GE-UL-109-Note ED
GE-UL-109-Note ED
UNIT – I:
Entrepreneurship
Who is an Entrepreneur?
An Entrepreneur is a person who brings in overall change through innovation for the maximum
social good. He is the one who is inspired to serve the society. He has firm belief in social
betterment and carries out this responsibility with conviction.
Definition of an entrepreneur:
The word ‘entrepreneur’ is derived from the French word ‘Entreprendre’ which means ‘to
undertake’, i.e. the person who undertakes the risk of new enterprise
Richard Cantilon, an Irishman, living in France who first used the term entrepreneur to refer to
economic activities. According to him, “An entrepreneur is a person who buys factor services at
certain prices with a view to selling its product at uncertain prices.” Thus to Cantilon, an
entrepreneur is a bearer of non-insurable risk.
F. H. Knight, “entrepreneurs are a specialized group of persons who bear risks and deal with
uncertainty.”
With J. A. Schumpeter, the term entrepreneur had received a wide acclaim. He defined, “the
entrepreneur as an innovator who carries out new combination to initiate the process of
economic development through introduction of new products, new markets, conquest of new
source of raw materials and establishment of a new organization of industry.”
He said, “The carrying out of a new combinations we call enterprise, the individuals whose
function is to carry them out we call as entrepreneurs.”
Intrapreneur:
He is an ‘intra corporate entrepreneur’ who pursues an innovation, becoming a champion for its
development, but does so from within the security of his or her organizational position.
Classification of entrepreneurs
Pure entrepreneur:
Ex. Dhirubhai Ambani, Jamshedji Tata, T.V. Sundaram Iyengar, Seshadriji, Birla,
Narayanamurthi, and Azim Premji
Induced Entrepreneur:
Induced entrepreneur is one who is induced to take up an entrepreneurial task due to the policy
measures of the government that provides assistance, Incentives, concessions and necessary
overhead, facilities to start a venture.
Motivated Entrepreneurs:
New entrepreneurs are motivated by the desire for fulfilment. They come into being because of
the possibility of making and marketing some new product for the use of customers. If the
product is developed to saleable stage, the entrepreneur is further motivated by reward in terms
of profit.
Ex. Sridhar Vembu- Zoho, Mahesh Gupta- Kent RO; Kailash Katkar- Qickheal Technologies;
Spontaneous Entrepreneur:
They are persons with initiative, boldness and confidence in their ability which motivate them
to undertake entrepreneurial activity. Such entrepreneurs have a strong conviction and
confidence in their inborn ability
Elon Musk
Growth entrepreneur: Growth entrepreneurs are those who necessarily take up a high growth
industry which has substantial growth prospects. Super growth entrepreneur: Super growth
entrepreneurs are those who have shown enormous growth of performance in their venture.
Classical Entrepreneur:
A classical entrepreneur is a type of entrepreneur who identifies a need they believe they can
address and focuses on supporting themselves through their venture of marketing said need.
Modern Entrepreneur:
Types of Entrepreneurs:
1. Business Entrepreneur
An individual who creates a new business, bearing most of the risks and enjoying most of
the rewards
2. Trading Entrepreneur
One who undertakes trading activities and is not concerned with the manufacturing work
3. Industrial Entrepreneur
A manufacturer
4. Corporate Entrepreneur
An individual who conducts at least part of their creation activities at work using
corporate resources, people, and/ or time
5. Agricultural Entrepreneur
A person who manages and develops agricultural products
6. Fabian Entrepreneur
Individuals who do not show initiative in visualizing and implementing new ideas and
innovations wait
Ex. Kodak
7. Drone Entrepreneurship
EVOLUTION OF ENTREPRENEURSHIP:
16th Century (France): Person leading military troops Person engaged in daring
work
17th Century (France): Person doing brave/daring work in business Contractor
undertaking construction of Govt. work like roads, bridges etc. Person doing tax
collection for Govt.
18th Century (France): People doing farming business
19th Century: Researcher presenting new inventions & ideas Coordinators of
production process
20th Century: One who starts new business or one who does old business in
newer ways, One having interest in new creations
Entrepreneur Manager
Skill Needs intuition, creative thinking & Depends more on human relations
innovative ability & conceptual abilities
Status Self-employed & his own boss Salaried & not independent of his
employer
Risk takes calculated risk; Not a Less tolerant of uncertainty;
taking gambler but faces uncertainty & doesn’t face the uncertainty of a
assumes risk new venture with its potential for
failure & financial loss
Reward Motivated by profits Motivated by externally imposed
goals & rewards
Innovation Doesn’t live with the status quo, Keeps running a business on
works to change in accordance established lines
with vision & values & is more than
an inventor
Creativity
Innovative
Goal oriented
Persistent
Persevering
Functions of an Entrepreneur:
Idea Generation
Determination of objectives
Raising of Funds
Procurement of Raw Material
Procurement of Machinery
Market Research
Determination of Form of enterprise
Recruitment of Manpower
Implementation of the Project
Classification of Entrepreneurs:
Business Entrepreneur
Trading Entrepreneur
Industrial Entrepreneur
Corporate Entrepreneur
Agricultural Entrepreneur
Social Entrepreneurs:
Technical Entrepreneur
Non-technical Entrepreneur
Professional Entrepreneur
Based on Motivation:
Pure Entrepreneur
Induced Entrepreneur
Motivated Entrepreneurs
Spontaneous Entrepreneur
Based on Growth:
Growth Entrepreneur
Super-Growth Entrepreneur
First-generation Entrepreneur
Modern Entrepreneur
Classical Entrepreneur
Innovative Entrepreneurs
Ex. Nokia
Aspiring Entrepreneurs
Lifestyle Entrepreneurs
Growth Entrepreneurs
Opportunist Entrepreneurs
E-Entrepreneurs
Mompreneurs
IT entrepreneurs
Women entrepreneurs
Culture of innovation
Economic –
• Raw Material- Cheap and consistent supply of quality raw material from reliable
sources.
Non-Economic Factors:
Social Conditions
Legitimacy of Entrepreneurship: The relevance of a system of norms and values
within a socio-cultural setting for the emergence of entrepreneurship, in which the
degree of approval or disapproval granted entrepreneurial behaviour influences its
emergence & characteristics if it does emerge. Schumpeter recognizes the
importance of such legitimacy in terms of appropriate social climate for
entrepreneurship. Entrepreneurship will be more likely to emerge in a setting in
which legitimacy is high
Social Mobility: Degree of social and geographical mobility and the nature of
mobility channels within a system
Psychological Factors
Most businesses are for-profit that serve their customers by selling a product or
service.
The entrepreneur earns an income from the for-profit and may also pay
shareholders & investors from the profits
Similar to non-profit a Not-for-profit entrepreneur does not earn profit for himself
or other promoters
All money earned through pursuing business activities or through donations goes
right back into running the organization
However, not-for-profit entrepreneurs are not required to operate for the benefit of
the public good and can simply serve the goals of its promoters and members
Financial constraints
Poor access to debt/loans; Inadequate financing options; High collateral
requirement; Lack of availability of equity capital; Lack of availability of Venture
Capital firms, banks; Underdeveloped public markets etc.
Infrastructural constraints
Intermittent energy, water & electricity supply; Lack of roads; Problems with
technology production; Lack of local linkages; Difficulty accessing technology
provider; Inadequate Research and Development activities; Unsafe location etc.
Entrepreneurship as a Career:
Primary incentive is the independence gained from personal control over one’s life
A small business entrepreneur may seek only to substitute for job income or to avoid
working as an employee
Corporate Entrepreneurship
Innovativeness
Self Renewal
Proactiveness
Organization Culture
Organizational Structure
Resource Availability
Organization Policies
Resistance to change
Start-up India
GST
Mudra Loan
Aadhar
Jan Dhan
Business Incubators
Rural Entrepreneurship
Ensures value addition to rural resources in rural areas and engaging largely rural
human resources
Rural Development
Local Food
Natural resources
Forests
Services
Agriculture
Produces any goods or renders any services with or without use of power
Agro based
Forest based
Mineral based
Textile
Handicrafts
Engineering
Services
competition
Capital formation
Rural employment
National self-reliance
Planned production
Social Entrepreneurship
Characteristics
Passionate people determined to get innovative & path breaking solutions to social
issues
Act boldly and engage in innovation, adaptation and learning by exhibition of accountability
Funding
Women Entrepreneurs
A women or group of women who initiate, organize and runs a business enterprise
Characteristics
Accept challenges
Ambitious
Hard working
Patient
Motivator
Adventurous
Conscious
Educated
Intelligent
Problem of marketing
Problem of finance
Problem of infrastructure
Competition
Lack of education
Family problems
Government Initiatives
Training Programs
Unit – II
Theories of Entrepreneurship
What is Theory?
Economic Theory
- Industrial policy
- Infrastructural availability
- Access to information
(b) technology
Limitations
Sociological Theory
- Society’s values
- Religious beliefs
- Customs
- Taboos
The entrepreneur merely performs a role as per the expectations of the society
- Entrepreneur combines land of one, labour of another and the capital of yet
another to produce a product
- By selling the product he pays interest on the capital, rent on land and wages
to labourers and what remains is profit
First time distinction between the capitalist as the financer and the entrepreneur as
the organizer
Innovation Theory
Development requires basic changes and entrepreneurs bring about the changes
Limitations
Psychological Theory
Entrepreneurship gets boost when society has sufficient supply of individuals with
necessary psychological characteristics
- A vision foresight
- Self reliance
These three needs are not innate but learned through culture, age and experience
X-Efficiency is the degree of inefficiency in the use of resources within the firm.
It measures the extent to which the firm fails to realize its productive potential
X-efficiency arises either because the firm’s resources are used in the wrong way
or because they are wasted, that is not used at all.
If not all factors of production are marketed or if there are imperfections in the markets,
the entrepreneur has to fill the gaps in the market.
To put the enterprise in motion, the entrepreneur should fill enough of gaps
It involves making available inputs that improve the efficiency of existing production
methods or facilitate the introduction of new ones.
More risk more gain: The degree of risk varies in different industries.
The risk theory proposes that the more risky the nature of business, the greater
must be the profit earned by it
Profit is the reward of entrepreneur for assuming risks. Hence it is also treated as a part
of the normal cost of production
This theory summarizes that profit is the reward of an entrepreneur effort which arises for
bearing non-insurable risks and uncertainties and the amount of profit earned depends
upon the degree of uncertainty bearing
Everette Hagen states how traditional society transforms into advanced society
He rejected the idea that the solution to economic development lies in imitating
western technology
In traditional societies the status of individuals is fixed and children learn to act
according to established norms
If by external influences new group gains power, the status of the old elite is
challenged and weakened.
Children tend to become dissatisfied with the society and readily accept new
values and become innovative personalities in time
Unit – III
Entrepreneurship Development
Entrepreneurial Competencies
Initiative
Persistence
• Keep trying again and again for overcoming the obstacles that come in the way of
achieving goals
Information seeker
Quality Consciousness
• Set high quality standards and put in their best for achieving these standards
Commitment to Work
Commitment to Efficiency
• Keen to evolve and try new methods for making working easier, simpler, better &
economical
Proper Planning
• Develop or evolve future course of action keeping in mind the goals to be realized
• Believe in developing relevant and realistic plans and ensure proper execution for
attaining their goals
Problem Solver
• Put in their best for finding out the appropriate solution to the problem
• Understand the problem and evolve appropriate strategy for overcoming the
problem
Self confidence
• Never get cowed down by difficulties as they believe in their own abilities and
strengths
Assertive
• Knows what to say, when to say, how to say and whom to say
• Believes in own abilities and ensures that others fall in line with his thinking, aimed
at promoting the interest of the organization
Persuasive
• Shows ability to convince others to do the works the way he/she wants them to do,
with his/her sound arguments and logical reasoning
• It is not physical but intellectual force he will use for convincing others
Effective Monitoring
• Ensures that everything is carried out in the organization as per their wish
• Ensure regular monitoring of the working so that the goals of the organization are
achieved in the best possible manner
Employees Welfare
• Takes personal interest in solving problems confronting workers and generates the
feeling that there is interdependence of the interests of workers and the
management
Effective Strategist
Entrepreneurship Development:
Concept
• The skills acquired through ED may not be immediately applicable but could be
useful in the long term
Objectives of EDP
• To know the available sources of help and support for a small scale industry
or a small business
• Getting support from various agencies such as DICs, SFCs, SISI etc.
Training Phase
Management
They should be taught basic principles of management and their applications in real
life scenarios to realize the benefits and significance of the management functions like
planning, organizing, staffing, directing, controlling and coordinating. The various
techniques involved in the management process must be explained. The trainer can use
case studies, management games, role- plays and simulations to polish the skills
acquired by the trainees
Technical Competence
• Focus should be laid upon acquiring technical competence suitable to the area
selected
• It’s important for the trainees to understand the basics of technology, rate of
technological change in that industry and challenges ahead
• The program may cover as details of technology, plant and machinery, major
suppliers, life span, special features of the machinery etc., raw materials and
their availability, manufacturing process and human resource requirements
• It’s important for the entrepreneurs to understand that they should not park
substantial funds in fast changing technology as obsolescence is a big risk
• The entrepreneurial training programs are designed to elevate and sustain the
motivation levels of the trainees
• Entrepreneurs are strong-willed individuals who may need family support during
tough times
• Securing subsidies and grants and utilizing incentives given by Centre and
State government
Evaluation of EDP
• This helps in charting ‘lessons learnt’ and in guiding the organizers to plan better
and remove loopholes in the next program
• Financial results
• Gestation period
• Capacity utilization
• Value addition
Role of EDP
Capital Formation
• An entrepreneur mobilizes idle savings of the public and puts them to productive
use. Thus, he helps in capital formation. This is very essential for the industrial and
economic development of a country
Employment Opportunities
Local Resources
• The proper use of local resources promote the progress and development of
the area at lower cost. EDPs help in the proper use of local resources by
providing guidance, assistance, education and training to the prospective
entrepreneurs
• EDPs promote the setting up of more enterprises. This will help in the
generation of more employment and income
• Entrepreneurs now make efficient use of the resources and produce better
quality products at lower costs. The consumers get better quality products at
lower prices. This leads to improved standard of living of the society
Economic Independence
• Entrepreneurs can produce wide variety of better quality goods and services
at competitive prices. They enable a country to earn foreign exchange by
selling these products in the foreign market. This helps in promoting
economic independence of the country
• EDPs can help in preventing spread of industrial slums. They can support
entrepreneurs for setting up their enterprises in industrially backward areas.
This will help in reducing pollution
• EDPs can help the unemployed youth for setting up enterprises by providing
proper guidance, training and assistance. This results in self-employment and
prevention of social tension and unrest
Overall Development
Methods of EDP
• Individual instruction
• Group instruction
• Lecture method
• Demonstration method
• Conference
• Meetings
EDP Cycle
Simulatory Role
• Registration of unit
• Arrangement of finance
Support Role
• Entrepreneurial education
Sustaining Role
• Help modernization
EDP Content
• Introduction to entrepreneurship
• Motivation training
• Essentials of management
• Plant visit
Role of Mentors
• Amplified chances of success in life and business by having the right mentor
• An access to unlimited network of people who can benefit the business and
career
• Helping in developing stronger EQ, with more maturity to have greater control
over their emotions
• Help to encourage and keeping high morale during failures and hard times
DIC
• In the Industrial policy announced by the Government of India in the year 1977,
laid special stress on the development of Small Scale, Village and Cottage
Industries.
• The policy statement indicated that the District would be the main focus of efforts
and the agency for promotion of small scale, village and cottage industries would
be a new organization called "District Industries Centre”.
• The District Industries Centre was started on the objective to find out the Micro,
Small and Medium Enterprises in the District & to provide all assistance to
Micro, Small and Medium Enterprises under One Roof, thereby reducing the time
taken to finish all government procedures.
Objectives of DIC:
• To provide a focal point for the promotion of small, tiny and cottage
industries and to provide all the service and support to the decentralized
industries under a single roof at pre investment, investment and post investment
stage
Role of DIC:
• Statistics and information about existing industrial units in the district in the
large, Medium, small as well as co-operative sectors.
• Acts as a link between the entrepreneurs and the lead bank of the district
Functions of DIC:
Identification of entrepreneurs:
Projects Selection:
• Once the projects are selected, entrepreneurs are given provisional SSI
registration.
• Sanctions margin money under Rural Industries Project Loan Scheme payable to
other financial agencies regarding the purchase of plant & machinery.
• Issues the certificates for import of raw materials & machinery required
• SSI’s in rural areas get IFST loan, up to 8% of the total fixed assets (max) from
SIDCO; sanction order issued from DIC.
• Recommends the SSI units to National Small Industries Corporation (NSIC) for
registration for Government purchase programme.
Arranges for the financial assistance with the lead banks of nationalized banks in the
respective areas.
Subsidy Schemes:
Assists SSI units and rural artisans to get subsidies like power subsidy, interest subsidy
for certain classes, subsidy under Integrated Rural Development Programme (IRDP) etc.
Training Programmes:
Schemes for youths between 18 to 25 Years of age with preferences given to SSLC,
Technocrats and women.
• Located in Hyderabad
Functions of SISI:
• Enterprise counseling
• Financial Assistance
• Ancillary development
(b) Enlistment of small scale units with the National Small Industries Corporation
• To conduct industrial surveys of less developed areas & suggest scope for
development of small industries based on locally available raw materials.
• To prepare designs & drawings for special equipments such as dies, jigs,
fixtures, tools
This includes supply of designs & drawing & provision of workshop facilities for the
manufacture of dies, tools, jigs, fixtures & components.
Training Facilities:
Testing Facilities:
Basic testing facilities (both physical & chemical) are provided in the laboratories &
workshops attached to SISI at concessional rates.
Marketing Assistance:
• Economic information on the nature & extent of the market for specific products
is collected & furnished to small industrialist at their request. The institute offers
export promotion service by counseling on export procedures & trends in
foreign markets.
Other Services:
• Was jointly set-up at Ahmedabad in 1983 by Gujrat Government, SBI & All India
financial institutions & sponsored by IDBI, IFCI, ICICI
Vision of EDII:
Mission of EDII:
Functions of EDII:
Objectives of NIESBUD:
• Organizing all those objectives that help develop entrepreneurial culture in the
society.
Functions of NEDB:
• Innovation is the specific tool of entrepreneurs, the means by which they exploit
change as an opportunity for a different business or a different service.
• Innovation is not about making new inventions, but rather about recognizing how
to take advantage of opportunities and changes
Innovation Degrees:
The impacts from these types of innovations can be much higher than from either
incremental or evolutionary innovations
Types of Innovation:
• Products
• Customer Experiences
• Solutions
• Systems
• Processes
Innovation Thresholds:
• Innovation thresholds range from low to high, and are different for each
business sector
Innovation Diffusion:
The innovation
Communication
Time: innovators, early adopters, early majority, late majority, and laggards
Social system
Disruptive Innovation:
Peter F. Drucker suggested that purposeful, systematic innovation begins with the
analysis of the opportunities and classifies "Seven Sources of Innovative
Opportunity"
The unexpected:
Does your organization have some success/failure that needs to be further explored?
The Incongruity:
Do you use your customers’ feedback to determine incongruity and create the opportunity
for innovation?
Demographics:
Have you explored what can Millennials bring to your innovation process?
Do you follow changes in perception among today’s consumers to improve your products
and services?
• Test – solutions
Empathise:
• Find out more about the area of concern through observing, engaging and
empathizing with people to understand their experiences and motivations.
• It allows design thinkers to set aside their own assumptions about the world in
order to gain insight into users and their needs.
• Putting together the information created and gathered during the Empathise
stage.
“We need to increase our nutrition food-product market share among young
boys & girls (Millennial) by 5%,”
“Young boys & girls (Millennial) need to eat nutritious food in order to thrive,
be healthy and grow.”
Ideate:
• Start to "think outside the box" to identify new solutions to the problem
statement created, and start to look for alternative ways of viewing the problem.
Prototype:
Test:
To test the complete product rigorously using the best solutions identified during
the prototyping phase.
• To help the enterprises through their various processes and systems and guide
them through proper directions.
• To help in facilitating the business of the entrepreneurs by assisting them
through evaluating the marketing scenario and looking for better opportunities.
Marketing Problems:
• Lack of exposure
Finance Problems:
• Faulty costing
• Dividend policy
• Deficiency of funds
• Initial Capital
• Employee training
• Performance management
Production Problems:
• High wastage
Research Problems:
External Problems:
• Taxation
• Government policies
• Competitive environment
• Economic viability
Mobility of Entrepreneurs:
• It denotes movement or changes in occupation. This may take place in two forms:
Location Mobility:
• But over a period of time, the very consideration for locating industries in a
particular region has undergone a considerable change.
• Ex. Shifting of Tata Nano plant from Singur, PB to Sanand, Gujrat; Enron-Dabhol
Power Project in Ratnagiri
Education:
An entrepreneur must be an educated person. An educated entrepreneur tends to be
more mobile than an uneducated one.
An entrepreneur must be properly trained and must have some past experience in
business or industry. Technical knowledge and experience influence entrepreneurial
mobility.
• Availability of facilities:
The entrepreneurs may move from the areas with no or fewer facilities to the areas with
more and better facilities.
• Political Conditions:
The entrepreneurial mobility is also influenced by political factors, such as tax policy,
political stability, trade restrictions etc.
• Size of enterprise:
Generally, larger business houses are more mobile than smaller business houses,
because a large size of the enterprise will have the capability to start a new business at
a new place.
Unit – IV
The term ‘Incentive’ is a general one and includes concessions, subsidies and bounties
Motivational force making an entrepreneur take a right decision and act upon it
Incentives are financial & promotional assistance provided by the Government to the
industries for boosting up industrial development in all regions.
Objectives of Incentives:
Government Grants:
Tied grant: government will insist for its utilization for the purpose given; industries
generally receive tied grants; Ex. If Japan gives a grant for establishing a Bullet train
project between Mumbai & Ahmedabad, it is a conditional grant.
Untied grant: can be used for anything; it is not sanctioned for specific purpose; Ex. If a
grant is given by World Bank to the flood affected area of Assam, the local administration
can use it, for any purpose they deem fit.
For those entrepreneurs with products and services that can be exported, there are many
exciting overseas opportunities
Therefore export promotion of products manufactured in the small scale sector has been
given considerable importance and efforts are being made to increase its share in total
exports
The Small Industries Development Organization (SIDO) along with its field offices
continued to provide techno-managerial assistance and guidance for the development &
promotion of exports of small industry products.
To satisfy the needs & wants of target consumers in more than one country
To expand the capacities of the existing units & find market for the products of new
units
To increase self-reliance
To provide necessary assistance to the new as well as those exporters who are in infancy
stage to develop the export business.
To increase the relative profitability of the export business vis-à-vis the domestic business
The Ministry of Commerce: Export assistance like export credit, cash assistance, import
replenishment, licensing transport bottlenecks, free trade zones, dry ports, quality
control, pre-shipment inspection, guidance to set-up ventures abroad
(i) Office of the Director General of Foreign Trade (DGFT) – responsible for the execution of
the export & import policies of the Government
Director General of Commercial Intelligence & Statistics – conducts studies on various topics
relating to promotion of trade, publications on trade statistics which are utilised in framing
economic policies, formulating trade agreements with foreign countries, helps in settlement of
commercial disputes, providing letter of introduction to Indian businessmen going abroad,
maintain commercial library to be used by the exporters, importers, research scholars.
Autonomous Bodies:
(i) Commodity Boards – to help exporters in the trade of traditional items like All India
Handloom & Handicraft Board. The functions like (a) to undertake promotional activities
(b) to provide intensive assistance to exporters (c) to participate in exhibitions & fairs
abroad (iv) to advise government on matters of Government policies such as signing trade
agreement, fixing quota etc. There are five statutory Commodity Boards responsible for
production, development and export of tea, coffee, rubber, spices and tobacco
(ii) Export inspection council – responsible for the enforcement of quality control and
compulsory pre-shipment inspection of various exportable commodities
Indian Institute of Foreign Trade – engaged in (a) training of personnel in modern techniques of
international trade (b) organization of research in problems of foreign trade (c) organization of
marketing research, area surveys, commodity surveys and market surveys (d) dissemination of
information arising from its activities relating to research and market studies (e) keeping India
abreast with the international development in the field of packaging (f) organizing training
programs on packaging technology.
Indian Institute of Packaging: to undertake research on raw materials for the packaging
industry, to organize training programs on packaging technology, to stimulate
consciousness of the need for good packaging technology.
Export Promotion Councils (EPCs): renders services such as – (i) to undertake market
research studies and furnish the results to the trade (ii) to assist the exporters in framing
export plans and policies and to make them aware of the assistance available from the
Government (iii) to carry out sales promotional campaigns through exhibitions,
showrooms, bulletins and other media of publicity (iv)to act as an arbitrator in the
settlement of commercial disputes between an exporter and his foreign buyer (v) to
provide commercially useful information & assistance to their members in developing &
increasing their exports (vi) to offer professional advice to their members in areas such as
technology upgradation, quality & design improvement, standards and specifications,
product development, innovation etc. (vii) to organize visits of delegations of its members
abroad to explore overseas market opportunities (viii) to organize participation in trade
fairs, exhibitions & buyer-seller meets in India & abroad (ix) to promote interaction
between the exporting community and the Government both at the central & state levels
(x) to build a statistical base & provide data on the exports & imports of the country,
exports & imports of their members as well as other relevant international trade data.
Develop & promote exports, imports & upgrade technology through fairs in India &
abroad
Delegations to industry & trade establishments in India with a view to promote trade
contracts
Agricultural & Processed Food Products Export Development Authority (APEDA): serves
as the focal point for agriculture particularly the marketing of processed foods in value
added forms.
(i) Industrial Raw Materials Assistance Centre (IRMAC): to render assistance for
supply of imported raw materials particularly to small-scale industries
(A) State Trading Corporations (STC): the major functions are –
1. to facilitate exports of ‘difficult to sell’ items through (a) direct assistance from STCs
Trading Development Fund (b) developing new lines of export (c) organizing production to
meet export demand & helping production unis to overcome difficulties of raw materials
& other essential requirements to meet export orders.
2. To arrange for exports where bulk handling & long-term contracting are advantageous.
3. To ensure implementation of trade plans with the State Trading Countries & other special
agreements by way of (a) undertaking imports of such commodities where such
procurement is advantageous & (b) undertaking imports of specified commodities in short
supply & other speculative items
(B) Minerals & Metal Trading Corporation: deals exclusively in minerals & metal trade
(C) Export Credit Guarantee Corporation: covers both commercial & political risks on
assignment of export credit transactions
Advisory Board:
Central Advisory Council on Trade: advise Government on – (i) export & import policy
programme (ii) operation of import & export trade controls (iii) organization &
development of commercial services (iv) Export Credit Guarantee Corporation.
Other Supportive Institutions/Organizations:
1. Export Promotion Assistance from Small Industries Development Organization
(SIDO): (i) creating export consciousness among the entrepreneurs (ii) identifying the
potential of small scale units & motivating them to undertake production of export
worthy items (iii) disseminating exports marketing information to export worthy units
(iv) providing export consultancy services in respect of export procedures,
documentation & export incentives (v) organizing training programmes in export
marketing in various SISI’s (vi) maintaining liaison with the export promotion
organizations and department for solving the problems of small scale exporters (vii)
sponsoring small scale units in sale-cum-study teams & trade delegations to be sent
abroad (viii) arranging meetings, seminars & open house discussions in collaboration
with the concerned export promotion agencies (ix) publication of quarterly small
industry export bulletin to highlight the areas of interest to small scale exporters.
2. EXIM Bank of India: The functions are – (i) financing of exports from, & imports into,
not only India, but also third counties of goods & services (ii) financing of exports &
imports of machinery & lease equipment on lease basis (iii) financing of joint ventures
in foreign countries (iv) providing loans to an Indian party so as to contribute to the
share capital of a joint venture in a foreign country (v) undertaking limited merchant
banking functions such as under-writing stocks, shares & bonds or debentures of
companies engaged in export & import; & providing technical, administrative &
financial assistance to parties in connection to export or import (vi) developing &
financing export oriented industries (vii) undertaking transactions involving a
combination of Government & commercial credit for the purpose of export or import
(viii) giving lines of credit to foreign government & foreign financial institutions in
developing countries by participation in the share capital of such institutions (ix)
providing refinance facilities to commercial banks by discounting export bills for
supporting their offers of export credit guarantees (x) undertaking certain type of
transactions in all permissible currencies which are incidental to its normal functions
(xi) conducting techno marketing studies with a view of promoting exports & (xii)
coordinating the working of institutions engaged in financing & importing goods &
services to promote the country’s international trade.
Fiscal & Tax Concessions:
Tax holidays to new industrial undertaking set up in backward States & Union Territories
Taxation benefits:
- Rehabilitation allowance: to small scale units, whose business has been disturbed by riot
or civil disturbance, floods, typhoons, hurricanes cyclones, earthquakes or other natural
disasters, accidental fire or explosions or action by an enemy
Sales tax concessions: Certain products like some vegetables, fish products, silk, khadi,
handlooms and certain services like plant cultivation & animal husbandry, renting/leasing
of agro machinery etc. are exempted from GST.
Women Entrepreneurs:
“Women entrepreneurs are those women who innovate, initiate or adopt a business activity”
A majority of women entrepreneurs are married. With the support of their husband they
accepted entrepreneurship.
A large number of women with little or no education and training enter into the business
field.
Women’s sincerity and hard work is the cause for sustainability and growth
Business enterprises of women lack working capital, this causes low profit margin.
Accept challenges
Ambitious
Hard working
Patience
Motivator
Adventurous
Conscious
Educated
Intelligent
In this dynamic world, women entrepreneurs are a significant part of the global
expedition for sustained economic development and social progress. Due to the growing
industrialization, urbanization, social legislation and along with the spread of higher
education and awareness, the emergence of Women owned businesses are highly
increasing in the economies of almost all countries.
In former days, for Women there were 3 Ks- Kitchen, Kids, Knitting, then came 3 Ps-
Powder, Pap pad, Pickles and now at present there are 4 Es- Electricity, Electronics,
Energy, Engineering. Indian women had undergone a long way and are becoming
increasingly visible and successful in all spheres and have shifted from kitchen to higher
level of professional activities.
Women entrepreneurs are fast becoming a force to reckon with in the business world and
are not only involved in business for survival but to satisfy their inner urge of creativity
and to prove their capabilities. Educated Women is contributing to a great extent to the
social transformation and in the future, will be seen that more women venturing into
areas traditionally dominated by men
Today’s women are taking more and more professional and technical degrees to cope up
with market need and are flourishing as de signers, interior decorators, exporters,
publishers, garment manufacturers and still exploring new avenues of economic
participation. It is perhaps for these reasons that Government Bodies, NGO’s, Social
Scientists, Researchers and International Agencies have started showing interest in the
issues related to entrepreneurship among women in India.
Financial Constraints
Stiff Competition
Limited Mobility
Family Ties
Legal formalities
Lack of Education
Social Attitudes
Throughout the world, it is observed that the ratio of Women entrepreneurs is increasing
tremendously. The emergence as well as development of Women entrepreneurs is quite
visible in India and their over- all contribution to Indian economy is also very significant.
The industrial structure and the enterprises are undergoing a radical change. Information
Technology has transformed the very technique of doing business individually. Business
ownership provides women with the independence they crave and with the economic and
social success they need. Nationally, business ownership has great importance for future
economic prosperity. Globally, women are enhancing, directing and changing the face of
how business is done today. Ultimately, female business owners must be recognized for
who they are, what they do, and how significantly they impact the World’ Global
Economy.
Better educational facilities and schemes should be extended to women folk from
government part
Counseling through the aid of committed NGOs, psychologists, managerial experts and
technical personnel should be provided to existing and emerging women entrepreneurs
Activities in which women are trained should focus on their marketability and profitability
1. Inception or Promotion
2. Day-to-day management
1. Central Government
2. State Government
Established in 1954 to provide effective coordination and inter-institutional linkages for the
benefit of small scale sector.
- Financial Institutions
- Industry Associations
- Quality upgradation
- Development of markets
- Development of infrastructure
Objectives:
- Provide term loans for the acquisition of land, building, plant and machinery
- Promotion of self-employment
- Expansion of industry
- Conducting EDPs
- Skill improvement
- Rural industrialization
- Transfer of technology
NON-GOVERNMENT INSTITUTES
- Information dissemination
- Entrepreneurship development
It is responsible to undertake:
- Entrepreneurial training
- Technology upgradation
- Marketing services
Small scale industries contribute 40% of gross industrial value & provide foreign exchange
Due to small size of industries , quick & timely decision can be taken
They create greater Employment Opportunities through Labor Intensive processes &
thereby help in tackling the Unemployment Problem
They have Low Gestation Period & thereby Expensive Financial Resources are not idled
unproductively for long periods
They Innovate & Introduce New Products particularly to cater to Local Needs
They provide equitable dispersal of enterprises throughout Rural & Backward Areas
They earn Vital Foreign Exchange for the Country through their Exports of Goods /
Services
They Increase Revenue to Central & State Govt.s by way of Taxes Paid by them
Some of the major causes for sickness in small scale industries are:
Non-availability of credit
Marketing Problems
Labour Problems
Poor Management
Diversion of resources
Globalization
Overambitious projects
Preventive measures to curb and overcome the failure of SSI Units are:
Financial assistance:
2. Enhancing the powers of bank managers of specialized banks branches in offering credit
to SSI
Improving infrastructure
Technology up-gradation
Marketing assistance
Liquidation
Government interventions
Training
Rehabilitation
Future of ED & Government:
Start Up India:
It is a revolutionary scheme launched on 16th January 2016, to help the people, who start
their own business.
Startup India Initiative has rolled out several programs with the objective of supporting
entrepreneurs, building a robust startup ecosystem and transforming India into a country
of job creators instead of job seekers.
- Annual turnover not exceeding Rs. 25 Crore in any preceding financial year.
- To encourage the people who have potential to innovate and start their own business
Modified and more friendly Bankruptcy code to ensure 90 day exit window
Boost GDP
Increase of Export
Creation of Jobs
Make in India:
As a strategy it is the road map to respond to glocal (global + local) challenges through
preparations for a World class manufacturing status & knowledge infrastructure that
should create further knowledge for stepping on to global competitiveness.
Companies across the globe would be invited to make investment and set up factories
and expand their facilities in India.
Using India’s highly talented and skilled manpower to create world class zero defect
products.
Job Creation
Economic Development
Global Recognition Mission of Campaign:- “Manufacture in India and sell the products
worldwide.”
Manufacturing
16%
Service
56%
Agricultur
e
Automobiles
Auto components
Aviation
Biotechnology
Chemicals
Construction
Defense manufacturing
Electrical machinery
Food processing
IT and BPM
Leather
Mining
Pharmaceuticals
Ports
Railways
Renewable energy
Space
Textiles
Thermal power
Wellness
• Skill development programs would be launched especially for people from rural and poor
ones from urban cities
• 25 key sectors have been short listed such as telecommunications, power, automobile,
tourism, pharmaceuticals and others
• Individuals aged 15-35 years would get high quality training in the following key areas
such as welding, masonries, painting, nursing to help elder people
Services of all Central Govt. Departments & Ministries will be integrated with the eBiz
Unit – V
Enterprise Promotion
Creating Entrepreneurial Venture:
According to Hickman & Michael Silva following New Age Skills are needed to create an
‘Entrepreneurial Venture’:
Sensitivity: Don’t judge a man until you have walked a mile in his shoes
Vision: Leaders who develop clear vision can mentally travel from known to the unknown,
creating the future from facts, figures, hopes, dreams, dangers and opportunities
Patience: Impatience compromises lasting performance Patience produces staying power &
leads to lasting excellence
Preparation of
Project Report
Project
Identification
Essential
Requirements
Essential Requirements:
Project Identification:
a) Meaning
b) Characteristics of a project
a) Meaning:
“Project identification is concerned with the collection, compilation and analysis of economic
data for the purpose of locating possible opportunities for investment.”
where the entrepreneur will have the necessary knowledge, skill and the attitude to run
the project.
where the entrepreneur will be able to raise the necessary finance through his own
contribution and through the borrowings, if required
b) Characteristics of a project:
Three Dimensions of project:
Inputs:
• Raw material
• Manpower
• Energy
• Organizational set-up
Outputs:
• Revenue
• Employment Potential
• Family
• Customers
• Friends
• Colleagues
• Salesmen
• Social Contacts
• Employees
• Solicitors
• Magazine
• Newspapers, Periodicals
• Journals
• Books
• Newsletters
• Catalogues
• Bankers
• Business Councilors
• Chamber of Comm.
• Entrepreneur Asso.
• Suppliers
• Technical Consultants
• College/University
• Research Laboratories
• Trade Shows
• Seminar/Workshops
• Suppliers/Dealers
• Professional Org.
• Federations, unions
(i) when demand exceeds the supply for a product or service, observed on account of non-
availability, stock-outs, overcharging or longer delivery periods
(ii) when products are not available locally and have to be brought from outside gives an
opportunity for import substitution
(iii) when certain products not having good opportunities in local markets but have excellent
export potential like handicrafts, some horticultural products like strawberries, mushrooms etc.
(i) Engineering
(ii) Non-engineering
(iv) Demand-based
(v) Technology-based
(vi) Need-based
(i) Consumer durables like steel furniture, electrical iron, voltage stabilizer, water heaters,
water purifiers, television sets, Refrigerators etc.
(ii) Consumer non-durables like plastic items, cosmetics, readymade garments, food items
(iii) Industrial non-durables like bolts, nuts, screws, spacers, washers, springs etc.
(iv) Intermediate goods like paints, varnish, pharmaceutical formulations, dye stuff etc.
(i) Domestic consumer: urban, semi-urban, rural areas, high, low and middle income
groups
Personal Services: quick print shops, software engineers, interior designers, tailors,
management or tax consultants
Information Services: Computers & telecom. Tech, newspapers, social & digital media
services, graphic & design, news & entertainment
Brief History: Why did the entrepreneur decide to set-up this particular project?
(a) Constitution of the unit (Proprietorship, partnership, private limited company etc.). Share
of each partner in case of partnership
(a) Brief background detail with reference to experience in related fields & how it will help
him/her in successfully running the unit
(b) Enclose bio data (education, previous employment details, business/industrial activities
undertaken)
Product
(c) Segmentation of estimated demand, the proposed share of the unit & projected sales for
first 3 years
(e) Competition and how does the unit propose to face the competition?
(f) Price & quality: how the unit’s product will compare with those of its competitors?
(i) If selling directly to customer, then details of showroom, sales force etc.
(ii) If selling through agents, their details, period of contract, commission payable, security
etc. to be offered by them & payment terms
Manufacturing process:
(a) Process flow chart, giving the manufacturing flow from one process to the next & from
one machine to the next
(b) Various operations for each item, sequence of operations & time taken for each operation
(c) Input / output ratios between raw material & finished products
(h) Reasons for selecting a particular supplier, alongwith quotations for each item from at
least 2 or 3 different suppliers.
Raw material:
(c) Availability
(e) Sources
(b) Indirect staff such ads sales-cum-purchase assistant, account-cum-store keeper etc.
(c) Direct labour strength such as skilled workers, unskilled workers, semi-skilled workers
Land, building, plant & machinery, furniture & fixture, pre-operative expenses, contingencies,
working capital required
Means of Finance:
(d) Average raw material stocking level for various raw materials & consumable items
(d) Item wise cost of production & total annual cost of production
Security offered
Simulatory / Encouragement:
Entrepreneurial Education
Assistance and guidance for selection of a product and preparing project report
Developing production and processes which are suitable to the local levels
Assistance:
Business registration
Supply of information
Support / Sustaining:
A written proof that the entrepreneur has performed the necessary research and has
studied the business activity adequately
It is a formal written expression of the entrepreneurial vision, describing the strategy and
operations of the proposed venture
It is a communication more about the top management team than simply the scope of
their entrepreneurial vision.
It is a document which provides the information about the direction of the company and
its goals and objectives
Vision statement
Market plan
Mission:
Objectives:
• Decision roles which enable entrepreneur to guide and measure the firm’s performance
towards its purpose
• These are the end results to be achieved by a plan and these may be tangible or intangible
Goals:
• Objectives need to be made explicit and operational by translating them into goals and
targets
• Entrepreneurial goals are determined on the basis of social, political, economic and
personal factors
Strategy:
• The ways in which an enterprise reacts to its environment by deploying its principal
resources and marshals its efforts in pursuit of it’s mission and objectives
• It is a plan designed to meet the threats and to exploit the opportunities created by
environmental changes
Policies:
i. Guides the ventures operations by charting its future course and devising a strategy for
success
iii. While developing a business, the plan forces potential entrepreneurs to look at their
business ideas in the harsh light of reality
c) Everyone targets to shoot for by providing a yardstick for measuring actual performance
against those targets, creating a plan forces entrepreneurs to subject their ideas to the
test of reality
Executive Summary:
An entrepreneur should describe market size and location with customer details, the
founders, key persons and their roles.
It also consists of estimates of revenue and expenses, founders equity debts and capital
needed
The entrepreneur should explain the nature of the business by clearly defining how the firm will
operate and what the founders intend to accomplish.
Entrepreneur should explain functions and nature of products and service, proprietary
interest and technical details
A market exists only when there are qualified purchasers, but entrepreneurs must
remember that the business plan is a prediction of future markets, not merely those
which exists
For ventures, that manufacture, design, or sell products as well as for service firms, that
require capital equipment, this manufacturing or operations plan is important
Entrepreneurs must take care to profit the entrepreneurial team honestly but effectively
They should emphasize team members’ strengths, past history, their success and positive
characteristics
Each person’s role in the new venture should be described briefly including board
members
Financial Documentations:
Financial statement for a new venture, called proforma, are projections based on
operating and marketing assumptions
An income statement is required to show revenue, cost of goods sold, operating expenses
and net income
Cash flow budget reflect information from the profit and loss statement adjusted properly
for credit sales, non-cash expenses and cash obtained and used outside of operations
income.
A projected balance sheet will summarize assets and liabilities and breakeven analysis will
reveal when entrepreneur activity begins to turn a profit
Executive Summary:
c) Brief description of the business, its products & services and the customer problems they
solve
g) Brief statement of the financial request & how the money will be used
What makes the business unique? What is the source of its competitive advantage?
1. Operational
2. Financial
3. Other
Industry Analysis
2. Significant trends
3. Growth rate
Business Strategy:
b) SWOT Analysis
1. Strengths
2. Weaknesses
3. Opportunities
4. Threats
c) Competitive Strategy
1. Cost-leadership
2. Differentiation
3. Focus
a) Description
2. Customer benefits
4. Uniqueness
1. Raw material
2. Costs
3. Key suppliers
Marketing Strategy:
a) Target market
2. Media costs
3. Frequency of usage
Marketing Strategy:
e) Pricing
1. Cost structure
- Fixed
- Variable
f) Distribution Strategy
a) Location
2. Traffic count
b) Layout
1. Size requirements
3. Ergonomics issues
Competitor Analysis:
a) Existing competitors
2. Strengths
3. Weaknesses
1. Their backgrounds
Plan of Operation:
c) Decision-making authority
Financial Forecasts:
a) Financial statements
1. Income statement
2. Balance sheet
b) Break-even analysis
a) Amount requested
Appendices:
Objectives:
Any entrepreneur desirous of starting a venture should have a clear picture of the
objectives of his / her project
It is advisable to prepare a comprehensive check list of the objectives, embracing all the
important matters
(a) Manufacturing?
(b) Marketing?
4. Have you studied the viability of your scheme? (Consult the Small Industries Service
Institute)
6. Have you obtained the necessary license from the local body / administration?
a) Indigenously or
a) Tooling
b) Quality control
a) Of skilled workers?
b) Of semi-skilled workers?
c) Of unskilled workers?
b) Operations?
b) Production planning
d) Assembly
e) Packaging
f) Distribution
i. Short-term loans
h) Have you got adequate cash/bank arrangement to furnish the earnest money required
by the NSIC?
13. What are your markets?
a) Local
b) Country wide
c) Export
a) Retailers
b) Wholesalers
c) Agents
d) Franchises
a) Road
b) Rail
c) Water
Market Analysis:
The objective of market analysis is to establish that a market exists for the proposed
venture
i. Potential customers
iii. Competitors
Market Research and Analysis should describe a customer profile that includes
demographic information
Market trends are important to identify including unusual opportunities for the
ventures
Market analysis is predicated on a price system that helps describe the venture’s market
The choice of a distribution system often defines the market niche, pricing system and
promotional activities
Development of Product/Idea:
The Idea Generation:
- Entrepreneurial insight
It synthesizes an idea for new product or process & draft of idea with time line for product
development
Once it begin to take a shape, put it down on paper, design & if appropriate make a
‘bench model’
Incubation:
A transition activity takes place in which decisions are made whether to pursue the idea
or not
At this stage entrepreneur prepares preliminary design & drawings with bench-top
prototype
Illumination / Implementation:
Another transition stage occurs as the inventor puts forward a formal proposal for
product development requiring a commitment of time & money
When this is achieved, the illumination stage occurs, in which the venture gears up for
test production, complete patent work, develops an engineered prototype and at the end
actually produces a limited run of new products
Diffusion:
New product is tested, markets are studied and various approvals are secured before the
venture enters the final stage
It is the process of expanding into production and into consumer markets while
continuing to improve the product to meet consumers’ expectation
Resources:
A firm makes more money than its rivals if its business model cerates and offers superior
customer value (lower cost or more differentiated products than those of competitors)
Ex. Serum Institute, Pfizer, Astra Zeneca, Johnson & Johnson needed well equipped R & D
Laboratories, a good team of scientists, patent rights etc. to manufacture medicines or Covid19
Vaccines
Firms must have the ability or capacity to turn resources into customer value and profit
Ex. For ‘Shell’ to make money from oil, it needs not only resources such as exploration
rights, sophisticated exploration equipment and geologists, but also the ability to find the
oil and turn it into something that its customers want
So the resources and an ability to use them with the value adding activities that a firm
needs to perform so as to offer its customers the type of value they want.
Property based resources are tangible resources and give the entrepreneur “rights” and
enable a firm to control its environment. Ex. Physical resources like plant, equipment,
financial capital in the form of cash
Knowledge based resources are intangible that enable the firm to adopt to a changing
environment. These are not identified in financial statements, but can be an excellent
source of profits. Ex. Non-physical or non-financial resources like patents, brands,
copyrights, trade marks, market research data and findings, knowledge, database,
relationship with vendors etc.
Financial resources
Human Resources
Operating Resources
Financial Resources:
Resources which take the form of, or can be readily converted to cash
Ex. Cash in hand, Overdraft facilities, loans, outstanding debtors, investment capital,
investment in other businesses People and the efforts, knowledge, skills and insights
they contribute to the success of the venture
Ex. Productive labour, technical expertise, provision of business services, communication skills,
strategic and leadership skills etc.
Operating Resources:
The facilities which allows people to do their jobs and used by business to deliver its
outputs to the marketplace
Ex. Premises, motor vehicles, production machinery, raw materials, storage facilities, office
equipment etc.
Human Resources:
People and the efforts, knowledge, skills and insights they contribute to the success of
the venture
Ex. Productive labour, technical expertise, provision of business services, communication skills,
strategic and leadership skills etc.
A firm needs to have the ability to convert its resources/assets to customer value
Ex. Patients do not buy patents, technology, and knowledge of skilled scientists, R & D
laboratories or Medicine / Vaccine manufacturing machinery from Pharmaceutical Company, but
they buy medicines / vaccines that have been developed by skilled scientists using their
knowledge embedded in patents, using technology, research laboratories and manufacturing
facility
A firm’s capacity to turn its resources into customer value is called a competence or
capability
Ex. Coca Cola, KFC’s ability to turn its secret formula and brand into a product that most of the
customers perceive as being preferable to its rival products; Apple’s iOS makes it’s mobile
phones unique and class apart from the other brands
Strategic Resources:
Common resources are necessary for carrying out the firm’s usual activities, but no
specific advantages, such as some equipment, office furniture
Value
Rareness
Imitability
Substitutability
Appropriability
Value:
Does the resource make a significant contribution toward the value that customers
perceive?
Rareness:
Is the resource rare? That is, is the firm only one with the resource; if not if its level of
resource higher than that of its competitors?
Is the firm only one with the capability, if not is its level of capability higher than that of
its competitors?
The contribution that the resource makes to customer value should be superior to that
made by competitors resources
(ii) If it is widely held, the firm’s level of resource is higher than that of its competitors
Ex. Batteries made up from rare materials like Lithium, Nickel, Cadmium
Imitability:
How long the resource can keep making its owner money is a function of its imitability –
the extent to which the resource can be imitated
If a resource can be copied, the owner of the resource will suddenly have many
competitors whose resources make the same significant contribution to customer value as
the owners resource does
Ex. Drug patent, Specially grown/cultivated and selectively picked coffee beans used by Nescafe
Substitutability:
Can another resource offer customers the same value that your firm’s resource does?
Appropriability:
To what extent can the firm appropriate value from the resource?
Opportunity Analysis:
It involves:
Opportunity Identification
Opportunity Evaluation
Opportunity Identification:
Sometimes even financially attractive opportunities may have to be rejected at this stage
due to lack of match
Opportunity Evaluation:
Qualitative Evaluation:
Quantitative Evaluation:
Innovator or Imitator:
Innovator:
They can work only when definite level of progress has already been achieved
Imitator:
SWOT Analysis:
Analyzing Internal & External Environment:
Situation Analysis:
1. Internal Analysis
(a) Strengths
(b) Weaknesses
2. External Analysis
(a) Opportunities
(b) Threat
Strengths:
Characteristics of the business or team that give it an advantage over others in the
industry
Ex. Well-known brand name, lower cost raw material or processes, superior management talent,
better marketing skills, good distribution skills, committed employees etc.
Weaknesses:
o Detract the organization from its ability to attain the core goal and influence its growth
o These are the factors which do not meet the standards we feel they should meet.
However sometimes weaknesses are controllable. They must be minimized and
eliminated
Ex. Limited financial resources, limited distribution, higher costs, out-of-date products /
technology, weak market image, poor marketing skills, limited management skills
Opportunities:
Chances to make greater profits in the environment – External attractive factors that
represent the reason for an organization to exist and develop
Arise when an organization can take benefit of conditions in it environment to plan and
execute strategies that enable it to become more profitable
Organization should be careful and recognize the opportunities and grasp them
whenever they arise. Opportunities may arise from market, competition, industry /
government and technology
Ex. Rapid market growth, changing customer needs / tastes, new uses for product discovered,
Economic boom, sales decline for a substitute product.
Threats:
External elements in the environment that could cause trouble for the business – External
factors, beyond an organization’s control, which could place the organization’s mission or
operation at risk
Arise when the conditions in external environment jeopardize the reliability and
profitability of the organization’s business
Ex. Entry of foreign competitors, changing customer needs / tastes, rival firms adopt new
strategies, increased government regulation, Economic downturn.
To organize important factors linked to success and failure in the business world
Make decisions about the best path for your initiative. Identifying your opportunities for
success in context of threats to success can clarify directions and choices.
Adjust and refine plans mid-course. A new opportunity might open wider avenues, while a
new threat could close a path that once existed
Establishing the objectives for which the SWOT analysis is carried out – This could be wide
/ narrow, general / specific
Allocate research and information gathering tasks – This may be carried out in two stages
– explorative and detailed.
Creating a workshop environment that enables free flow of information among the
people involved.
Evaluating listed ideas against objectives – sorting and grouping ideas in relation to the
stated objectives
Carry the findings forward by making sure that SWOT analysis is used in subsequent
planning. It is also helpful to revisit the findings at suitable intervals.
SWOT can be very subjective. Two people rarely come up with the same version of a
SWOT. It can only be used as a guide but not as a prescription
May cause organizations to view circumstances as very simple due to which certain key
strategic contacts may be overlooked.
To be effective SWOT needs to be conducted very regularly. The pace of change makes it
very difficult to anticipate developments
The data used in the analysis may be based on assumptions that subsequently prove to
be unfounded (good and bad)
External Environment
Internal Environment:
Promoters’ values
Management structure
Company image
Human Resources
Internal relationships like jobs, wages, safe & hygienic work place, security etc.
o Customers
o Suppliers
o Competitors
o Public
o Financers
o Marketing intermediaries
o Economic factors
o Demographic factors
o Political factors
o Natural factors
o Technological factors
o Global factors
Political factors:
Economic factors:
Interest rates
Long-term prospects of the economy like GDP, per capita income growth
Socio-cultural factors:
o Does language impact upon the diffusion products into the markets?
o What is the quality of life & life expectancy? Are older generations wealthy?
Technological factors:
Does technology allow the products & services to be produced cost effectively & of better
quality standard?
Does technology offers consumers & businesses more innovative products & services like
digital banking, AI & ML based tools etc.?
Does technology offers new ways to the companies to communicate with consumers like
CRM, Social and digital media?
Environmental factors:
They have become important due to the increasing strain on the limited resources, increasing
scarcity of certain raw materials, rising pollution, ethical, eco-friendly and sustainable business
practices, carbon footprint targets set by government.
Legal factors:
Health and safety, equal opportunities, advertising standards, consumer rights and laws,
product labelling and safety
A clear understanding about what is legal and what is not, in order to trade successfully
In case of global operations and trading, it is tricky to understand the unique codes and
set of rules and regulations of each country.
Industry Analysis:
History:
Size:
locally
country wide
globally
What is the size of your business and how do you compare it with the others around?
What percentage does the industry contribute to the market and the GDP etc.?
Growth Potential:
• Locally
• Nationally
• Globally
What is the current growth rate of the industry / your business? How has it grown since last five
years?
Competition:
o How are you going to acquire, keep and retain the customers from competition?
o What are your competitors good at? What can you learn from them?
Trends:
Predictions about the upcoming trends for the products and services in the industry
Why do you need to know the changing trends and how can you use that information to
make yourself future ready for product / service up gradation, inventory etc.
Opportunities:
• What opportunities do you foresee in the coming year and how will you use those to gain
advantages or competitive advantages?
When a corporation spins off a business unit that has its own management structure, it
sets it up as an independent company under a renamed business entity
Assume a company, Mykaa Ltd, has multiple lines of businesses like manufacturing:
• Lipstick
• Sportswear
• Handbags
• Shoes
One day the company realizes that its sportswear segment is doing extremely well but
since the company’s primary segment is cosmetics, it is not able to focus on the
sportswear segment.
This is when Mykaa Ltd decides to spinoff the sportswear company on its own with an
independent management team, CEO, resources etc.
Threat of substitutes
Not only the existing firms pose threat to the business, but the arrival of new entrants is
also a challenge.
As per the ideal scenario, the market is always open for entry and exits, resulting in
comparable profits to all the firms.
In reality, all industries have some traits that protect their high profits and help them in
warding off potential new entrants by erecting barriers.
Threat of substitutes:
The substitutes can be defined as the products of other industries that have the ability to
satisfy similar needs
Example: Coffee can be a substitute for tea, as it can be also used as a caffeine drink in
the morning
When price of a substitute product changes, the demand of a related product also gets
affected
When the number of substitute product increases, the competition also increases as the
customers have more alternatives to select from.
This forces the companies to raise or lower down the prices. Hence, it can be concluded
that the competition created by the substitute firms is ‘price competition’.
When there many producers and there is a single customer in the market, then that
situation is called as ‘monopsony’.
In these markets, the position of the buyer is very strong and he sets the price.
The bargaining power of the buyers compels the firms to reduce the prices and may also
demand a product or service of higher quality at low price.
Since the company needs raw material for producing, therefore the producers have to
build a relationship with its suppliers.
When suppliers have the power in their hands, they can exert influence on the producing
firms by selling them raw materials at higher prices.
Example: Wal-Mart as an organization thrives on the basis of its relationship with its
suppliers.
For most industries the intensity of competitive rivalry is the major determinant of the
competitiveness of the industry.
Potential factors:
• Degree of transparency
A business model describes the rationale of how an organization creates, delivers and captures
value.
9 Building Blocks
Customer Segments:
Value Proposition
What are you offering them? What is that getting done for them? Do they care?
Channels
How does each customer segment want to be reached? Through which interaction points?
Customer Relationship
Revenue Streams
What are customers really willing to pay for? How? Are you generating transactional or
recurring revenues?
Key Resources
Key Activities
Which activities do you need to perform well in your business model? What is crucial?
Key Partners
Cost Structure
KP KA VP CR CS
Hotel Impersonal
KR CH
Insurance
Single Aircraft Model No Frills Call Centers
CS Training RS
Maintenance Tickets
Sufficient strength in some domains can mitigate weaknesses in others whereas good
opportunities can be found in not-so-attractive markets and industries
There is technological uncertainty, strategic uncertainty, high initial costs but steep cost
reduction, scope for emergence of embryonic companies & spin offs, first time
buyers/customers
In Transition or Maturing industries the growth rates are reaching at saturation stage
It can be delayed by innovations and other events that fuel continuous growth for
industry players
Strategic breakthroughs may also cause transition industries to regain their rapid growth
Firms compete for market share and competition is concentrated on cost and service
Firms can find an opportunity by rationalizing the product mix combined with correct
pricing and right buyer selection
Decline industries face an absolute decline in unit sales over a sustained period
The decline results due to slower economic growth, product substitution & continued
technological changes in the areas like electronics, computer, chemicals
The demand is unsure and there are exit barriers so firms have to keep competing amid
falling demand with costly price wars
Effective leadership can make the firms sail through, identifying a niche would be the key,
harvest relationships and be ready for divestment
Waste Management
Green Infrastructure
Water Management
Digital Skills
Digital Selling
Digitization of Processes
Marketing:
o The ultimate goal is to facilitate exchanges between an enterprise and its customers
o Marketing involves inter-related activities designed to satisfy customer needs & thereby
achieve organizational goals
o Once the most promising markets are chosen, a detailed analysis is done to design
appropriate product pricing, distribution & promotional strategies. The key market
characteristics to be examined are:
Socio-cultural environment
Physical factors
Finance:
The various sources of capital employed and their relative proportion make up the
financial structure of a venture
Most ventures will need ‘Seed Capital’ during the pre-start-up and start-up phases, which
is the cash needed for product development, market research and the initial operating
expenses before sales revenue can begin to offset business expenses
Potential lenders and investors want to know how the entrepreneur has worked out:
Inventory
Operating expenses
Accounts receivable
Other items
Collection of debts
Through the initial start-up and revival stages, entrepreneur has to change the role from
founding entrepreneur to the manager, who has a ‘Transaction orientation’ that permits
him to maintain psychological distance between his personal lives & business decisions.
He tends to focus on operational tasks & solving organizational problems at the initial
stage.
As the venture grows he should be able to handle management functions like planning,
organizing and controlling an expanding business. He should be concerned with gaining
new resources, finding expansion capital, increasing manpower and developing new
products or services.
As the competitive forces increases and the venture evolves towards maturity, he should
become capable of consolidating his assets and repositioning his venture.
When things slow down, these functions are reversed. New resources may be required,
but in lesser quantities, capital become scarce and organization may have to be trimmed
down in size
Ownership:
Sole Trading
Concern/Sole
Proprietor
Co-operative Partnership
Society Firm
Forms of
Ownership
Organizations
Franchising:
It is a system used by a company (franchisor) that grants others (franchisees) the right and
license (franchise) to market a product or service under the franchisor’s trade names,
trademarks, service marks, know-how and methods of doing business
It is a format of mutual dependence which allows both the franchisor and the franchisee
realize profits and benefits
Franchisee: The independent owner of a franchise outlet who enters into an agreement
with a franchisor.
Franchise: The right to use a specific business name and sell its goods or services in a
specific city, region or country
A
contractual
relationship Branded
Combining Product
Resources /Service
Franchise
Common
Public Marketing
identity Procedures
Benefits:
It allows consumers to buy good quality items or services at the right price
It provides entrepreneurs a means to enter business with a low capital investment and
risk
Disadvantages:
Compliance of technology, very little scope for any R & D and innovation
No decision making freedom as most important decisions are taken by the parent
company
Binding of getting most of the supplies from the parent company at higher prices in spite
of availability of better alternatives
A collaboration between two or more firms that join together on a loose, non-contractual
basis.
Strategic alliances are cooperative agreements between two or more companies to work
together and share resources to achieve a common business objective, Each company
maintains its autonomy while gaining a new opportunity
A global strategic alliance is an agreement among two or more independent firm to co-
operate for the purpose of achieving common goal such as a competitive advantage or
customer value creation while remaining independent.
Sharing resources like products, distribution channels, manufacturing capability, project funding,
capital equipment, knowledge, expertise, or intellectual property, to create Synergy to gain
Competitive Advantage.
Alliances enable buying & supplying firms to combine their individual strengths & work
together to reduce non-value-adding activities & facilitate improved performance
In order for both parties to remain committed to this form of relationship, mutual benefit
must exist (i.e. a "win-win" relationship) 1+1=3
Strengthening operations
Reducing risks
Credibility
Reduce/share costs
Provide marketing
Types of alliances:
o Joint venture: is a strategic alliance in which two or more firms create a legally
independent company to share some of their resources and capabilities to develop a
competitive advantage
o Equity strategic alliance: is an alliance in which two or more firms own different
percentages of the company they have formed by combining some of their resources and
capabilities to create a competitive advantage.
o Global Strategic Alliances: working partnerships between companies (often more than
two) across national boundaries and increasingly across industries. Sometimes formed
between company and a foreign government, or among companies and governments
o Horizontal Alliance: include firms from the same industry. Alliances are usually used to
achieve scale, to adjust for seasonal changes or handle niche areas of expertise.
o Operations and logistics alliance: which involves either pooling the cost of establishing
manufacturing facilities or taking advantage of an existing investment in a country by a
local firm
o Marketing, sales and service alliances: in which a company makes use of the marketing
infrastructure etc. of another company, in the foreign market for its products. This may
help easy penetration of the foreign market and preemption of potential competitors
o Multiple activity alliance: which involves two or more types of alliances. While marketing
alliances are often single country alliances, as international firms take on different allies in
each country, technology development and operations alliances are usually multi-country
since these kinds of activities can be employed over several Countries.
Advantages of Alliance:
Alliance could help a company develop a more effective process, expand into a new
market or develop an advantage over a competitor (Competitive Advantage)
Disadvantages of Alliance:
• Loss of control over such important issues as product quality, operating costs, employees,
etc.
Examples of Alliance:
Buying an existing business could be one of the entrepreneurial option in which the buyer
takes over full ownership of the business
The largest advantage is having an existing blueprint that can include important factors
like an established customer base, defined operating expenses, and fully trained
employees
Some entrepreneurs choose to buy existing businesses rather than starting their own. In a
typical year millions are businesses are bought and sold. Buying an established business
can offer many advantages, if the entrepreneur knows what they are really buying and if
the business is priced right
A prospective owner must ask several key questions before buying an existing business
What changes are needed? How extensive are they, to realize the full potential of the
value of the business?
Equipment, machinery, assembly line is already installed and productive capacity is known
The new owner can use the experience of the previous owner
o The business may be for sale because it is either not making profit or non-profitable
o Prevailing problems may get inherited with the purchase of an existing business
Major events, critical risk factors and activities which constitute progressive checkpoints provide
the entrepreneur with a set of control for monitoring the new venture.
Major Events:
Lining up Facilities: choosing a location for physical facility, securing a lease or purchasing
a store, assuring transportation services, dealing with legal issues like zoning ordinance.
The facilities include fixtures, furniture, equipment, parking space and necessary
renovations
Acquiring Inventory: Description of inventory control plan, right from inventory purchase
methods, inventory management and logical inventory forecasts
Staging a Grand Opening: Extent of R & D efforts, vendor relations, supply requirements,
maintenance expectations, transport requirements, QC policies, various processes,
production and safety requirements
• They are the real owners of a corporation and corporate benefits from the introduction of
new-value added products or necessary services by entrepreneurs
• Entrepreneurs meetings with the stockholders are essential to protect their interest
• Marketing must be integrated with other functions, looking at the natural barriers that
divide specializations as manufacturing prefer simplicity and function over form whereas
marketing persons prefer exciting designs and fancy packaging
• Successful entrepreneurs tend to have a clear vision of both existing and potential
customers.