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MS-93 Management of New and Small Enterprises
1. Assume that you are a garment exporter, operating in the small scale sector . Critically evaluate the support infrastructure
available in the country and make your suggestions for making the support infrastructure more conducive to the needs of
small exporters
Support infrastructure
Services and supplies needed to sustain an organization in its day to day operations, such as communications, labor, power, transport,
water.
Trade is beneficial for poverty reduction. “The central effect on poverty is assumed to come from the effects on real wages of the
unskilled workers, endowed with labor but no human or financial capital” (Bhagwati and Srinivasani (2002)). There is little persuasive
evidence concerning the effect of trade on income and therefore growth. Also, although many countries have benefited greatly from
policies aimed at fuller integration into the world economy, lagging countries are found in all regions. It is widely believed that in a
proper policy environment trade can promote growth and thereby reducing poverty. With increased competition in major markets
forcing business to adapt to just in time production and management systems, flexibility, speed and reliability in delivery of goods
have assumed significant importance.
However, for most, inadequate infrastructure and poor transport network make it difficult for their manufacturers to participation in
new global outsourcing and just in time production because they cannot guarantee timely delivery of goods or ensure reliability or
flexibility in the supply of the goods. Some of the delays are due to poor infrastructure in both transit countries and in national
economies. The fact that delays can occur outside the territorial boundaries of one country underlines the point that these countries
acting alone would not be in a position to overcome the real obstacles.
The high transport costs of imports of countries inflate the prices of capital goods and
intermediate inputs, thereby increasing the cost of domestic agricultural and industrial
production. Outside Oceania, Africa has the highest freight costs as a percentage of
import value .The ratio increased from 9.4 in 1990 to 9.9 in 2004 (slightly lower than in 2003). Developing European countries have,
however, managed to reduce the cost of freight as a percentage of import value from 6.9 in 1990 to 2.8 in 2004. Thus a significant
reduction in the transport cost of imports would boost domestic production, support diversification efforts and increase the
competitiveness of exports.
The median landlocked country tends to incur transport costs 50 per cent higher than those of the median coastal country, and to have
trade volumes that are 60 per cent lower (Limão and Venables (2001)). Of the 30landlocked developing countries worldwide, (12 of
them are least developed countries (LDCs)). There are 16 principal coastal transit countries serving the landlocked countries by
providing land transit corridors to ports, giving them access to the sea and to world markets Notably, the high transit costs faced by
exports have become a far more restrictive barrier to trade than tariffs in major markets. Tariffs in Canada, the European Union, Japan
and the United States vary from averages of 3 to 7 per cent on goods originating. In contrast, transit costs paid by landlocked countries
are on average almost three times higher than the average tariffs. Transit costs vary from a low of under5 percent for Swaziland to a
high of 50 percent for Chad and Malawi. Border delays form a significant part of the transit costs. For example, border post delays in
Southern range from 4 to 36 hours on average).It is estimated that delays at major border posts in Southern cost the region in the range
of $48 million annually.
Institutional Infrastructure for export promotion in India
Institutions engaged in export effort fall in six distinct tiers. At the top is the Department
of Commerce of the Ministry of Commerce and industry. This is the main organization to
formulate and guide Indiaâ€™s trade policy. At the second tier, there are deliberative and
consultative organizations to ensure that export problems are comprehensively dealt with
after mutual discussions between the Government and the Industry. At the third tier are
the commodity specific organizations which deal with problems relating to individual
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commodities and/or groups of commodities. The fourth tier consists of service institutions which facilitate and assist the exporters to
expand their operations and reach out more effectively to the World Markets. The fifth tier consists of Government trading
organizations specifically set up to handle export/import of specified commodities and to supplement the efforts of the private
enterprise in the field of export promotion and
import management. Agencies for export promotion at the State level constitute the Sixth
tier.
The Department of Commerce is the primary government agency responsible for evolving and directing foreign trade policy ad
program, including commercial relations with other countries, Various trade promotional measures and development and
regulation of certain export-oriented industries.
Apart from the Finance and Administrative Divisions, the principal functional divisions of the Department of Commerce are
Economic Divisions, Trade policy Division, Export Products Division, Export Services Division and Export Industries Division.
The main task of the Trade Policy Division is to keep abreast of the developments in the
international organizations like UNCTAD, WTO, the Economic Commission for Europe,
Africa, Latin America and Asia and Far East (ESCAP). It is also responsible for
Indiaâ€™s relations with the European Economic Community, European Free trade
Association Latin American Free Trade Area, other regional groupings and the
Commonwealth. It also looks after the generalized system of preferences and non-tariffs
barriers.
The Foreign Trade Territorial Division is entrusted with the work relating to the
development of trade with different countries and regions of the world. This Division also
handles matters pertaining to State trading a barter deals, organization of trade fairs and
exhibitions, commercial publicity abroad, etc. It also maintains contacts with Indian
Trade Missions abroad and attends to the connected administrative work including the
protocol functions.
The Export Products Division pays attention to the problem connected with production,
generation of surplus and development of markets for the various products under its
jurisdiction. These products include plantations, marine products, chemicals, plastics, leather and leather goods, sports goods, films,
steel, metals, engineering products, minerals and ores, coal, petroleum products, mica, salt, etc. The Export Industries Division is
responsible for development and regulation of rubber, tobacco and cardamom. The division is also responsible for handling export
promotion activities relating to textiles, woolens, handlooms, readymade garments, silk and cellulose fibers, jute ad jute
products, handicrafts, coir and coir products.
The Export Services Division deals with the problem of export assistance including
import replenishment licensing, cash assistance, export credit, export houses, Marketing
Development Assistance and grants, transport, free trade zones, dry ports, quality control
and pre-shipment inspection, joint ventures abroad and capacity creation in export-
oriented industries including assistance to import capital goods and essential raw
materials.
The Economic Divisions, headed by the Economic Adviser, is responsible for the formulation of export strategies, export planning,
periodic appraisal and review of policies and also for maintaining coordination and constant contacts with the other Divisions as well
as with various organizations which have been set up under the
commerce Department to assist the export drive. This Division also monitors work
relating to technical assistance, management services for export and overseas investments
by Indian entrepreneurs.
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2. A potential entrepreneur is planning to setup a computer training institute, to train people in software development and
usage. He has sought your help in conducting the market assessment for this proposed enterprise. What are the factors that he
should study to conduct his demand analysis, analysis of the competitive situation and an analysis of the trade practices?
Explain in detail.
The lessons offered can range from the very basic to the utterly advanced. With the computer being an everyday item nowadays, it is
now a must that everyone knows how to use it. With that fact, one can conclude that a computer training center is a very lucrative
business opportunity.
Setting up a computer training center is not a daunting task once you have become aware of what you need to prepare. The
requirements for a computer training center are not as complicated as you might think. Here are the important things to consider when
starting a computer training center
Computers and Software
You would need at least 10 personal computer units in order to start a computer training
center. The number of computers actually varies according to the space you have
available, as well as your budget. Aside from computers, you need to have the necessary
software in which your students will come to learn about. The computers should also be
up to date, with the latest processors and operating system as much as possible.
To avoid legal troubles and to protect your reputation as a businessman, make sure to use genuine and licensed software only. It would
do you no good to use pirated programs even if they may be cheaper and easier to procure.
Good Teachers
Teaching is a talent, not a skill that is learned at school. Teachers can only be called as
such if they get their points across to their audience, and if the students learn enough to
acquire new skill. In a computer training center, the knowledge level of your students
range from the ignorant to those with background but wish to learn more. Because of this,
you need good teachers that have the skill to deal with different kinds of students.
You won’t need to look for a professional degree in a computer training center, although it can be a plus. Anyone can become a
teacher in a computer training center, just as long as they have the necessary knowledge in what they will be teaching. When hiring a
teacher, make sure to have him or her perform a teaching demo so you can judge the applicant’s actual capability to teach and help the
students of your center.
Computer Training Center Business Registration
This is very important. You need to have the business registered into the agency responsible for businesses in your state. Depends on
where you live, you might need to have yourself certified by a body to show that your business is qualified to teach the skill of using
computers to the public.
Starting a computer training predominantly requires you to be a computer literate person yourself. There are certain prerequisites for
starting up a computer training for business purpose. If you are serious about launching a computer training business of your own, you
require to be guided by the following points
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Selection of Proper Location
Location plays important role in setting up a computer training institute.
Important factors to be considered before choosing a location are convenient accessibility, less competition and great demand for its
usage.
Budget
While planning budget allocation for establishing set-up for your proposed computer training, make sure that you invest according to
your limits. Do not expect any return or profit in the first six months.
Authentic Software
There is growing trend to use pirated software by computer trainings and businesses. However, it is not a healthy trend to follow. It
may land you in serious legal trouble. Always use genuine software. If you have limited budget, you can use alternate option and
download open source software like Open Office.
Branded Hardware
Using a cheap and ordinary hardware may make your computer function inefficiently. So, always use branded and latest hardware
that could give your computers advanced look and a cutting edge over your competitors.
• Foremost requirement for initiating computer hardware business are the skills of servicing and assembling. Other requirements
include excellent customer relations, internal control, accounting, software trouble-shooting, time management and purchasing. It
should be noted that it is the proper expertise of computer networking that paves way for computer repair and maintenance
business.
• Computer networking business has evolved to be a very fulfilling business. This business has wide prospects for people who can
offer maintenance plans and handle the technicalities that surround servers and workstations. Several factors help in establishing a
perfect networking business. Among all of these, a well-conceived promotional strategy tops others. The promotional strategy
includes tools like advertising, word-of-mouth and networking.
• Computer Business Ideas: Home Based Small Computer Related Business-

Question: I am planning to go for small business of any computer related, can you...
• How to Start a Computer Business- Computer has become a household item in most Indian cities. It’s utility to the masses...
• Hardware and Networking Jobs- Hardware and Networking jobs in India have huge openings in the IT sector. Computer
hardware...
• How To Start Computer Repair Business: Plan for Running Business- How to Start Computer Repairing and Maintenance
Business Over the previous decade, computer repair business...
• Computer Jobs- Most job seekers in India are technically efficient to meet the demands of high end...
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3. Conduct a survey of ten Entrepreneurs in your region. Discuss with them to analyze the common errors that they made in
their business plan formulation which became apparent once they started their enterprises . What are the suggestions that you
can give to avoid such errors?
Ans. A business plan is a formal statement of a set of business goals, the reasons why they are believed attainable, and the plan for
reaching those goals. It may also contain background information about the organization or team attempting to reach those goals.
Business plans may also target changes in perception and branding by the customer, client, tax-payer, or larger community. When the
existing business is to assume a major change or when planning a new venture - a 3 to 5 year business plan is essential
Business plans may be internally or externally focused. Externally focused plans target goals that are important to external
stakeholders, particularly financial stakeholders. They
typically have detailed information about the organization or team attempting to reach the
goals. With for-profit entities, external stakeholders include investors and customers.
External stake-holders of non-profits include donors and the clients of the non-profit's services. For government agencies, external
stakeholders include tax-payers, higher-level government agencies, and international lending bodies such as the IMF, the World Bank,
various economic agencies of the UN, and development banks.
Internally focused business plans target intermediate goals required to reach the external
goals. They may cover the development of a new product, a new service, a new IT
system, a restructuring of finance, the refurbishing of a factory or a restructuring of the
organization. An internal business plan is often developed in conjunction with a balanced
scorecard or a list of critical success factors. This allows success of the plan to be measured using non-financial measures. Business
plans that identify and target internal
goals, but provide only general guidance on how they will be met are called strategic
plans.
Operational plans describe the goals of an internal organization, working group or department. Project plans, sometimes known as
project frameworks, describe the goals of a particular project. They may also address the project's place within the organization's
larger strategic goals
The Most Common Errors When Writing A Business Plan
The thought of compiling a formal business plan can be quite daunting to the entrepreneur. Many of us see ourselves as the creative
type rather than the formal intellectual and we might have an inbuilt tendency to try and fly by the “seat of our pants”. In spite of the
pain, perceived or otherwise, involved in its creation, we must invest the time and effort to come up with a formal business plan. It is
not as hard as you think; there are plenty of good books on the subject and some really great software packages, such as Business Plan
Pro, for example.
So what are the most common errors people face when writing a business plan? Apart from the obvious - procrastination - you should
always make sure that you include the necessary items. Make sure that you do devote time to creating the plan and don’t use any
excuses, such as your busy schedule. You must look at the bigger picture, which includes the need to craft a formal projection of
where you want to go.
When constructing your business plan, think in terms of cash rather than profits. Even though you may come up with a projection
which you like - income being greater than expenses - you must understand cash flow. A profit and loss statement should be almost
secondary to your cash flow statement, as you must ensure that you have enough cash in hand on a day-by-day basis to even survive.
Don’t focus too much on your grand idea, but make sure that you have all the
fundamentals covered. A bold idea is hard to sell, so you need to stress that you have the
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available time, common sense and business smarts to succeed. If you are looking for
investors, they will be more interested in you and/or your people, rather than the idea.
When you’re compiling a business plan, leave out the hype. Do not use any colorful language or preconceived notions. People who
will be looking at your business plan will want to see hard, solid facts, backed up by very reasonable assumptions. Milestones must be
set, tasks established and sound logic applied to your reasoning.
Remember that you must focus and not come up with an unachievable list of too many priorities. Your strategies are very important
and you will only be kidding yourself if you try and cast your net too wide.
It’s an obvious goal to project growth, make sure that it is realistic and that any growth spurts are tied and referenced to
understandable and realistic events. Your projections must be conservative at all times and you must be able to defend them.
Always make sure that you are not living in a bubble and that you are thoroughly aware of your business competition. If your business
plan is too inwardly focused, you run the risk of ignoring other companies in your marketplace at your peril.
Don’t base your business plan and your very success on one mega-deal. This is known colloquially as putting “all your eggs in one
basket” and should you, or your clients drop this basket, you will be doomed!
Remember, this does not have to be rocket science. A business plan is based, first and foremost, on common sense. You must, deep
down within yourself, believe in all the assertions and assumptions that you’re making. Take time to sit down in a quiet room and
really think it all through, before committing to paper. Solid preparation now puts you in good stead for the future
Entrepreneurs were asked “What do you think is the most critical mistake entrepreneurs make in the business plans that they present to
angel investors?” The entrepreneurs who responded to this survey question had, as a group, a remarkably thorough understanding of
what can go wrong with a business plan.
1. Unrealistic 27% the respondents really took their fellow entrepreneurs to task for not presenting a realistic picture of the
business opportunity to investors. They told us that nearly all parts of the plan are unrealistic, except perhaps the table of contents
and the appendix.
Entrepreneurs said:
o “Not being practical & pragmatic”
o “Underestimate the time and amount of money needed to develop a product”
o “Overestimate potential and underestimate competitive pressure’s”
o “Too much BS and inflated guesses on the numbers”
o “Inflating the numbers or expectations, the-’if I sold 1 cup of tea to every person in China syndrome”
2. Lacking in Clarity of the Presentation 16% The best business plans are those that are concise and to the point. The trend these
days is toward shorter business plans. The 100-page magnum opus of the past has given way to a sportier, twenty-five page
document.
Entrepreneurs said:
o “Unclear and overoptimistic projections of the expected results”
o “Too involved in the details and forget to sell the sizzle”
o “Too much useless information, too many numbers, not precise about what is being offered”
o “Not being able to present their reason for funding in a simple and concise manner”
o “Being clear and concise about what they are all about and excess of knowledge about the idea but many difficulties giving a
good and easy explanation about the real business”
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3. Incomplete 15%
Incompleteness of presentation often stems from a lack of basic homework into the market and the competition. The plan is an
ideal venue for the founders of the company to demonstrate their thorough knowledge of the market space they will be entering.
Unfortunately, many times the business plan content demonstrates just the opposite.
Entrepreneurs said:
o “Not showing profit timeline”
o “Poor presentation (business plan incomplete)”
o “A lack of defined ives and poorly presented executive summary”
o “Insufficient explanation of marketing and sales strategy and approach”
4. Valuation and Exit Strategy 10%

This is a controversial part of a business plan. Is it better to be extremely direct and specific about the proposed deal structure-
how much equity can be given up for how much capital? Or be flexible and not state a projected return on investment and exit
strategy? The experts and the investors disagree.
Entrepreneurs said:
o “Exit strategy is unclear of overly optimistic”
o “Do not show how they will generate ROI for investors nor an exit strategy for them
o “Weak business plan (i.e. no clear ROI)”
o “Lack of return on investment figures”
5. Financial Projections 8%
With financial projections, sometimes less is more. Only 8% of entrepreneurs responded that unrealistic financial projections was
the most critical mistake while both angel investors and venture capitalists ranked unrealistic financial projections as the number
one most critical mistake.
Entrepreneurs said:
o “Too long and involved in financial numbers.”
o “Presenting vague or ambiguous assumptions regarding their projected cash flow statements”
o “Not understanding their business start up costs, possibly due to lack of research”
6. Market Need 8%
For an entrepreneur to succeed in his/her mission of obtaining capital, the venture must be clearly set apart, and show to be
superior, to both potential competitors in the market space, but also to other deals that are competing for the investors’ attention
and dollars. Entrepreneurs tend to overlook the latter type of competition: other entrepreneurs are constantly coming up with
good ideas as well.
Entrepreneurs said:
o “Inadequate presentation of market need and value proposition”
o “Do not identify the size of the market, nor the particular niche they will compete in”
o “Failing to explain what is different about the ‘solution’ that they offer”
7. Competition 8%
It is truly amazing how many business plans contain a statement like the following: “There is no competitor in our market space
who is providing the same service/product that we are; therefore we do not see any direct competitors.”
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Entrepreneurs said:
o “Not understanding their competition”
o “Not thorough enough analysis of competitive landscape”
o “They think they have no competitors”
8. Management Team 4%
It is interesting that relatively few entrepreneurs cited this as the major weakness of a business plan, whereas investors
overwhelmingly view this as the critical factor in making the investment decision.
Entrepreneurs said:
o “Don’t focus enough on their management team and what experience they bring to the new venture”
o “Lack of information on management or inexperience in their field”
Avoid the following errors while formulating business plan
1) Missing significant market changes caused by economic, social, demographic, technological and other trends.
2) Not effectively segmenting your market.
3) Presenting your evidence to make your market appear subservient to your Company's needs, instead of the opposite.
4) Underestimating Competitive, Potential Strength and Edge.
5) Boldly declaring and assuming you have no competition.
6) Unaware of Competitor's market plans.
7) Not differentiating effectively between Sales and Marketing. Sales = dealing directly with customers. Marketing = enticing
the customer to consider your product or service.
8) Justifying your Pricing Strategy solely by the cost to produce, market and sell your product or service without considering
market and customer price tolerance.
9) Assuming your Distributors will give your Product or Service equal sales time without having an Agreement of such.
10) Not effectively targeting your markets by attempting to fulfill many lucrative yet unrelated market gaps.
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11) A Marketing and Sales Strategy that is too broad or unachievable.
12) Underestimating the significance of Brand Name and Awareness and Product Packaging.
13) Failure to assess your Manufacturing Process, Operations and Alternatives in terms of costs, capabilities, serviceability,
delivery and such.
14) Inefficient Plant, Factory and Workplace Layout.
15) Failure to manage costs.
16) Poor Inventory Control Planning: No balance between meeting demand and minimizing costs via ordering,
production, handling and storage, capital allocations, parts and product shortages, etc. Inadequate Inventory Control System.
17) Failing to clearly isolate and identify all product or service costs (i.e. fixed, variable, direct, and indirect).
18) Poor Personnel Management Plan: Poor hiring practices. Lack of quality Management practices.
19) Failing to plan for Long-Range needs and changes in locations, facilities, equipment and machinery.
20) Having a Management Team with vastly unrelated experience to the industry you are in.
21) Missing Non-Compete and Employment Contracts which protect the proprietary nature of your business.
22) Giving up too much ownership to attract and attain good people and management or compensating such people too much
without basing your incentives on achieving Strategic Milestones, by creating a paradigm in which an equitable payback
occurs for the outlays to key people.
23) Absence of a prestigious, experienced, unpaid, active and objective Board of Directors ("unpaid" not referring to equity
ownership).
24) Lack of a Succession Plan and Crisis Management Plan in the event of losing key
people.
25) Not having enough ownership to offer in the event second round funding becomes necessary. Lack of strong equity to
leverage funding goals and terms.
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4. While catering services and restaurants are one of the false test growing segment in the small scale sector, it has been felt
that the human resource component in such small enterprises is not given the kind of attention it merits. Want suggestions do
you have for
a. Making the small entrepreneurs in such enterprises conscious of the need to give adequate attention to get human resource
management
SMEs, both in size and shape, are not uniform across the globe. The way they are defined
depends on the stage of national economic development and the broad policy purposes
for which the definition is used. The Small-Scale Industry (SSI) sector in India is
different from the SME sector in other countries. There is no typology of medium scale
industry in India and the Indian definition of SSI is investment specific, while in the rest
of the world it is in terms of employment, assets or sales or combination of these factors .
HRM practice in small business is undoubtedly quantitatively and qualitatively different
from those in larger organisations. The growing small businesses need to develop their
HRM practices, as increasing size inevitably brings increased complexity, necessitating a
more professional approach towards managing the personnel. Audretsch and Thurik
(2000, 2001) argue that effective HRM practices are becoming increasingly important in
the new "knowledge-based" economy, as companies face the double challenge of the
need for more highly trained employees coupled with a shortage of qualified labour.
These challenges, towards smaller firms in general, reinforce the need for effective HRM
practices in the small firm. New trends in this area of HRM indicate that SMEs may have
realised the importance of sound HRM practices (Damodar and Golhar, 1994).
Gilbert and Jones (2000) found that HR practices in small businesses are predominantly
informal, ad-hoc and opportunistic; nevertheless, they are effective in small business.
Yet, relatively little research addressed the nature and significance of these differences.
There is no consensus among researchers regarding the role of HRM in small-firm

success (Deshpande and Golhar, 1994). HRM practices may be a leading cause of small
business failures (McEvoy, 1984). Inadequate and inefficient HRM in SMEs may result
in low productivity and high dissatisfaction and turnover among the staff (Mathis and
Jackson, 1991).
Globalisation has thrown many challenges to SMEs. One of the greatest conceptual
challenges is that on one hand, the individual SMEs would be fiercely competing with
each other within the nation and beyond and on the other hand at the same time they would be forced to collaborate and work together
than ever before to safeguard their own mutual interests to survive (Anil, 2003).
Recruitment and Training and Development (17 firms) accounting for 34 per cent have emerged as the two major HR practices for
which the ISO firms would like to consult external HR consultants.
Training and Development Programmes (72 per cent), Growth Plans and Strategies (64
per cent) and Regular Performance Appraisal (52 per cent) have emerged as the major
HR practices used among ISO certified firms when compared to firms without ISO
certification.
Issues related to training and development, usage of management techniques and HRM
practices followed have been the major differentiating factors between small
manufacturing firms with and without ISO certification. From this study, it is very clear
that ISO certified small firms place a greater emphasis on the use of HR consultants and
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human resource management practices are followed when compared to small firms
without ISO certification. Training and development programmes, regular performance
appraisal, growth plans and strategies have emerged as the major human resource
management practices followed by both small manufacturing firms with and without ISO
certification. Also, the usage of some of the management techniques such as continuous
improvement, just-in-time inventory control, and electronic work or der management are
more significant in ISO certified small firms when compared to small manufacturing
firms without ISO certification.
ISO certified small manufacturing firms when compared to their non-ISO certified
counterparts, have placed more focus on adoption of advanced technology,
training/development activities and human resource management practices. They are well
aware of the benefits of having a well-established workforce, which directly corresponds
to their firms' performance both qualitatively and quantitatively. While these results
throw some light on the differences in perception of small manufacturing firms with and
without ISO certification especially in a developing country with respect to technology adoption, and HRM practices followed, the
findings can further be explored using quantitative tools.
b. Developing sustainable Training mechanisms for the staff and workers in these enterprises
Managerial staff development
In SME’s managerial personnel are considered the evaluators and they themselves
seldom (if ever) experience a formal evaluation session. This is also logical considering
the small size of the firm and thus, managerial officers are generally evaluated informally by owners and the frequency of evaluation
is often uncertain. In large multinationals, even top level managers received a formal evaluation and these formal evaluations are
performed periodically.
Training and performance appraisal
In SME’s, programs of developing employees ' skills and appraising their performance
are generally managed directly by owner of the company or top managers. This is
logical due to the small size of the firm and the necessity to personally guarantee that
these new recruits are worth their compensations. In large multinationals on the other
hand, responsibilities to train and appraise performance are delegated to middle level
managers because top managers are already burdened with various strategic concerns.
Sources of recruitment
In SMEs, recruitment process generally uses only word of mouth among relatives, associates or colleagues Owners and
managers of SMEs generally do not feel the necessity of hiring professionals by advertising in mass media , or other means of
public communication .
In multinational corporations on the other hand, a greater range of formal recruitment sources, like newspaper advertisement and
government recruitment agencies are utilized in the recruitment process
Candidate screening
In SME 's candidates are generally screened through one or two simple process . In most small companies, one interview is all that is
required to decide on which candidate is suitable for the position. In large multinationals on the other hand, numerous formal selection
processes is in order before any decision could be made regarding employment .
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The quality of employees and their development through training and education are major factors in determining long-term
profitability of a small business. If you hire and keep good employees, it is good policy to invest in the development of their skills, so
they can increase their productivity.
Training often is considered for new employees only. This is a mistake because ongoing training for current employees helps
them adjust to rapidly changing job requirements.
Purpose of Employee Training and Development Process
Reasons for emphasizing the growth and development of personnel include
• Creating a pool of readily available and adequate replacements for personnel who may leave or move up in the organization.
• Enhancing the company's ability to adopt and use advances in technology because of a sufficiently knowledgeable staff.
• Building a more efficient, effective and highly motivated team, which enhances the company's competitive position and
improves employee morale.
• Ensuring adequate human resources for expansion into new programs.
Research has shown specific benefits that a small business receives from training and developing its workers, including:
• Increased productivity.
• Reduced employee turnover.
• Increased efficiency resulting in financial gains.
• Decreased need for supervision.
Employees frequently develop a greater sense of self-worth, dignity and well-being as

they become more valuable to the firm and to society. Generally they will receive a
greater share of the material gains that result from their increased productivity. These
factors give them a sense of satisfaction through the achievement of personal and
company goals.
The Training Process
The model below traces the steps necessary in the training process:
• Organizational Objectives
• Needs Assessment
• Is There a Gap?
• Training Objectives
• Select the Trainees
• Select the Training Methods and Mode
• Choose a Means of Evaluating
• Administer Training
• Evaluate the Training
Your business should have a clearly defined strategy and set of objectives that direct and drive all the decisions made especially for
training decisions. Firms that plan their training process are more successful than those that do not. Most business owners want to
succeed, but do not engage in training designs that promise to improve their chances of success. Why? The five reasons most often
identified are:
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Time - Small businesses managers find that time demands do not allow them to train employees.
Getting started - Most small business managers have not practiced training employees. The training process is unfamiliar.
Broad expertise - Managers tend to have broad expertise rather than the specialized skills needed for training and development
activities.
Lack of trust and openness - Many managers prefer to keep information to themselves. By doing so they keep information from
subordinates and others who could be useful in the training and development process.
Skepticism as to the value of the training - Some small business owners believe the future cannot be predicted or controlled and
their efforts, therefore, are best centered on current activities i.e., making money today.
A well-conceived training program can help your firm succeed. A program structured with the company's strategy and objectives in
mind has a high probability of improving productivity and other goals that are set in the training mission.
For any business, formulating a training strategy requires addressing a series of questions.
• Who are your customers? Why do they buy from you?

• Who are your competitors? How do they serve the market? What competitive advantages do they enjoy? What parts of the
market have they ignored?
• What strengths does the company have? What weaknesses?
• What social trends are emerging that will affect the firm?
The purpose of formulating a training strategy is to answer two relatively simple but vitally important questions: (1) What is our
business? and (2) What should our business be? Armed with the answers to these questions and a clear vision of its mission, strategy
and objectives, a company can identify its training needs.
Identifying Training Needs
Training needs can be assessed by analyzing three major human resource areas: the organization as a whole, the job characteristics and
the needs of the individuals. This analysis will provide answers to the following questions:
• Where is training needed?

• What specifically must an employee learn in order to be more productive?
• Who needs to be trained?
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5. Identify the key issue and problems associated with managing family enterprises
in India. Suggest suitable coping strategies to manage the problems identified by
you.
A family-owned business is any business in which two or more family members are
involved and the majority of ownership or control lies within a family. Family-owned
businesses may be the oldest form of business organization, and today they are
recognized as important and distinct participants in the world economy. According to
Nancy Bowman-Upton in the Small Business Administration publication Transferring
Management in the Family-Owned Business, about 90 percent of American businesses
are family owned or controlled. Ranging in size from two-person partnerships to Fortune
500 firms, these businesses generate about half of the nation's Gross National Product.
Family businesses may have some advantages over other business entities in their focus
on the long term, their commitment to quality (which is often associated with the family
name), and their care and concern for employees. But family businesses also face a
unique set of management challenges stemming from the overlap of family and business
issues.
ISSUES IN FAMILY BUSINESSES
A family business can be described as an interaction between two separate but connected
systems—the business and the family—with uncertain boundaries and different rules.
Graphically, this concept can be presented as two intersecting circles. Family businesses
may include numerous combinations of family members in various business roles,
including husbands and wives, parents and children, extended families, and multiple
generations playing the roles of stockholders, board members, working partners, advisors,
and employees. Conflicts often arise due to the overlap of these roles. The ways in which individuals typically communicate within a
family, for example, may be inappropriate in business situations. Likewise, personal concerns or rivalries may carry over into the
work place to the detriment of the firm. In order to succeed, a family business must keep lines of communication open, make use of
strategic planning tools, and engage the assistance of outside advisors as needed.
Bowman-Upton listed a number of common issues that most family businesses face.
Attracting and retaining non family employees can be problematic, for example, because
such employees may find it difficult to deal with family conflicts on the job, limited
opportunities for advancement, and the special treatment sometimes accorded family
members. In addition, some family members may resent outsiders being brought into the
firm and purposely make things unpleasant for nonfamily employees. But outsiders can
provide a stabilizing force in a family business by offering a fair and impartial
perspective on business issues. Family business leaders can conduct exit interviews with
departing nonfamily employees to determine the cause of turnover and develop a course
of action to prevent it. If the problem is a troublemaking family member, Bowman-Upton
suggests counseling them on their responsibilities to the business, transferring them to
another part of the company, finding them a job with another firm, or encouraging them
to start their own, noncompeting company.
Many family businesses also have trouble determining guidelines and qualifications for
family members hoping to participate in the business. Some companies try to limit the
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participation of people with certain relationships to the family, such as in-laws, in order to minimize the potential for conflicts. Family
businesses often face pressure to hire
relatives or close friends who may lack the talent or skill to make a useful contribution to
the business. Once hired, such people can be difficult to fire, even if they cost the
company money or reduce the motivation of other employees by exhibiting a poor
attitude. A strict policy of only hiring people with legitimate qualifications to fill existing
openings can help a company avoid such problems, but only if the policy is applied
without exception. If a company is forced to hire a less-than-desirable employee,
Bowman-Upton suggests providing special training to develop a useful talent, enlisting the help of a nonfamily employee in training
and supervising, and assigning special projects that minimize negative contact with other employees.
Another challenge frequently encountered by family businesses involves paying salaries

to and dividing the profits among the family members who participate in the firm. In
order to grow, a small business must be able to use a relatively large percentage of profits
for expansion. But some family members, especially those that are owners but not
employees of the company, may not see the value of expenditures that reduce the amount
of current dividends they receive. In order to convince such people of the value of
investments in the company's future, Bowman-Upton suggests that the leader of the
family business use nonfamily employees to gather facts and figures to support the
argument, demonstrate the bottom-line effect of the expenditure, and enlist the help of
outside advisors such as an accountant, banker, or attorney. To ensure that salaries are
distributed fairly among family and nonfamily employees, business leaders should match
them to industry guidelines for each job description. When additional compensation is
needed to reward certain employees for their contributions to the company, fringe
benefits or equity distributions can be used.
Another important issue relating to family businesses is succession—determining who

will take over leadership and/or ownership of the company when the current generation
retires or dies. Bowman-Upton recommends that families take steps to prepare for
succession long before the need arises. A family retreat, or a meeting on neutral ground
without distractions or interruptions, can be an ideal setting to open discussions on family
goals and future plans, the timing of expected transitions, and the preparation of the current generation for stepping down and the
future generation for taking over. When
succession is postponed, older relatives who remain involved in the family firm may
develop a preference for maintaining the status quo. These people may resist change and
refuse to take risks, even though such an attitude can inhibit business growth. The
business leaders should take steps to gradually remove these relatives from the daily
operations of the firm, including encouraging them to become involved in outside
activities, arranging for them to sell some of their stock or convert it to preferred shares,
or possibly restructuring the company to dilute their influence.
Family business leaders can take a number of steps in order to avoid becoming caught up in these issues and their negative
consequences. Bowman-Upton noted that having a clear statement of goals, an organized plan to accomplish the goals, a defined
hierarchy for decision-making, an established plan for succession, and strong lines of communication can help prevent many possible
problems from arising. All family members involved in the business must understand that their rights and responsibilities are different
at home and at work. While family relationships and goals take precedence at home, the success of the business comes first at work.
When emotion intrudes upon work relationships and the inevitable conflicts between
family members arise, the business leader must intervene and make the objective
decisions necessary to protect the interests of the firm. Rather than taking sides in a
dispute, the leader must make it clear to all employees that personal disagreements will
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not be allowed to interfere with work. This approach should discourage employees from
jockeying for position or playing politics. The business leader may also find it useful to
have regular meetings with family members, engage the services of outside advisors who
have no connection to family members as needed, and put all business agreements and
policy guidelines in writing.
How to cope up with challenges in family business enterprise.
THE PLANNING PROCESS
Strategic planning—centering around both business and family goals—is vital to

successful family businesses. In fact, planning may be more crucial to family businesses
than to other types of business entities, because in many cases families have a majority of
their assets tied up in the business. Since much conflict arises due to a disparity between
family and business goals, planning is required to align these goals and formulate a
strategy for reaching them. The ideal plan will allow the company to balance family and
business needs to everyone's advantage. Unfortunately, Nation's Business reported that only 31 percent of family businesses surveyed
in 1997 had written strategic plans. There are four main types of planning that should be conducted by family businesses: family
planning, business planning, succession planning, and estate planning.
FAMILY PLANNING In family planning, all interested members of the family get together to develop a mission statement that
describes why they are committed to the business. In allowing family members to share their goals, needs, priorities, strengths,
weaknesses, and ability to contribute, family planning helps create a unified vision of the company that will guide future dealings.
A special meeting called a family retreat or family council can guide the communication
process and encourage involvement by providing family members with a venue to voice
their opinions and plan for the future in a structured way. By participating in the family
retreat, children can gain a better understanding of the opportunities in the business, learn
about managing resources, and inherit values and traditions. It also provides an
opportunity for conflicts to be discussed and settled. Topics brought to family councils
can include: rules for joining the business, treatment of family members working and not
working in the business, role of in-laws, evaluations and pay scales, stock ownership,
ways to provide financial security for the senior generation, training and development of
the junior generation, the company's image in the community, philanthropy, opportunities
for new businesses, and diverse interests among family members. Leadership of the
family council can be on a rotating basis, or an outside family business consultant may be
hired as a facilitator.
BUSINESS PLANNING Business planning begins with the long-term goals and
objectives the family holds for themselves and for the business. The business leaders then
integrate these goals into the business strategy. In business planning, management
analyzes the strengths and weaknesses of the company in relation to its environment,
including its organizational structure, culture, and resources. The next stage involves
identifying opportunities for the company to pursue, given its strengths, and threats for
the company to manage, given its weaknesses. Finally, the planning process concludes
with the creation of a mission statement, a set of objectives, and a set of general strategies and specific action steps to meet the
objectives and support the mission. This process is often overseen by a board of directors, an advisory board, or professional advisors.
SUCCESSION PLANNING Succession planning involves deciding who will lead the company in the next generation.
Unfortunately, less than one-third of family-owned businesses survive the transition from the first generation of ownership to the
second, and only 13 percent of family businesses remain in the family over 60 years. Problems making the transition can occur
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because the business was no longer viable or because the owner or his or her children did not want it to occur, but usually result from
a lack of planning. At any given time, a full 40 percent of American firms are facing the succession issue, yet relatively few make
succession plans. Business owners may be reluctant to face the issue because they do not want to relinquish control, feel their
successor is not ready, have few interests outside the business, or wish to maintain the sense of identity work provides.
But it is vital that the succession process be carefully planned before it becomes necessary due to the owner's illness or death.
Bowman-Upton recommends that family businesses follow a four-stage process in planning for succession: initiation, selection,
education, and transition. In the initiation phase, possible successors are introduced to the business and guided through a variety of
work experiences of increasing responsibility. In the selection phase, a successor is chosen and a schedule is developed for the
transition. During the education phase, the business owner gradually hands over the reigns to the successor, one task at a time, so that
he or she may learn the requirements of the position. Finally, the transition is made and the business owner removes himself or herself
from the daily operations of the firm. This final stage can be the most difficult, as many
entrepreneurs experience great difficulty in letting go of the family business. It may help
if the business owner establishes outside interests, creates a sound financial base for
retirement, and gains confidence in the abilities of the successor.
ESTATE PLANNING Estate planning involves the financial and tax aspects of
transferring ownership of the family business to the next generation. Families must plan
to minimize their tax burden at the time of the owner's death so that the resources can stay within the company and the family.
Unfortunately, tax laws today provide
disincentives for families wishing to continue the business. Heirs are taxed upon the
value of the business at a high rate when ownership is transferred. Due to its complexity,
estate planning is normally handled by a team of professional advisors which includes a
lawyer, accountant, financial planner, insurance agent, and perhaps a family business
consultant. An estate plan should be established as soon as the business becomes
successful and then updated as business or family circumstances change.
One technique available to family business owners in planning their estate is known as
"estate freeze." This technique enables the business owner to "freeze" the value of the business at a particular point in time by creating
preferred stock, which does not appreciate in value, and then transferring the common stock to his or her heirs. Since the majority of
shares in the firm are preferred and do not appreciate, estate taxes are reduced. The heirs are required to pay gift taxes, however, when
the preferred stock is
transferred to them.
A variety of tools are available that can help a business owner defer the transfer taxes
associated with handing down a family business. A basic will outlines the owner's wishes
regarding the distribution of property upon his or her death. A living trust creates a
trustee to manage the owner's property not covered by the will, for example during a long
illness. A marital deduction trust passes property along to a surviving spouse in the event
of the owner's death, and no taxes are owed until the spouse dies. It is also possible to pay
the estate taxes associated with the transfer of a family business on an installment basis,
so that no taxes are owed for five years and the remainder are paid in annual installments
over a ten-year period. Other techniques exist that allow business owners to exclude some
or all of their assets from estate taxes, including a unified credit/exemption trust, a
dynamic trust, and an annual exclusion gift. Since laws change frequently, retaining legal
assistance is highly advisable.
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VK.
ASSISTANCE IN PLANNING
A professional family business consultant can be a tremendous asset when confronting planning issues. The consultant is a neutral
party who can stabilize the emotional forces within the family and bring the expertise of working with numerous families across many
industries. Most families believe theirs is the only company facing these difficult issues, and a family business consultant brings a
refreshing perspective. In addition, the family business consultant can establish a family council and advisory board and serve as a
facilitator to those two groups.
Advisory boards can be established to advise the company's president or board of

directors. These boards consist of five to nine nonfamily members who meet regularly to
provide advice and direction to the company. They too can take the emotions out of the
planning process and provide objective input. Advisory board members should have
business experience and be capable of helping the business to get to the next level of
growth. In most cases, the advisory board is compensated in some manner.
As the family business grows, the family business consultant may suggest different
options for the family. Often professional nonfamily managers or an outside CEO are
recruited to play a role in the future growth of the business. Some families simply retain
ownership of the business and allow it to operate with few or no family members
involved.
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MS-93 Management of New and Small Enterprises

Institutional Infrastructure for export promotion in India

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Computers and Software

Computer Training Center Business Registration

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Selection of Proper Location

Location plays important role in setting up a computer training institute.

• Computer Business Ideas: Home Based Small Computer Related Business-

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The Most Common Errors When Writing A Business Plan

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4. Valuation and Exit Strategy 10%

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Avoid the following errors while formulating business plan

2) Not effectively segmenting your market.

4) Underestimating Competitive, Potential Strength and Edge.

5) Boldly declaring and assuming you have no competition.

6) Unaware of Competitor's market plans.

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11) A Marketing and Sales Strategy that is too broad or unachievable.

14) Inefficient Plant, Factory and Workplace Layout.

15) Failure to manage costs.

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There is no consensus among researchers regarding the role of HRM in small-firm

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Managerial staff development

Training and performance appraisal

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Purpose of Employee Training and Development Process

Reasons for emphasizing the growth and development of personnel include

Employees frequently develop a greater sense of self-worth, dignity and well-being as

The Training Process

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• Who are your customers? Why do they buy from you?

Identifying Training Needs

• Where is training needed?

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ISSUES IN FAMILY BUSINESSES

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Another challenge frequently encountered by family businesses involves paying salaries

Another important issue relating to family businesses is succession—determining who

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How to cope up with challenges in family business enterprise.

THE PLANNING PROCESS

Strategic planning—centering around both business and family goals—is vital to

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Advisory boards can be established to advise the company's president or board of

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