in profit or a successful company) as the dreams of glory of an entrepreneur. The business plan helps to maintain a perspective for the entrepreneurs on what needs to be accomplished. Potential investors are not likely to consider investing in the new venture until the business plan is completed. What is a business plan? The business plan is a written document prepared by the entrepreneur describing all relevant external and internal elements involved in starting or running a business activity. The business plan is an integration of the functional plans such as the marketing plan, finance plan, manufacturing plan, human resources plan, etc. Business plan addresses both, the long term and short term decision making for at least the first 3 years of operation. The business plan is also called as the road map or game plan. In the business plan or road map the following questions need to be answered correctly: a. Where am I now? b. Where am I going? c. How will I get there? Why you need a business plan? An entrepreneur needs a business plan for the following reasons a. for starting a new business b. diversification, expansion of his existing business c. buying another business d. for getting government grants and other incentives from government financial bodies Who prepares the business plan?

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The business plan should be prepared by the entrepreneur himself. However he may consult with many others in its preparation like lawyers, chartered accountants, marketing professionals, engineers and other consultants who are experts in business plan. Who reads the business plan?

The business plan will benefit various types of people who will be using this plan as a basis for making decisions. a. b. c. d. e. potential investors bankers and venture capitalists suppliers and distributors big customers employees (top level management)

Writing a plan / Outline of a business plan These are living documents that will need constant modification and continuous re-evaluation of strategies. The business plan must tell a story that compels action and the audience should clearly understand and get excited about it. Just as a book is separated into chapters which follows a logical sequence the business plan should follow a scientific and logical sequence. Outline of a business plan I. Introductory Page A. Name & Address of the company B. Name & address of the owners / principals / promoters of the company C. Nature of Business D. Statement of Finance required E. Statement of confidentiality of report Executive Summary - Normally 3-4 pages summarising the complete business operation. Industry Outlook A. Future outlook and trends B. Analysis of Competitors C. Market Segmentation Description of Venture A. Products B. Services C. Size of Business D. Background of the entrepreneur E. About their set-up (office equipment, personnel, location, factories, offices, etc) Manufacturing Plan
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II. III.

IV.

V.

VI.

VII.

VIII.

IX.

X.

XI.

XII.

A. Production process / technology B. Physical plant C. Machinery & Equipment D. Raw Materials (& their suppliers) Operational Plan A. Description of the companys operation B. Flow of orders for goods and services C. Technology utilisation (paperless office, electronic communication) Marketing Plan A. Pricing B. Distribution C. Promotion D. Product Forecasts E. Controls (Eg: Inventory control, promotion control) Organisational Plan A. Form of ownership (Pvt Ltd, Public Ltd., Partnership, Under guarantee / no shareholding eg: BCCI) B. Identification of partners / principal shareholders C. Authority of the principals D. Management team background E. Roles and responsibilities of members of the organisation Assessment of Risk A. Evaluate weakness of the business B. New technology making others obsolete C. Contingency plan Financial Plan A. Capital cost 1. Long Term 2. Short Term B. Income Statement C. Cash Flow Projection D. Break Even Analysis E. Sources & application of funds Benefits of business to community (Not Compulsory) A. Employment generation B. Import substitution (thereby saving foreign exchange) C. Ancillarisation D. Environmental protection Appendix (Not Compulsory) Contain back-up material A. B. C. D. Market Research Data Contracts & leases entered by the company price list from suppliers letters and documents received from government and other bodies

Business planning is about results. You need to make the contents of your plan match your purpose. Dont accept a standard outline just because its there.
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What is a business plan? A business plan is any plan that works for a business to look ahead, allocate resources, focus on key points, and prepare for problems and opportunities. Unfortunately, many people think of business plans only for starting a new business or applying for business loans. But they are also vital for running a business, whether or not the business needs new loans or new investments. Businesses need plans to optimize growth and development according to priorities. What is most important in a plan? It depends on the case, but usually its the cash flow analysis and specific implementation details.

Cash flow is both vital to a company and hard to follow. Cash is usually misunderstood as profits, and they are different. Profits dont guarantee cash in the bank. Lots of profitable companies go under because of cash flow problems. It just isnt intuitive. Implementation details are what make things happen. Your brilliant strategies and beautifully formatted planning documents are just theory unless you assign responsibilities, with dates and budgets, follow up with those responsible, and track results. Business plans are really about getting results and improving your company.

Can you suggest a standard outline? If you have the main components, the order doesnt matter that much, but heres the outline order thats suggested: 1. Executive Summary: Write this last. Its just a page or two of highlights. 2. Company Description: Legal establishment, history, start-up plans, etc. 3. Product or Service: Describe what youre selling. Focus on customer benefits. 4. Market Analysis: You need to know your market, customer needs, where they are, how to reach them, etc. 5. Strategy and Implementation: Be specific. Include management responsibilities with dates and budget. 6. Management Team: Include backgrounds of key members of the team, personnel strategy, and details. 7. Financial Plan: Include profit and loss, cash flow, balance sheet, break-even analysis, assumptions, business ratios, etc. 8) Mantras of business plan Success Factors
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This section is very important as it provides a summary explaining why the plan will succeed. You could have a good marketing plan, an excellent management team, sufficient capital and a strong product, but what makes all the things you have to offer different. You need a unique selling point or points for your plan. What do you have that will make it succeed? These factors could be very different, for example: Strong initial advertising The ability to offer low prices Quality of service A product or products with their own unique selling points Pre-agreed channels and volumes Capacity to innovate or modify products quickly Exclusive distribution channels

All businesses, from fruit shops to car manufacturers, cafes to banks have their own success factors and in many cases there is only one factor that creates this success. For a hairdresser it could be the quality and price, or just the quality; for easyJet it is the price; for Rolls Royce the quality and status; for a builder a specialist area of expertise. The secret is to identify these points and then to highlight them. TIPS

Write only the important points Get to the point and be brief, each sentence is important. If a sentence does not hold important information, delete it.

Success factors in business (http://www.the-success-factor.com/success_factors_business.htm) Success factor Have a Business Plan A successful Business Plan will consist of

market trends financial planning competitive analysis exit strategies marketing and promotional options everything about your goal.

Success factor - Plan your plan

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You should construct a plan to include goal, milestones, deliverables such as contracts, business plans, etc., and accomplishments. This will provide you with a visual as to what you are working for, what milestones you have successfully met, and where you need to do better. Being successful also means keeping to a schedule. In addition, you need to learn how much is too much. Good time and resource management will help you ensure that you use your time wisely and that you are not adding third portions onto a plate still overflowing with seconds. Success factor - Know your Customers You should know, really know, your customers, especially your top ten. Find out what they like and dislike. What other products or services would be of value to them? These very relationships are what will keep your business going. It is crucial to consider your customers desires all of the time. Success factor - The Right Marketing When you get ready to start marketing your business or idea, never rely on one method of marketing. It is important to look at several options since nothing will last forever. Success factor - Timing is Everything You have probably heard it before timing is everything. Especially when it comes to opening a business, there is a right and a wrong time to start a business. This would be extremely important if your business has cycles or is seasonal. For example, if you are starting a business to do landscaping, the winter months when snow is on the ground is not the right time. You can be working toward your Business Plan, marketing ideas, finding investors, if required, etc., during those cold months, but you certainly would not want to open your doors for the first time in the heart of winter. Success factor - Plan your Costs Unbelievably, there are thousands of entrepreneurs that start a business without the foggiest idea of what their costs are going to be. Either there is an estimation that is way overstated or understated. From the very beginning, you need to have a strong handle on knowing what you will need to get your business started and keep it running. Additionally, you need to have projections for your future success. Know your numbers and make sure they are accurate. Success factor - Conduct Research It is important to know what you are getting into.

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First, you will want to conduct research as far as the business, industry, or interest associated with your particular success. Second, the research will help you stay up to date on trends, which may or may not require you to make adjustments in your own goal.

For example, if you were interested in opening a particular business focusing on a specific technology and that technology took a turn to another direction, new advancements, you may need to change the direction you were going for your own business. Unless you kept up on research, you would not know when a change was needed and therefore, would end up building a business already headed for failure. Success factor - Keep it Lean Start-up businesses do not have room for dead weight. As an example, when first starting out, if you need some assistance, rather then hiring a permanent employee that will involve salary, insurance, other benefits, etc., consider a temporary employee until the business grows. Keep improving the bottom line before you start adding on more expenses to your business. Success factor - Get the Word Out If your success is focused on a business, when you get ready to open your doors, make sure you get the message out. This will include marketing promotions, advertising, sending out a press release. There are many marketing opportunities available and to make your marketing spend a success, ensure your marketing is aligned with your target market. The more people know about your business, the better chance of you have of reaching success. Success factor - Customer Relations Keep your line of communication open with your customers. If your customers have a problem, show them the deserved respect and resolve the issue quickly. Make occasional phone calls to see if they have any needs. This will let your customers know that you are there for them and care about their business. This relationship is what is going to keep you on the road to success. After all, the customer is your link between failure and success. Success factor - Watch for Scams Whether you are just starting out or expanding an existing business, unfortunately, there are thousands of people waiting to defraud you out of money.
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If something appears too good to be true IT IS! Always conduct thorough research and never jump into opportunities that look perfect. If someone becomes pushy, wanting you to make a quick decision on any type of investment, do not walk away RUN away! Success factor - Offer a Guarantee If you have created a business that offers either products or services, in order to get and keep customers coming back, they have to know that you stand behind what you offer. Providing a guarantee will help your business grow and reach the highest level of success. 9) Why do some business plan fails According to the Small Business Administration, two-thirds of new businesses survive for at least two years, and only 44 percent survive at least four years. Why some businesses fail and why some succeed is a matter of debate, although there are some common mistakes that can sink a business in no time. A. Marketing Aspect Marketing helps the product selling and money flowing into the business. Hence, it is a crucial operation for the company. 1. Ignoring Competition is a strategy that will enable competitors to swallow up your company, your strategy should enable you to sustain the environment with a competitive edge 2. Ineffective Customer Service 3. Failing to validate your customers 4. Lack of internal marketing (employees themselves) B. Financial Aspect Finance is the life blood of any business and its management effectively is the most important factor for success. Poor financials can lead to disasters ultimately proceeding to the closure of business. The most important factors in the financial aspect are: 1. Lack of foresight leads to a. Unfavourable gearing and leverages b. Inappropriate diversion of capital c. Over trading d. Improper tax planning 2. Cash Flow Problem it is essential to track the money coming into and going out of your business. Even a profitable venture can fail if it runs short of cash. The entrepreneur must learn to make cash flow projections that will help in deciding how much more money can be spent and also provide a warning in times of trouble. 3. Personnel Aspect problems encountered are: a) Lack of cohesion b) Inability to cope up with fast changes in business environment
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c) ineffective management and feedback 4. Technology Aspect: the problems encountered are: a) b) c) d) e) technology becoming obsolete lack of awareness quality standards lack of sufficient networking benchmarking

5. Planning Aspect: An organisation can fail if the planning is not correct: a) b) c) d) unrealistic and non-precise targets or goals no strict deadlines lack of re-evaluation when reaching a milestone no systematic and step-by-step formulation of plans

6. Personal aspects of the entrepreneur: business can also fail due to improper handling of the personal issues a) mixing personal and professional issues b) close-mindedness procrastination

Give your new business venture a fighting chance by taking care to avoid these fatal errors: Overexpansion. Wanting to be the first to market with a new product, taking on added overhead, and the need to demonstrate revenue growth to anxious investors can all induce businesses to overextend themselves financially. Rather than head down this path, start with realistic goals and allow yourself to grow as needs dictate. Let your revenue, not pie-in-the-sky projections, dictate your hiring practices. Poor capital structure. Look at the businesses that fail and you'll find that many of them took on too much debt. Learn to pay strict attention to your finances and keep careful records of all money coming in and going out. Even if everything's coming up roses today, trouble can still be right around the corner. Overspending. Many startups spend their seed money before cash has begun to flow in at a positive rate. This often happens because of misconception about how business operates. If you're just starting out in business, seek out seasoned veterans you can bounce your ideas off of prior to making big financial commitments. Lack of reserve funds. Failing to prepare for volatile markets and uncontrollable costs like energy-rate increases, materials, labor, natural disasters, and the like is another top reason many businesses fail. Make sure you protect your investment and keep enough reserve cash to carry you through market downtrends and seasonal slowness. Bad business location. Don't let a cheap lease tempt you into opening your doors in the wrong neighborhood if your gut is telling you it's not right. Key factors to consider include competition (how many other similar businesses are located nearby?) and accessibility (is the area well served by freeways, public transportation, and foot traffic?).
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Poor execution and internal controls. Poor customer service, accounting controls, and overall employee incompetence can all combine to bring down the ship. Make sure you and your employees place a premium on customer service to generate repeat business, establish protocols for how tasks should be accomplished, and remain continually in the know on all things accounting. An inadequate business plan. Your business plan is your blueprint for success. A wellthought-out business plan forces you to think about the future and the challenges you'll face. It also forces you to consider your financial needs, your marketing and management plans, your competition, and your overall strategy for coming out on top. Failure to change with the times. The only constant in business is change. Once mighty behemoths fall to earth while unknown upstarts rise to prominence. The ability to recognize opportunities and be flexible enough to adapt to changing times is a key ingredient to surviving and even prospering in the toughest business climate. Therefore, learn how to wear multiple hats and to generate new interests and areas of expertise. Ineffective marketing and self-promotion. Customers can't walk through your front door if they don't know you're there. Learn how to cost-effectively advertise and promote your business through such tried-and-true methods as direct mail, ads in local newspapers, Web sites, blogs, even by sponsoring a local little league team. The number of advertising and promotional ideas that exist is only limited by your own creativity. Underestimating the competition. Consumer loyalty doesn't just happen; you have to earn it. If you don't take care of your customers, your competition will. Watch your competition as closely as you do your own employees. Entrepreneurs should avoid following mistakes while planning for their new venture: 1. Creating products in a vacuum: Do not be a product searching for a market. Do the "market research" up front. Test the idea. Talk to potential customers, at least a dozen of them. Find out if anyone wants to buy it. Do this before anything else. 2. Equal partnerships: Suppose you and your new partner split the company 50/50. That seems fine and fair right now, but as your personal and professional interests diverge, it is a sure recipe for disaster. Either party's veto power can stall the growth and development of your company. 51/49 works much better than 50/50. 3. Low prices: Set your prices as high as your market will bear. Even if you can sell more units and generate greater dollar volume at the lower price (which is not always the case) you may not be better off. Make sure you do all the math before you decide on a low price strategy. Figure all your incremental costs. Figure in the extra stress as well. 4. Not enough capital: Be conservative in all your projections. Make sure you have at least as much capital as you need to make it through the sales cycle, or until the next planned round of funding. Or lower your burn rate so that you do. 5. Out of Focus: Concentrating your attention in a limited area leads to better-than-average results, almost always surpassing the profits generated from diversification. Al Reis, of Positioning fame, wrote a book that covers just this subject. It's called Focus.
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6. First class and infrastructure crazy: The best entrepreneurs know how to stretch their cash and use it for key business-building processes like product development, sales and marketing. Spend all the money really necessary to achieve your objectives. 7. Perfection-it is: Focus on creating a market-beating product within the allotted time. Set a deadline and build a product development plan to match. Know when you have to stop development to make a delivery date. When your time's up, it's up. Release your product. 8. No clear return on investment: Do the analysis. Talk to your customers, create case studies. Come up with ways to quantify the benefits. If you can't justify the purchase, don't expect your customer will. If you can demonstrate the great return on investment your product provides, sales are a slam dunk. 9. Not admitting your mistakes: OK, everybody makes mistakes. Just try to catch them quickly, before they kill your company. To avoid some mistakes in the future, it sometimes helps to ask good questions ahead of time. Click the link if you would like a copy of my fractal strategic planning questionnaire. 10. Cash flow casualness: Most people think in terms of profits instead of cash. Understanding cash flow is critical. If you have only one table in your business plan, make it the cash flow table. 11. Idea inflation: Don't overestimate the importance of the idea. Plans don't sell new business ideas to investors. People do. Investors invest in people, not ideas. 12. Fear and dread: Doing a business plan isn't as hard as you might think. You don't have to write a doctoral thesis or a novel. 13. Spongy, vague goals: Leave out the vague and the meaningless babble of business phrases (such as "being the best") because they are simply hype. Remember that the objective of a plan is its results, and for results, you need tracking and follow up. 14. One size fits all: Tailor your plan to its real business purpose. Business plans can be different things: they are often just sales documents to sell an idea for a new business. 15. Diluted priorities: Remember, strategy is focus. A priority list with 3-4 items is focus. A priority list with 20 items is certainly not strategic, and rarely if ever effective. 16. Hockey-stick shaped growth projections:
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Sales grow slowly at first, but then shoot up boldly with huge growth rates, as soon as 'something' happens. Have projections that are conservative so you can defend them. 17. Unrealistic Costs: Prospective small business owners may not be realistic about costs associated with the cash flow plan. Cost estimates, especially build-outs, are usually incomplete, not researched, not based on at least three estimates, dont allow for contingencies, and often include too much startup inventory. 18. Vague Pricing: Entrepreneurs may not have a good handle on estimating pricing of their product/service. This affects the break-even sales projections (if they do these at all) and other financial projections. 19. No Exit Strategy: Too many business plans have no exit strategy. This applies especially when large amount of money has to be borrowed. The financing people want to know what happens to the business if something happens to the owner. 10) Quick-start route to Entrepreneurship Refer Vijay Ovhals notes 11) Small Scale Industries & their problems Small Scale Industries may sound small but actually plays a very important part in the overall growth of an economy. Small Scale Industries can be characterized by the unique feature of labor intensiveness. The total number of people employed in this industry has been calculated to be near about one crore and ninety lakhs in India, the main proponents of Small scale industries. The importance of this industry increases manifold due to the immense employment generating potential. The countries which are characterized by acute unemployment problem especially put emphasis on the model of Small Scale Industries. It has been observed that India along with the countries in the Indian continent have gone long strides in this field. Advantages associated with Small Scale Industries

This industry is especially specialized in the production of consumer commodities. Small scale industries can be characterized with the special feature of adopting the labor intensive approach for commodity production. As these industries lack capital, so they utilize the labor power for the production of goods. The main advantage of such a process lies in the absorption of the surplus amount of labor in the economy who were not being absorbed by the large and capital intensive industries. This, in turn, helps the system in scaling down the extent of unemployment as well as poverty.

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It has been empirically proved all over the world that Small Scale Industries are adept in distributing national income in more efficient and equitable manner among the various participants in the process of good production than their medium or larger counterparts. Small Scale Industries help the economy in promoting balanced development of industries across all the regions of the economy. This industry helps the various sections of the society to hone their skills required for entrepreneurship. Small Scale Industries act as an essential medium for the efficient utilization of the skills as well as resources available locally.

Small Scale Industries enjoy a lot of help and encouragement from the government through protecting these industries from the direct competition of the large scale ones, provision of subsidies in the form of capital, lenient tax structure for this industry and many more. Difficulties faced by small scale industries in india The production problems include raw material availability, capacity utilization, and storage problems.

The marketing problems arises because of dealing in only one product, cut throat competition, adopting cost oriented method of pricing, lack of advertisement, not branding their products etc. The financial problems include investment risks, procurement of loan from banks and their repayment, meeting day to day expenses and the like. The labour problems include highly demanding employees, absenteeism lack of skilled workers and transportation of workers. Infrastructure problems also add coal to the fire. Unless and until you have the infrastructure in its place the rest of the efforts are futile. Personal problems like spending less time with family and for the whole sweat exerted the rewards have not been favorable. PROBLEMS OF SMALL SCALE INDUSTRIES SSI units face a number of problems. A large number of SSI units are sick of weak. It is estimated that about 99% of the total sick/weak units in the country belong to the SSI sector. The sick or weak position of SSIs is due to the various problems faced by them The problems faced by SSI units can be broadly divided into four groups as shown in the following chart:
PROBLEMS OF SSI UNITS

Production Problems

Financial Problems

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Marketing Problems

Other Problems

I. PRODUCTION PROBLEMS 1. Problem of Raw Materials : SSI units face the problem of raw materials. The problems may be: Shortage of raw material : SSI units face the problem of shortage of raw material, and as such , the production cycle gets affected, which in turn create problems for delivery of goods in the market. Poor Quality of Raw Materials : At times, SSI units have to face the problem quality of raw materials and other inputs. As a result of this , the quality of production gets affected, which in turn affects sales and revenues

2. Use of Outdated Technology : SSI units use outdates technology. A good number them purchase second hand machinery . the use outdated technology affects Quality and quantity of production . Increase the costs, due to increase in wastage, loss due to breakdowns , high maintenance of machines etc.

3. Lakh Research & Development : SSI units hardly place emphasis on R & D. They continue to manufacture the same type of goods year after year. There is hardly any innovation in product features, packaging, and so on . Lack of R & D not only affects the quality of products, but also the units continue to make goods at higher costs therefore, in order to improve quality, product features, and to reduce the costs, there is a need to undertake R & D 4. Problem of Infrastructure: SSI units a number of infrastructural problems especially in the area of transport and power. The small sector units in the rural and semi-urban areas face the worst of infrastructural shortage. As a result of poor infrastructure , the overall sector units gets affected . 5. Poor Quality Control : Some of the SSI units do not place much emphasis on quality control. As a result of this the quality of product gets affected. This in turn affects good will of the units. Due to problem of quality the sale of the SSI units do get affected which in turn may affected their profits, and at times they have face huge losses

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6. Under Utilization of Plant Capacity : Quite often, the SSI units are not in a position to utilize plant capacities. This is due to lack of demand for their products. The SSI units go for plant expansion without proper analysis of the market demand for their products. It is estimated that 50% of the installed capacity is not utilized by SSI units in India II. FINANCIAL PROBLEMS 7. Credit Problems : The SSI units face the problem of finance. They find it difficult to raise working capital needs, as well as fixed capital needs. The SSIs and cottage moneylenders, as it is difficult to obtain timely financial assistant from the organized banking sector . However , since 1990, SIDBI is financing professionally managed SSI units directly as well as indirectly. SIDBI provides indirect finance through state Financial Corporations (SFCs and state Industrial Development Corporations (SIDCs). MARKETING PROBLEMS : Defective Marketing Strategies : The SSI units face a number of problems. Due to marketing problems, the SSI units find it difficult to market and promote their products. Due to this, their sale get affected, and consequently profits. The following are some of the marketing problems faced by SSI units: Defective pricing strategies Poor distribution network Lack of Marketing Research Poor and inadequate promotion Lack of emphasis on after sale-service Poor Packaging and design of products

III. 8.

IV. 9.

GENERAL PROBLEMS Law Labour Productivity : The SSI units also face personnel problems. A number of SSI units owners are harassed by selfish and militant trade unions. Also, the labour productivity is low due to the following problems : Unscientific recruitment and selection of employees Lack of training of development. Faculty placement of employment. Faculty ok lack of performance appraisals. Poor compensation policies.

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10. Lack Professionalism in Management : One of the major problems of SSI units is the lack of professionalism on the part of management. They often lack management and technical skills. The lack of professionalism is reflected in the following Dependence on outdated technology Lack of emphasis on R & D Improper personnel policies Emphasis on only profits etc.

11. Adverse Effects of Liberalization and Globalization : Since the post-reform period SSI units face a tough competition both from cheap imports (due to reduction in customs duties and removal of quantitative restrictions) and also from within the country. The Government started the process of dereservation of items reserved for SSI ( on a large extent ) since 2002. As a result, the reserved for SSI units have come down to 239 in Jan 2007. The dereservation intended to improve the overall performance of SSIs. However in reality a number of SSI units have become weak or sick , and several of them have closed down their operations after the post-reform period

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12) Gov. concessions and incentives to SSI

The responsibility of development of small scale industries rests with the government of India. In the pre-liberalised era the small scale industries enjoyed various advantages. However, with the opening up of the economy, the situation has taken a different turn. 1. Reservation of items for exclusive manufacture in the small scale sector (Open General License OGL, etc) 2. Reservation of items for exclusive purchase from SSI (DGS&D Director General Supplies & Disposal buys for the government, they buy some items only from SSI on basis of govt directives) 3. Foreign Direct Investment (FDI) SSI sector 24% allowed 4. Export Promotion Council help entrepreneurs exhibit products in foreign locations, etc; to overcome the problems of marketing of the SSI products in the overseas market, the Export Promotion Council helps its members a. Direct Marketing b. Developing Vendor Relations c. Opening Sales Outlets in foreign destinations 5. Incentive Schemes for ISO 9000 certification govt of India gives incentive to SSI for acquiring ISO 9000 certification to the extent of the cost incurred subject to a max of Rs. 75000. This scheme is implemented by small industrial development bank of India (SIDBI) for the government of India which takes care of MSMEs in India. 6. Investment limit in plant & machinery lowered to 100 lakhs. 7. Integrated technology upgradation and management programme (Uptech) 8. Technology Bureau for Small Enterprises 9. Small Enterprise Information & Resource Centre Network (SENET) 10. Relaxation under Environmental laws 11. Common Effluent Treatment Plants 12. Industry related Research institutes CSIR (Council for Scientific and Industrial Research) has a pool of scientists capable of providing research & development solutions relating to the industry sector. 13. Exemption & Preferential Treatment from excise dut ies (Upto 150 lakhs you dont have to pay excise duty) 14. Priority in Credit Policy nationalised banks have been instructed accordingly 15. Initiative for Credit RBI to ensure adequate and timely credit to small scale entrepreneurs has directed the commercial banks to provide working capital requirements to the extent of 20% of the annual sales turnover subject to a limit of 100 lakhs. 16. Interest on Delayed Payments Act was enacted in 1993 by the Indian Parliament to tackle the problem of settlement of dues from big companies to the SSI units.

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13) Support Organizations Refer Vijay Ovhals notes SIDBI (Small Industries Development Bank of India) Established in April 2,1990 Principal Development Financial Institution for : -- Promotion -- Financing and -- Development of Industries in the small scale sector and --Co-ordinating the functions of other institutions engaged in similar activities. SIDBI was established on April 2, 1990. The Charter establishing it, The Small Industries Development Bank of India Act, 1989 envisaged SIDBI to be "the principal financial institution for the promotion, financing and development of industry in the small scale sector and to coordinate the functions of the institutions engaged in the promotion and financing or developing industry in the small scale sector and for matters connected therewith or incidental thereto. The business domain of SIDBI consists of small scale industrial units, which contribute significantly to the national economy in terms of production, employment and exports. Small scale industries are the industrial units in which the investment in plant and machinery does not exceed Rs.10 million . About 3.1 million such units, employing 17.2 million persons account for a share of 36 per cent of India's exports and 40 per cent of industrial manufacture. In addition, SIDBI's assistance flows to the transport, health care and tourism sectors and also to the professional and self-employed persons setting up small-sized professional ventures. Mission To empower the Micro, Small and Medium Enterprises (MSME) sector with a view to contributing to the process of economic growth, employment generation and balanced regional development Vision To emerge as a single window for meeting the financial and developmental needs of the MSME sector to make it strong, vibrant and globally competitive, to position SIDBI Brand as the preferred and customer - friendly institution and for enhancement of share - holder wealth and highest corporate values through modern technology platform

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14) Venture Capital Starting and growing a business always require capital. There are a number of alternative methods to fund growth. These include the owner or proprietors own capital, arranging debt finance, or seeking an equity partner, as is the case with private equity and venture capital. Venture capital is a means of equity financing for rapidly-growing private companies. Finance may be required for the start-up, development/expansion or purchase of a company. Venture Capital firms invest funds on a professional basis, often focusing on a limited sector of specialization (eg. IT, infrastructure, health/life sciences, clean technology, etc.). The goal of venture capital is to build companies so that the shares become liquid (through IPO or acquisition) and provide a rate of return to the investors (in the form of cash or shares) that is consistent with the level of risk taken. With venture capital financing, the venture capitalist acquires an agreed proportion of the equity of the company in return for the funding. Equity finance offers the significant advantage of having no interest charges. It is "patient" capital that seeks a return through long-term capital gain rather than immediate and regular interest payments, as in the case of debt financing. Given the nature of equity financing, venture capital investors are therefore exposed to the risk of the company failing. As a result the venture capitalist must look to invest in companies which have the ability to grow very successfully and provide higher than average returns to compensate for the risk. When venture capitalists invest in a business they typically require a seat on the company's board of directors. They tend to take a minority share in the company and usually do not take day-to-day control. Rather, professional venture capitalists act as mentors and aim to provide support and advice on a range of management, sales and technical issues to assist the company to develop its full potential. Venture capital has a number of advantages over other forms of finance, such as:

It injects long term equity finance which provides a solid capital base for future growth. The venture capitalist is a business partner, sharing both the risks and rewards. Venture capitalists are rewarded by business success and the capital gain. The venture capitalist is able to provide practical advice and assistance to the company based on past experience with other companies which were in similar situations. The venture capitalist also has a network of contacts in many areas that can add value to the company, such as in recruiting key personnel, providing contacts in international markets, introductions to strategic partners, and if needed co-investments with other venture capital firms when additional rounds of financing are required.

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The venture capitalist may be capable of providing additional rounds of funding should it be required to finance growth.

Venture capital (VC) is a type of private equity capital typically provided for early-stage, highpotential, growth companies in the interest of generating a return through an eventual realization event such as an IPO or trade sale of the company. VC investments are generally made as cash in exchange for shares in the invested company. It is typical for VC investors to identify and back companies in high technology industries and start ups. VC typically comes from institutional investors and high net worth individuals and is pooled together by dedicated investment firms. VC is also associated with job creation, the knowledge economy and used as a proxy measure of innovation within an economic sector or geography. A core skill within VC is the ability to identify novel technologies that have the potential to generate high commercial returns at an early stage. By definition, VCs also take a role in managing entrepreneurial companies at an early stage, thus adding skills as well as capital (thereby differentiating VC from buy out PE which typically invest in companies with proven revenue) and thereby potentially realizing much higher rates of returns. The distinguishing feature of VC and non-VC investee companies is one of focus. The prospective VC investee company needs to have a convincing product or line of business potential and an accomplished management team. If the company is generating a cash flow, this will likely be an incipient development. In fact, these two aspects product and management team are what the VC investor and his group are ultimately betting on, irrespective of whether the company is generating cash yet or not. Companies with wellestablished sales and profitability track records generally tend to involve PE financing that more appropriately falls into one of the other non-VC categories of PE unless they are taking on a new business venture under their corporate umbrella. A Venture Capitalist is a person or investment firm that makes venture investments and these Venture Capitalists are expected to bring managerial and technical expertise as well as capital to their investments. VC is most attractive for new companies with limited operating history that are too small to raise capital in the public markets and have not reached the point where they are able to secure a bank loan or complete a debt offering. In exchange for the high risk that venture capitalists assume by investing in smaller and less mature companies, venture capitalists usually get significant control over company decisions, in addition to a significant portion of the company's ownership (and consequently value).
Structure of VC Firms

VC firms are typically structured as partnerships, the general partners of which serve as the managers of the firm and will serve as investment advisors to the VC funds raised. VC firms may also be structured as LLC, in which case the firm's managers are known as managing members. Investors in venture capital funds are known as limited partners. This comprises both high net worth individuals and institutions with large amounts of available capital, such as state and private pension funds, university financial endowments, foundations, insurance companies, and pooled investment vehicles, called fund of funds or mutual funds.
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Depending on the business type, the VC firm approach will differ. When approaching a VC firm following aspects must be considered: 1. 2. 3. 4. 5. 6. Business Cycle: Do they invest in budding or established businesses? Industry: What is their industry focus? Investment: Is their typical investment sufficient for your needs? Location: Are they regional, national or international? Return: What is their expected return on investment? Involvement: What is their involvement level?

Targeting specific types of firms will yield the best results when seeking VC financing. It is important to note that many VC firms have diverse portfolios with a range of clients. If this is the case, finding gaps in their portfolio is one strategy that might succeed. Specialisation by stage Venture capitalists differentiate themselves not only by sector and geography but also in terms of the point at which they will invest in a start-up. Some VC companies provide first-stage or seed capital. Others wait until the company has been established and is either maki ng sales or generating cash flow. Seed financing is usually in the range of US$0.5m to US$1m. First stage VC firms tend to be small because larger firms cannot afford the labour-intensive care required at this stage on relatively small investments. However, feeder funds are a new niche whereby a large VC firm provides funding for first-stage VC firms in return for the opportunity to make a later-stage investment if the start-up is successful. Another niche is the turnaround VC firm, which will, for example, buy out the founder of an insolvent start-up at a fire sale price, usually with an opportunity for the founder to remain with the company in an executive position as a paid employee. The turnaround VC will then offer the companys creditors a price fo r their debt holdings with a significant haircut.

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Roles within VC Firms

Within the VC industry, the general partners and other investment professionals of the VC firm are often referred to as "venture capitalists" or "VCs". Although the titles are not entirely uniform from firm to firm, other positions at VC firms include:

Venture partners - Venture partners are expected to source potential investment opportunities ("bring in deals") and typically are compensated only for those deals with which they are involved. Entrepreneur-in-residence (EIR) - EIRs are experts in a particular domain and perform due diligence on potential deals. EIRs are engaged by VC firms temporarily (six to 18 months) and are expected to develop and pitch startup ideas to their host firm (although neither party is bound to work with each other). Some EIR's move on to executive positions within a portfolio company. Principal - This is a mid-level investment professional position, and often considered a "partner-track" position. Principals will have been promoted from a senior associate position or who have commensurate experience in another field such as investment banking or management consulting. Associate - This is typically the most junior apprentice position within a VC firm. After a few successful years, an associate may move up to the "senior associate" position and potentially principal and beyond. Associates will often have worked for 1-2 years in another field such as investment banking or management consulting.

Structure of the funds

Most VC funds have a fixed life of 10 years, with the possibility of a few years of extensions to allow for private companies still seeking liquidity. The investing cycle for most funds is generally three to five years, after which the focus is managing and making follow-on investments in an existing portfolio. In such a fund, the investors have a fixed commitment to the fund that is initially unfunded and subsequently "called down" by the VC fund over time as the fund makes its investments. It can take anywhere from a month or so to several years for venture capitalists to raise money from limited partners for their fund. At the time when all of the money has been raised, the fund is said to be closed and the 10 year lifetime begins. Some funds have partial closes when one half (or some other amount) of the fund has been raised. "Vintage year" generally refers to the year in which the fund was closed and may serve as a means to stratify VC funds for comparison. VC funding Venture capitalists are typically very selective in deciding what to invest in; as a rule of thumb, a fund may invest in one in four hundred opportunities presented to it. Funds are most interested in ventures with exceptionally high growth potential, as only such opportunities are likely capable of providing the financial returns and successful exit event within the required timeframe (typically 3-7 years) that venture capitalists expect.
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Because investments are illiquid and require 3-7 years to harvest, venture capitalists are expected to carry out detailed due diligence prior to investment. Venture capitalists also are expected to nurture the companies in which they invest, in order to increase the likelihood of reaching an IPO stage when valuations are favourable. Venture capitalists typically assist at four stages in the company's development:

Idea generation; Start-up; Ramp up; and Exit

There are typically six stages of financing offered in Venture Capital, that roughly correspond to these stages of a company's development. 1. Seed Money: Low level financing needed to prove a new idea (Often provided by "angel investors") 2. Start-up: Early stage firms that need funding for expenses associated with marketing and product development 3. First-Round: Early sales and manufacturing funds 4. Second-Round: Working capital for early stage companies that are selling product, but not yet turning a profit 5. Third-Round: Also called Mezzanine financing, this is expansion money for a newly profitable company 6. Fourth-Round: Also called bridge financing, 4th round is intended to finance the "going public" process The need for high returns makes venture funding an expensive capital source for companies, and most suitable for businesses having large up-front capital requirements which cannot be financed by cheaper alternatives such as debt. That is most commonly the case for intangible assets such as software, and other intellectual property, whose value is unproven. In turn this explains why VC is most prevalent in the fast-growing technology and life sciences or biotechnology fields. If a company does have the qualities venture capitalists seek including a solid business plan, a good management team, investment and passion from the founders, a good potential to exit the investment before the end of their funding cycle, and target minimum returns in excess of 40% per year, it will find it easier to raise venture capital. 15) Discuss PESTEL factors that make or mar the entrepreneurial climate w.r.t. contemporary India Refer Vijay Ovhals Notes

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