ED Poornima Charantimath

Content
Entrepreneurship Development and Small Business Enterprises
Contents
1. Modern Small Business Enterprises
2. Entrepreneurship
3. Women Entrepreneurs
4. Institutions Supporting Small Business Enterprises
5. Setting up a Small Business Enterprise
6. Family Business
7. Sickness in Small Business Enterprises
8. Strategic Management in Small Business
9. Financial Management in Small Business
10.Marketing Management in Small Business
11.Production Management in Small Business
12.Human Resource Management in Small Business
Content
Chapter 1 - Modern Small

Business Enterprises
The Small-Scale Industry (SSI) Sector continues to play a vibrant role in the
socio-economic transformation of the country. In the changed environment,
the SSI sector needs to integrate itself with the overall domestic economy and
global markets by gearing itself to greater interdependence by capacity
building and networking.
Content
Learning Objectives
To understand the role and importance of small-scale
industry (SSI)
To present the impact of globalisation and the WTO on
SSI
To introduce concepts and definitions of SSI
To illustrate government policy and development of the
small-scale sector in India
To trace the growth and performance of SSIs in India
To analyse the findings of third All India Census of SSI
sector
To understand small and medium enterprises in other
countries
To understand the problems and prospects of SSIs
Content
ROLE OF SMALL-SCALE INDUSTRIES

Dynamic and vibrant sector of the economy
Prominent
role
in
socio-economic
transformation of the country
Accounts for 35 per cent of industrial
production, 40 per cent of exports and 60 per
cent of employment opportunities
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The Importance of Small-scale Industries

Provide increased employment through labourintensive process.
Require lower gestation period.
Easy to set up in rural and backward areas.
Need small/local market.
Encourage growth of local entrepreneurship.
Create a decentralised pattern of ownership.
Foster diversification of economic activities.
Introduce new products particularly to cater to local
needs.
Influence the standard of living of local people.
Provide equitable dispersal of industries throughout
rural and backward areas.
Content
Impact of Globalisation and the WTO on SSI

Tighter patent laws through regulation of
intellectual property rights under the TRIPS
Agreement
Worldwide market and opportunity to export
Intensified competition in the domestic market
Import of high quality goods
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Investment Ceiling for Small-Scale Industries

(December 1999)
Type of SSI
unit
Investment
limit
Remarks
Small-scale industry
Rs 10 million
Historical cost of plant and machinery
Ancillary
Rs 10 million
At least 50 per cent of its output should go

to other industrial undertaking
Export oriented
Rs 10 million
Obligation to export 30 per cent of

production
Tiny enterprise
Rs 2.5 million
No location limits
Women enterprise
Rs 10 million
51 per cent equity holding by women
Service and business

Rs 0.5 million
enterprise
No location limits
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8
Evolution on Investment Limits for Smallscale Industries

Year
Investment limit
Additional condution
Less than 50 to 100 persons
with or without Power
1950
Up to Rs 0.5 million in fixed assets
1960
Up to Rs 0.5 million in fixed assets
No condition
1966
Up to Rs 0.75 million in plant and machinery
No condition
1975
Up to Rs 1 million in plant and machinery
No condition
1980
No condition
1985
Up to Rs 3.5 million in plant and machinery
No condition
1991
No condition
1997
No condition
1999
No condition
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9
Indias SSI sector is divided into seven industry

groups
Traditional Sector: Handicrafts, Handlooms, Khadi,
Village and Cottage Industries, Coir and Sericulture.
Modern Sector: Power looms and residual SSI

Indian definition of SSE based largely on cumulative
amount of investment in plant and machinery whose
limits have been periodically revised upwards
Emerging liberalised and competitive economic
environment
necessitated
structural
and
fundamental changes in the policy framework,
causing a shift in focus from protection to promotion
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10
Performance of SSI Units during the 1980s
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11
Performance of Small-scale Industries

during the 1990s
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12
Comparative Performance of SSIs in Terms

of Average Growth Rates
Areas of
Performance
Average growth rate (%)

1980-1990
1991-2000
No. of Units
8.6
5.63
Production
19.9
16.14
Employment
4.05
Export
19.15
18.93
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13
Overall Performance of Small-scale Sector

in India
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14
Third All India Census on SSI

All the SSI units permanently registered up to March 31
2001, numbering 22,62,401, were surveyed on a complete
enumeration basis. Of these 13,74,974 units (61 %) were
found to be working and 8,87,427 units (39 %) were found to
be closed.
Of the 13,74,974 working units, 9,01,291 were SSIs and
4,73,683 were SSSBEs. Thus, the proportion of SSIs was
65.55 per cent. About 5.08 per cent of the SSI units were
ancillary units. The proportion of units operating in rural
areas was 44.33 %.
In terms of the number of working units, six states, viz., Tamil
Nadu (13.09 %), Uttar Pradesh (11.85 %), Kerala (10.69 %),
Gujarat (10.08 %), Karnataka (8.04 %), and Madhya
Pradesh (7.41 %), had a share of 61.16 %.
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15
Third All India Census on SSI cont

With regard to closed units, six States, viz., Tamil
Nadu (14.33 %), Uttar Pradesh (13.78 %), Punjab
(9.32 %), Kerala (8.43 %), Madhya Pradesh (7.4
%), and Maharashtra (6.11 %) had a share of
59.37 %.
The per unit employment was 4.48. The
employment per Rs 1 lakh investment in fixed
assets was 0.67.
The rice milling industry topped the list in terms of
gross output. In terms of exports, the textile
garments and clothing accessories industry was
on top.
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16
Third All India Census on SSI cont

Compared to the Second Census, the Third Census
brought out some structural changes in the
registered SSI sector. While the proportion of
working units remained the same, by and large, the
domination of SSIs among the working units has
been reduced considerably from 96 % to 66 %. This
is mainly due to an increase in the number of units
engaged in services. The per unit employment has
gone down from 6.29 to 4.48. The per unit fixed
investment has gone up from Rs 1.60 lakh to Rs
6.68 lakh. This could be due to technological
upgradation.
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17
Sector-wise Distribution of Working and Closed

Units
Rural
Urban
Total
Working
units
44.33%
55.67%
100.00%
Closed unit
37.92%
62.08%
100.00%
Total
41.82%
58.18%
100.00%
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18
Percentage distribution of Registered SSI

units by location
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19
Unregistered SSI Sector

This sector was surveyed using a two-stage
stratified sampling design. Out of the
9,94,357 villages and urban blocks, 19,579
villages and urban blocks were surveyed to
identify the units of unregistered SSI sector.
Out of these, information was complete
received in respect of 19,278 villages and
urban blocks. In these villages and urban
blocks, the enumerators selected 1,68,665
unregistered SSI units for survey, but they
could actually survey 1,67,665 units.
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20
Unregistered SSI Sector cont

The size of the unregistered SSI sector is
estimated to be 91,46,216. Of these, only 38.75 %
were SSIs and the rest were SSSBEs.
The reasons for non-registration were elicited in
the Third Census. Interestingly, 53.13 % of the
units informed that they were not aware of the
provision for registration, while 39.86 % of the
units indicated that they were not interested.
About 45.38 % of the units were engaged in
services while 36.12 % were engaged in
manufacturing and the remaining 18.5 % in
repair/maintenance.
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21
Unregistered SSI Sector cont

The maximum number of unregistered SSI units (16.89 %)
were located in Uttar Pradesh. Other States with a high
concentration of unregistered SSI units were Andhra
Pradesh, West Bengal, Maharashtra, Madhya Pradesh,
Tamil Nadu, Karnataka, Bihar, Rajasthan and Gujarat.
About 96.9 % were proprietary units and 1.13 % partnership
units.
The average employment was 2.05 and the employment

generated per Rs 1 lakh fixed investment was 3 persons.
About 10.13 % of the units were women enterprises and the
socially backward classes managed 57 % of the units.
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22
Total SSI sector

The size of the total SSI sector is estimated to be
over one crore (1,05,21,190). About 42.26% of
these units were SSIs, the rest were SSSBEs. The
number of ancillaries among SSIs was 2.98%.
About 47.22% of the units were located in Uttar
Pradesh, Andhra Pradesh, Maharashtra, Madhya
Pradesh and Tamil Nadu.
The services sector emerged as the dominant
component in the total SSI sector with a share of
44% of the units.
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23
Total SSI sector cont

Although registration is voluntary in the SSI
sector, the registered SSI sector was found to
be the cream of the total SSI sector. In terms
of size, it was only 13%, but in terms of
investment its share was 59 % and it
contributed to 59% of the total production.
About 95.8% of the units were of the proprietary
type of ownership. Entrepreneurs belonging to
socially backward classes managed about 56% of
the units.
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24
Total SSI sector cont

The percentage of women enterprises was
10.11%. The percentage of enterprises
actually managed by women was 9.46%.
The percentage of women employees was
13.31%. The employees belonging to
socially backward classes was to the tune of
57.45%.
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25
Sickness in SSI sector

Sickness was identified through the latest definition
of RBI given by the Kohli Committee. Incipient
sickness was identified in terms of continuous
decline in gross output.
Sickness in the total SSI sector was to the tune of
1%, whereas in the registered and unregistered SSI
sectors it was 3.38% and 0.64% respectively.
The maximum number of sick units.about 59.33 %
was located in West Bengal, Kerala, Maharashtra,
Karnataka, and Andhra Pradesh.
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26
cont
Out of the units having loan outstanding with

institutional sources such as banks and financial
institutions, sickness was reported to be about
19.6% in the registered SSI sector and 16.61% in
the unregistered SSI sector. In the total SSI
sector, this percentage was 17.8.
Incipient sickness, identified in terms of a
continuous decline in gross output was 11.5% in
the registered SSI sector and 6.48% in the
unregistered SSI sector. In the total SSI sector,
this percentage was 7.4.
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27
cont
Combining the three yardsticks used to

measure sickness, viz., (a) delay in
repayment of loan over one year, (b) decline
in net worth by 50%, and (c) decline in output
in last three years, about 13.98% of the units
in the registered SSI sector were identified to
be either sick or incipient sick. This
percentage was only 6.89 in the case of
unregistered units. In the total SSI sector, this
percentage was 7.82.
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28
cont
The States of Kerala, Tamil Nadu, Andhra

Pradesh, Karnataka, and Maharashtra had
maximum number of sick/incipiently sick SSI
units. These five States together accounted
for 54.28% of the sick/incipiently sick SSI
units in the country.
Lack of demand and Shortage of working
capital were the main reasons for
sickness/incipient sickness in both the
registered and unregistered SSI sectors.
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29
Third All India Census On SSI
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30
Small and Medium Enterprise (SME)

International SME network (INSME) is a
hub of networks and structure of
services among members.
Definition of an SME varies from one
country to another.
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31
Definition of SMEs in Various Countries

In the Indian context, we have so far not
defined medium enterprises clearly. What
is neither small nor large is being loosely
defined as medium. Further, enterprise
encompasses businesses, services and
industries. In the broadband of small,
the discussion extends to medium as well.
Another possible connotation for the
SMEs is the small manufacturing
enterprises.
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32
External and Internal Problems Faced

by Small-scale Industries
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33
Chapter 2 Entrepreneurship
What differentiates an entrepreneur? To visualize a

dream and go after it. At the end of the day, that's what
you do in life. Either that dream can be so unreachable,
so crazy that you never reach itor that dream can have
the inherent ability to be achieved.
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34
Learning Objectives
To understand the importance of entrepreneurship
To introduce concepts of entrepreneurship

To identify the characteristics of a successful
entrepreneur
To identify various types of entrepreneurs
To identify the myths of entrepreneurship
To discuss entrepreneurial development models
To present the problems faced by entrepreneurs and

capacity building for entrepreneurship.
To present the profiles of some successful entrepreneurs
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35
IMPORTANCE OF ENTREPRENEURSHIP
Entrepreneurial development today has assumed
special significance, since it is a key to economic
development.
Entrepreneurs are, thus the seeds and fruits of
industrial development.
They have invented new products and developed
organizations and the means of production to
bring them to market.
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36
Why Should You Become an Entrepreneur?

You will be your own boss and boss to other
people and make decisions that are crucial to
the business success or failure.
You will make money for yourself rather than
for someone else.
You may participate in every aspect of
running a business and learn and gain
experience in a variety of disciplines.
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37
Difference between a Manager and an

Entrepreneur
Entrepreneur
Own boss
Takes own decisions
Hires employees He is an employee
Uncertain rewards which can be unlimited
Manager
Salaried employee
Executes the decisions of the owner
He is an employee
Fixed rewards and salary
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CONCEPTS OF ENTREPRENEURSHIP
Entrepreneurial Development is a key to socioeconomic transformation of the region.
Entrepreneurship can be defined as a process of action

an entrepreneur undertakes to establish his enterprise.
The word entrepreneur is derived from the French
Verb enterprendre, means to undertake. This refers
to those who undertook the risk of new enterprises.
Entrepreneurial development process can be explained

in five stages.
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Various Definitions of an Entrepreneur

The word entrepreneur is derived from a Sanskrit word called
Antaraprerana.
Poornima Charantimath
An individual who bears the risk of operating a business in the face of
uncertainty about the future conditions.
Encyclopedia Britannica
He is the one who innovates, and introduces something new in the
economy.
Joseph A. Schumpeter
He shifts economic resources out of an area of lower and into an area of
higher productivity and greater yield.
J.B.Say (French economist)
He searches for change, responds to it and exploits opportunities.
Innovation is the specific tool of an entrepreneur.
Peter F. Drucker
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Various Definitions of an Entrepreneur

Entrepreneurs are people who have the ability to see and evaluate
business opportunities; together with the necessary resources to take
advantage of them; and to intimate appropriate action to ensure success.
International Labour Organization (ILO)
He is the one who is endowed with more than average capacities in the
task of organizing and coordinating the various factors of production. He
is a pioneer and captain of industry.
Francis A. Walker
He is a critical factor in economic development and an integral part of
economic transformation.
William Diamond
He is a person who is able to look at the environment, identify
opportunities to improve the environment, marshall resources, and
implement action to maximize those opportunities.
Robert E. Nelson
He is the agent who buys means of production at a certain price in order
to combine them into a product that is going to sell at prices that are
certain at the moment at which he commits himself to his costs.
Cantillion
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The Characteristics of a Successful

Entrepreneur
Creativity
Innovation
Dynamism
Leadership
Team Building
Achievement Motivation
Problem Solving
Goal Orientation
Risk Taking and Decision-Making ability
Commitment
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Classification of Entrepreneurs
Based on the functional characteristics: Innovative,
Imitative/Adoptive, Fabian, Drone.
Based on the Developmental Angle: Prime mover,
Manager, Minor innovator, Satellite, Local trading.
Based on the types of Business: Manufacturing,
Wholesaling, Retailing, Service.
Based on the 9 Personality types: The Improver,

The Advisor, The Superstar, The Artist, The
Visionary, The Analyst, The Fireball, The Hero, The
Healer.
Based on the Schools of Thought on
Entrepreneurship.
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Myths of Entrepreneurship
Entrepreneurs are born not made

Entrepreneurs are academic and social misfits
Entrepreneurs fit an ideal profile.
All you need is money to be an entrepreneur
All you need is luck to be an entrepreneur
A great idea is the only ingredient in a recipe for
business
My best friend will be a great business partner
Having no boss is great fun
I can make lots of money
I will definitely become successful
Life will be much simpler if I work for myself
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Models suggested for the development of

entrepreneurship
Psychological models.
Sociological models.
Integrated models.
Five stages for promoting small
entrepreneurship
Stimulation.
Identification.
Development.
Promotion.
Follow up.
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Entrepreneurial Development Cycle
Entrepreneurial
Development
Cycle
Sustaining
Activities
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PROBLEMS FACED BY ENTREPRENEURS

Problems faced by entrepreneurs are:
Internal problems
External problems and
Specific management problems.
To build capacity for entrepreneurship following
measures can be taken:
Availability of credit,
imported raw materials,
Skilled labour,
Technology and Equipment,
Infrastructural facilities,
Advisory Services and access to market.
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Chapter 3 - Women Entrepreneurs
When women move forward, the family

moves, the village moves and the Nation
moves. - Pandit Jawaharlal Nehru
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48
Learning Objectives
To introduce the concept of women entrepreneurship and
identify the importance of women entrepreneurs
To discuss the women entrepreneurship environment
To illustrate the challenges in the path of women
entrepreneurship
To understand the significance of the empowerment of
women by entrepreneurship and grass root
entrepreneurship through self-help groups (SHGs)
To identify the institutions supporting women
entrepreneurship in India
To identify the top women entrepreneurs in India
To present the profiles of successful women entrepreneurs in
India
To present the strength of womens organisations supporting
women entrepreneurship
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49
WOMEN ENTREPRENEURSHIP DEFINED

An enterprise owned and controlled by a women
having a minimum financial interest of 51 per cent of
the capital and giving at least 51 per cent of the
employment generated by the enterprise to
women. - Government of India
A woman entrepreneur can be defined as a
confident, innovative and creative woman capable
of achieving self economic independence
individually or in collaboration, generates
employment opportunities for others through
initiating, establishing and running the enterprise by
keeping pace with her personal, family and social
life. - Kamal Singh
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50
FACTORS INFLUENCING WOMEN

ENTREPRENEURS
The following are the major factors
influencing women entrepreneurs.
Economic independence
Establishing their own creativity
Establishing their own identity
Achievement of excellence
Building confidence
Developing risk-taking ability
Motivation
Equal status in society
Greater freedom and mobility
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Some Common Features of Women

Entrepreneurs in India
Women with small families are more likely to
become entrepreneurs.
A majority of women entrepreneurs are married.
Unmarried women face difficulties in getting
financial support to launch their enterprises.
Many women entrepreneurs belong to the lowincome group.
Gender discrimination is encountered at every
stage of business development.
Though the trend is changing, it is not
uncommon to find enterprises owned by
women but run by men.
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WOMEN ENTREPRENEURSHIP
ENVIRONMENT
Women entrepreneurs operate through
different spheres or environment. The overall
context of women entrepreneurship
development can be described in three
different spheres
Micro sphere
Meso sphere
Macro sphere
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CHALLENGES IN THE PATH OF WOMEN

ENTREPRENEURSHIP
Lack of Confidence Problems of Finance and
Working
Capital Socio-cultural
Barriers Production
Problems Inefficient Marketing Arrangements
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GRASSROOT ENTREPRENEURSHIP
THROUGH SELF-HELP GROUPS (SHGs)
Entrepreneurship can make significant
contributions towards women empowerment
by allowing her to participate in economic
activity and decision-making process.
A Self-help Group is a small economically
homogeneous and affinity group of
rural/urban poor, voluntarily formed to save
and mutually agree to contribute to a common
fund to be lent to its members as per group
decisions.
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How do Self-Help Groups Work?

1. The group addresses a felt need and a
common interest.
2. The benefits of working together outweigh
the costs.
3. The group is embedded in the local social
organisation.
4. The group has the capability, leadership,
knowledge and skills to manage the tasks.
5. The group owns and enforces its rules and
regulations
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Institutions supporting women

Consortium of Women Entrepreneurs of India
(CWEI)
Federation of Indian Women Entrepreneurs
(FIWE)Federation of Ladies Organisation(FLO),
Womens India Trust (WIT)
Central Bank of India Credit Schemes
NABARD
DWCRA
Small Industries Development Bank of India (SIDBI)
Association of Women Entrepreneurs of Karnataka
(AWAKE)
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WOMEN ENTREPRENEURS IN INDIA
Kiran Mazumdar Shaw

Vidya Chhabria
Anu Aga
Ranjana Kumar
Sulajja Firodia Motwani
Amrita Patel
Priya Paul
Elsie Nanji
Swati Piramal
Shahnaz Hussain
Rajshree Pathy
Shanti Ekambaram
Vinita Jain
Anuradha Desai
Mallika Srinivasan
Lalita Gupte
Ekta Kapoor
Naina Lal Kidwai
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Success Stories
The success story of three
organisation
spromoting
womens
women
The strength of Women Entrepreneurs Shri

Mahila Griha Udyog, Lijjat Papad (Recognised by
Khadiand Village Industries)
Co-operative Women Entrepreneurship -The
Mahila Bunkar Sahakari Samiti
Sabala:
An
organisation
for
women
empowerment
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59
Summary
The Government of India has defined a
womens entrepreneurship as an enterprise
owned and controlled by a women having a
minimum financial interest of 51 per cent of
the capital and giving at least 51 per cent of
the employment generated by the enterprise
to women.
The overall context of womens
entrepreneurship development can be
described in three different spheres: micro
sphere, mesosphere, and macro sphere.
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Summary cont
The problems and constraints experienced by
women entrepreneurs have resulted in restricting
the expansion of women entrepreneurship.
Facilitating their direct participation in income
generation activities and decision-making capacity
can make significant contributions towards women
empowerment. Entrepreneurship can help womens
economic independence and improve their social
status.
There are several institutions in India for promoting
women entrepreneurship. Financial institutions and
banks have also set up special cells to assist
women entrepreneurs.
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61
Summary cont
Self-help Groups enable the rural poor to
earn their livelihood through entrepreneurial
activities besides participating in the process
of development.
A select group of women entrepreneurs, who
are high achievers, are shattering the glass
ceiling.
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Chapter 4 Institutions Supporting
Small Business Enterprises
There are always plenty of resources for those who can create
practical plans for using it.
N Hill
Content
63
Learning Objectives
To identify the Central level
institutions/agencies supporting smallbusiness enterprises
To identify the State level
institutions/agencies supporting smallbusiness enterprises
To identify other agencies supporting
small-business enterprises
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Institutions Supporting Small Business

Enterprises
CENTRAL LEVEL
SSI BOARD
KVIC
SIDO
NSIC
NSTEDB
NPC
NISIET
NIESBUD
IIE
EDI
STATE LEVEL
DIs
SSIs
DICs
SFCs
SIDCs/SIICs
OTHERS
SSIDCs
Industry Associations
Non Governmental
Organisations
Research and
Development
Laboratories
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The Main Services Rendered by the

DC(SSI) Office
Advising the Government in policy formulation for
the promotion and development of small-scale
industries.
Providing techno-economic and managerial
consultancy, common facilities and extension
services to small-scale units.
Providing facilities for technology up gradation,
modernization, quality improvement and infrastructure.
Developing Human Resources through training and
skill up gradation.
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The Main Services Rendered by the

DC(SSI) Office
Providing economic information services.
Maintaining a close liaison with the Central
Ministries, Planning Commission, State
Governments, Financial Institutions and other
Organizations concerned with development of
Small-scale Industries.
Evolving and coordinating Policies and Programmes
for development of Small-scale Industries as
ancillaries to large and medium scale industries.
Monitoring of PMRY Scheme.
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Services provided by SIDO

(a)Entrepreneurship Development and Management
Training.
(b)Extension and Training Services.
(c)Skill Development.
(d)Entrepreneurship Development Institutes (EDIs).
(e)Preparation of Project Profiles.
(f) Plant Modernization Studies.
(g)Marketing Support.
(h)Collection of Data.
(i) Prime Ministers Rozgar Yojana (PMRY).
(j) National Awards.
(k)Prototype Development and Training Centre
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Salient Features of PMRY

Programme
Reservation for SC/ST/OBCs.
Preference for weaker sections and women.
No collateral guarantee required. Only assets
created under the scheme would be hypothecated
to the bank.
Each entrepreneur whose loan is sanctioned is
provided training for 15 to 20 working days and a
stipend of Rs 300/- for the industry sector and
training of 7 to 10 working days, and a stipend of Rs
150/- for the service and business section.
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NGOs/Associations with SCXs Established with the

Financial Assistance from Government
Karnataka
Small-scale
Industries
Association,
Bangalore
Kerala State Small Industries Association, Trichur
North Karnataka Sub-Contracting Exchange, Hubli
United Cycle Parts Manufacturers Association,
Ludhiana
Ambattur Industrial Estate Mfrs. Association, Chennai
Udyog Vihar Industries Association, Gurgaon
Small
Industries
Development
Council,
Thiruvananthapuram
PHD Chamber of Commerce and Industry, New Delhi
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NGOs/Associations with SCXs Established

with the Financial Assistance from
Government
Maharashtra Industrial Development Corporation,
Nagpur
Vidharbha Industries Association, Nagpur
All Assam Small-scale Industries Association, Guwahati
Eastern U.P. Chamber of Commerce and Industry,
Allahabad
Tamil Nadu Small and Tiny Industries Association,
Chennai
M.P. Laghu Udyog Sangh, Bhopal
Kanara Small Industries Association, Mangalore
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The Venture Capital Cycle
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Chapter 5 - Setting up a Small

Business Enterprise
Long-range investing under rapidly changing conditions,

especially under conditions that change or may change at any
moment under the impact of new commodities and
technologies, is like a shooting at a target that is not only
indistinct but also moving and moving jerkily at that.
- JA Schumpeter
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Learning Objectives
To identify the business opportunities
To understand the procedure for setting up of
a small-scale industrial unit
To present a business plan
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74
Before Starting Your Own Business

Does the idea fire your motivation and is it adequate
enough to keep you going for next one to two
years?
Is it a viable business proposition in your area?
Does it match the needs of your clientele, local or
otherwise?
Check it out with basic market research.
Test it out in the market.
Consult with experts.
Look out for competition in the field.
Is it a sunrise industry?
Evaluate Your business opportunity.
Project conceptualisation.
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Home-based Businesses
There are many businesses especially in the
services sector, which can be run efficiently from
home. A list of some of such industries:
Courier and messenger service

Outdoor catering service
Mail order retailing
Beauty parlours
Health clubs
Travel agencies
Clearing and maintenance services
Travel agencies
Date processing
Medical clinics
Crches
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Business opportunities Need to be Filtered

through a Five-layer Sieve
Researching your industry. how can you learn
more about your chosen industry and about the
resources that are available to help you?
Market assessment. is there a market for your
product or service? If so, how much income
can you expect to derive from it?
Profitability assessment. how much will starting
a new business cost you? Can you afford a
lengthy red ink period following start-up, as
well as periodic lulls in cash flow? Can you
afford to fail?
Content
77
Business opportunities Need to be Filtered

through a Five-layer Sieve
Financing assessment. will you be able to obtain the
necessary financing for your business? If so, from
where?
Legal assessment. what potential legal liabilities are you

exposing yourself to by starting a new business? Are
the costs of protecting yourself worth the trouble?
The potential sectors for business

opportunities are:
Green business, Biotechnology, Events management,
IT enabled services, Food processing, Mineral water,
Courier services, Insurance, Telecommunication,
Herbal, Travel and Tourism, Vermiculture, and Plastic.
Content
78
Flow chart for setting up a small-scale industrial

(SSI) unit
1. Selection of a project
a. Product or service selection
b. Location selection
c. Project feasibility study
d. Business plan preparation
e. Prepare project profile
2. Decide on the constitution
3. Obtain SSI registration
5. Arrange for land/shed
4. Obtain clearances from

departments as applicable
6. Arrange for plant and

machinery
7. Arrange for infrastructure
8. Prepare project report

9. Apply and obtain finance
10 a. Proceed to implement
b. Obtain final clearances
Content
79
Project feasibility study: a schematic diagram

Preliminary Work
Generation of ideas
Initial screening
Is the idea prima facie promising
No
Yes
Analysis
Plan feasibility analysis
Conduct market analysis
Terminate
Conduct technical analysis
Evaluation
Conduct financial analysis
Conduct economic & ecological analysis
Is the project worthwile?

Yes
Prepare funding proposal
No
Terminate
Content
80
Table of Contents of a Business Plan

I.
Title Page
II. Executive Summary
Vision and Mission Statement

Fact Sheet
III. Company Plan
Company Description
Merchandising Plan
Operating Plan
Organisational Plan
Content
81
Cont
IV. Marketing Plan

Market Description and target market
Competition analysis
Methods of distribution
Advertising
Pricing
Product/service design
Timing of market entry
Industry trends
Content
82
Cont
V. Financial Plan
Summary of financial needs
Sources and uses of funds
Cash flow statement
Three year income projection
Break even analysis
Balance sheet
Income statement
Risk assessment
Business financial history
Content
83
Cont
VI. Supporting Documents

Personal resumes
Personal financial statement
Credit reports
Copies of leases
Letters of reference
Content
84
Information Heads in a Project Profile
Introduction
Promoter(s) Background (education, experience, and so on)
Product(s) description (specification, uses, and so on)
Market and marketing
Details of infrastructure needed
Plant and machinery (description, capacity, cost, and so on)
Process details
Raw materials (requirements, specification, cost, and so on)
Manpower required (type of personnel required and
salaries/wages)
Cost of the project and means of finance
Cost of production and profitability
Content
85
Alternatives
To start an industry the promoter's have to
decide on the constitution of the unit. There
are four major alternatives.
a. Sole proprietorship
b. Partnership
c. Corporation/Limited company
d. Cooperative
e. Franchising
Content
86
A Mutual Dependence
Small scale industries should seek
registration with the Director of Industries of
the concerned State government.
Obtain a Provisional Registration Certificate.
Once the unit goes into production, the PRC
has to be converted into a Permanent
Registration Certificate (PMTC).
Content
87
The Specific Clearances Usually Required

Depending on the Type of Unit
Agricultural land conversion
Urban land ceiling
clearance
Building plan approval
Factories Act
Trade licence
Pollution Control Board
clearances
Sales tax registration
Central excise registration
Bureau of Indian Standards

(BIS) certificate
Fruit Products Order (FPO)
licence
Food Adulteration Act licence
Power loom registration
Electronics industries
registration
Drugs and cosmetics licence
Approvals of hotels
100 per cent export-oriented
unit
Content
88
NSIC Procedures for Hire Purchase of

Machinery
The hire purchase application has to be made
on the prescribed form.
The Director of Industries of the State under
whose jurisdiction the applicant happens to
be, forwards the application to the head office
of the NSIC at Delhi with his recommendation
and comments.
Content
89

Machinery Cont
All applications for indigenous or imported machines
are considered by acceptance committees
comprising the representatives of the Chief
Controller of Imports, Development Commissioner,
Small-Scale Industries, and other concerned
departments.
The decision of these committees is conveyed to
the parties concerned with copies to the regional
offices of the NSIC and the concerned Directorate of
Industries.
It is open to an applicant whose case has been
rejected to get his application reviewed by a high
powered committee known proforma invoice.
Content
90

Machinery Cont
Once the entrepreneur completes all these
formalities, instructions are sent to the suppliers to
dispatch the consignment (duly insured for transit
risk) to the entrepreneur and to send the R/R or
C/R, as the case may be, to the regional office.
The NSIC after ensuring that the entrepreneur has
paid all dues, releases the R/R or C/R to him for
taking delivery of the machines.
In case of imported machines, the procedure is
slightly different inasmuch as the shipping
documents are sent to the clearing agents for
clearing the consignment from the Customs and
dispatching it to the entrepreneur.
Content
91
The Project Report is Generally Prepared to Cover

the Following Seven Broad Segments
1. Executive summary
2. Existing company details (if any)
3. Operational details of the existing company
(if existing)
4. Project details
5. The company vis--vis related industry
6. Conclusion
7. Annexure
Content
92
Regulatory or Taxation Clearances

Registration under Sales Tax Act.Commercial Tax
officer of the area concerned.
Registration under Central Excise Act.Collector of
Central Excise or his nominee.
Payment of Income Tax.ITO of the area concerned.
Registration of Partnership deed.Inspector General
of area concerned.
Calibration of weights and measures.Weights and
Measures Inspector of State.
Power connection.designated officer of State
Electricity Board.
Employee strength exceeding 10 with power
connection, or 20 without power - Chief Inspector of
Factories.
Content
93
Product Specific Clearances

Establishing a printing press.District Magistrate.
License for cold storage construction.designated official in
State.
Pesticides - Central/State Agricultural Department.Ministry of
Agriculture.
Drugs and pharmaceuticals.drug licence from State Drug
Controller.
Safety matches/fireworks.licence under Explosives Act from
Directorate of Explosives, Nagpur.
Household electrical appliances.licence from the Bureau of
Indian Standards.
Wood working industry within 8 km from forest.District Forest
Officer.
Milk processing and milk products manufacturing units.approval
under Milk and milk Products Order from State
Agricultural/Food Processing Industries Department above a
designated capacity.
Content
94
Chapter 6 - Family Business
For still in every house, that loves the right, their fate
for evermore rejoiced in an issue fair and good.
- Aeschylus
Content
95
Learning Objectives
To understand the role and importance of a family
business
Understand the various definitions, and types of
family businesses
Identify the model of family business, family
business system governance, history of family
business, responsibilities and rights of shareholders
in family business
Discuss the succession in family business and the
key issues in sibling rivalry in family business
Identify the causes for pitfalls in family business
Identify the requirements needed to improve the
capability of a family business
Content
96
Some of the Largest Family Firms

Worldwide
Wal-Mart (USA, revenues $245 billion, Sam Walton family)
Samsung Group (South Korea, revenues $98.7 billion, Lee
family)
Fiat Group (Italy, revenues $54.7 billion, Agnelli family)
The Gap (USA, revenues $13.8 billion, Fisher Family)
L.Oreal (France, revenues $12.2 billion, Bettencourt
family)
IKEA (Sweden, revenues $10.4 billion, Kamprad family)
Tata Group (India, revenues $7.9 billion, Tata family)
Grupo Modelo (Mexico, revenues $3.5 billion, Diez
Fernandez family)
McCain Foods (Canada, revenues $3.5 billion, McCain
family)
Content
97
Family Business Defined

1. in which two or more extended family
members influence the business through the
exercise of kinship ties, management roles,
and ownership rights
and/or
2. which the owner intends to pass to a family
heir
Content
98
The 3-Circle Model of Family Business

Ownership
Business
Family
Content
99
The 3-Circle Model of Family Business

The 3-circle model of family business has three
systems
(a) The business system
(b) The family system
(c) The ownership system.
There are three components to family governance.

Periodic assemblies
Family council meeting
A family constitution
Content
100
Snapshot
The succession plan should include the following.
Key goals for the succession process
A schedule of the transition stage
Contingency plan
SuccessionThree ways to ease transition.
Hire the most competent advisors you can find and
afford
Business valuation is a critical element of
succession planning
Funding is often a hidden or non-recognised cost of
succession planning
Content
101
Creating Family Legacy for Future Generations

Family foundations have a valuable use in
succession planning.
Unless a family business owner has something to
move to, he or she is not likely to move from the
family business. It is not just a matter of a title, but a
place where they can be involved in what they have
created. The family business is their .theatre., it is
how members of family business are defined; it is
where they go for validation. For many family
business entrepreneurs, the idea of not being part
of the family business is a concept that provokes
many emotions.
Content
102
Creating Family Legacy for Future Generations
One strategy we recommend is to have the

family business entrepreneur consider
creating a family foundation. This is not
something that goes into play after the person
dies, but something that can capture their
creative energy while they are still alive.
Content
103
PITFALLS OF THE FAMILY BUSINESS

Causes of pitfalls of family business are
as follows:
Lack of focus and strategy
Nepotism in family
Lack of professionalism
Inability to separate the familys interest from
the interest of the business
Sibling rivalry in the family business
Content
104
Seven Simple Tips to Avoid Conflicts in

Family Business
Make time to understand the points of view of
others the payoff can be huge.
Understand we make a difference. One
conversation at a time dont try to out shout
everyone else.
Seek more information and insights from those
with whom you disagree ask for amplification
and examples that will enable you to better
understand other points of view.
While disagreements on issues may be strong,
do not forget the familys values are a shared
bond and represent a shared commitment to the
common good.
Content
105
Seven Simple Tips to Avoid Conflicts in

Family Business
Create rules of behaviour for family meetings
and abide by them being family does not excuse
boorish behaviour or lack of business etiquette.
Do not ridicule or be sarcastic to other family
members know and understand that being in a
family business does not result in solidarity of
opinion.
Establish time limits on discussions and debates
when that time limit is reached but closure is not
attained, table the topic for further research and
put it on the agenda for discussion at a future
meeting.
Content
106
Tips for Controlling Sibling Rivalry in Family

Business
Open communications The number one
issue hands down is communication. If you
know there is stuff going on, you have to get it
out. To know there is a time and place you
can express it is such a relief.
Clarity of roles It is essential that siblings
know exactly what their job expectations are.
There is a need to have roles clearly spelled
out to avoid conflicts.
Content
107
Tips for Controlling Sibling Rivalry in Family

Business
A sense of humor Use humor to release
tension and keep things in perspective.
When the worst things happen try to figure
out what to do.
Time away from the business Siblings should
make it a point to go off-premises for informal
time outside of the business setting. It is
necessary to do things like go to a local
restaurant together or simply talk on the
phone during off-hours.
Content
108
The Changing Environment of Family

Business
Sellers. Market Buyers.
Market
Diversification
Family Wealth
Shareholder Value
Core Competency
Growth Eva (Economic

Value Added)
Family Succession
Planning Attracting
Managers
Content
109
How to save the family business?

Formulate policy framework and rules
Families must serve the business
There should be future outlook
Family members should be accountable

Issues should be addressed
Create shared vision
Content
110
Chapter 7 Sickness
in Small
Business Enterprises
Blue Light is Dims

Content
111
Learning Objectives
To define the sick SSI unit and present the status of
sickness in small business enterprises in India
To identify the causes of sickness in small business
enterprises
To discuss the remedies to avoid sickness
To present a case study of sickness in a SSI of
Sangli district
To present five examples of sick SSI units in India

and causes of sickness and rehabilitation packages
Content
112
A small-scale industrial unit is considered sick

If any of the borrowal accounts of the unit remains
substandard for more than six months, that is,
principal or interest, in respect of any of its borrowal
accounts has remained overdue for a period
exceeding one year. The requirement of overdue
period exceeding one year will remain unchanged
even if the present period for classification of an
account as substandard is reduced in due course;
When there is erosion in the net worth due to
accumulated losses to the extent of 50 per cent of its
net worth during the previous accounting year, and
When the unit has been in commercial production for
at least two years.
Content
113
Sick SSI Units
Amount in Rs Crore. Source: RBI

(P) - Provisional
Note: These units include village and cottage industries
Content
114
Summary of Third All-India Census on

Sickness in SSI
No. of sick/incipient sick units (with erosion of net worth by
more than 50 per cent or delay in repayment of institutional
loan by more than 12 months or decline in gross output over
three consecutive years)
1,92,328
(13.98%)
6,30,568
(6.89%)
8,22,896
(7.82%)
Reasons for sickness/incipient sickness Lack of demand
1,11,508
(58%)
4,35,121
(69%)
5,46,629
(66%)
Shortage of working capital
1,09,844
(57%)
2,69,648
(43%)
3,79,492
(46%)
Non-availability of raw material
23,493
(12%)
76,029
(12%)
99,522
(12%)
Power shortage
33,099
(17%)
77,345
(12%)
1,10,444
(13%)
Labour problems
12,182
(6%)
26,282
(4%)
38,464
(5%)
Marketing problems
70,202
(37%)
2,24,002
(36%)
2,94,204
(36%)
Equipment problems
16,995
(9%)
76,038
(12%)
93,033
(11%)
9,124 (5%)
21,088 (3%)
30,212 (4%)
Management problems
Content
115
SICKNESS/INCIPIENT SICKNESS IN SSI

Criteria to identify sickness
Continuous decline in gross output compared
to the previous two financial years
Delay by more than 12 months in repayment
of loan taken from institutional sources
Erosion in the net worth to the extent of 50
per cent of the net worth during the previous
accounting year
Content
116
CAUSES FOR SICKNESS/INCIPIENT

SICKNESS IN SSI
Reasons for sickness
Exogenous factors.
Endogenous factors.
Content
117
Exogenous Factors
The external factors causing sickness are given

below:
Change in preference of consumers
Cheaper variety of products available in the market
Shortage in the supply of vital inputs
Rise in the cost of raw materials
Radical changes in government policies
General recession in industries
Foreign exchange fluctuations leading to adverse
effect on the price of machinery and raw materials,
which are imported.
Content
118
Endogenous Factors
(a) Anatomical Causes
Underestimation of the project cost

The existing manufacturing process has
become out dated or obsolete
Selection of wrong project site, resulting in
increased transportation cost
Undue investment in fixed assets
Defective working of plant and machinery
affecting quality of production
Content
119
Endogenous Factors
(b) Operational Causes
Defective financial planning and financial
management
No research and development planning
Low productivity
Incapable and incompetent management
Improper manpower planning
Difference among promoters and interference in the
functioning of the company
Management that is inclined to making personal
gains at the cost of the company
Content
120
Rehabilitation of Sick Unit

For tackling the problems of industrial
sickness in the SSI sector and rehabilitation
of sick units, the Reserve Bank of India
issued guidelines to commercial banks in
February 1987 (modified in June 1989 and
April 1993) containing, inter-alia, definition of
sick SSI units, viability norms, incipient
sickness, as also relief/concessions from
banks/financial institutions for implementation
of packages in the case of potentially viable
sick SSI units.
Content
121
Viability of a Sick unit

A unit may be regarded as potentially viable,
if after implementing a relief package spread
over a period not exceeding five years from
the commencement of the package from a
financial institution, government and other
agencies, it would be in a position to continue
to service its repayment obligations as agreed
upon.
Content
122
Chapter 8 - Strategic Management in Small

Business
Business is like a war in one respect. If its grand strategy is

correct, any number of tactical errors can be made and yet the
enterprises proves successful. - Robert E. Wood
Content
123
Learning Objectives
To identify the phases in the organisation life
cycle and organisation renewal cycle
To understand the importance and process of
strategic management
To identify the essence of business ethics
Content
124
ORGANISATION LIFE CYCLE

The organisation life cycle comenses five
stages:
Start
up,
Expansion,
Consolidation, Revival, and Decline.
Reversing a companys pattern of poor
performance is called turning it around. For
entrepreneurs who survive the earlier stages
and who are also capable of turning their
ventures around, the metamorphosis is
complete.
Content
125
Why Should an Organisation Have a Vision

Brings people together around a common
dream.
Coordinates the work of different people.
Helps everyone make decisions.
Builds foundation for business planning.
Challenges the comfortable or inadequate
present state.
Makes incongruent behaviour more
noticeable.
Content
126
The Organisational Renewal Cycle

Phase 1 Creativity
Work is for a clear purpose

Excitement about a new idea model/product/market
Lots of vision
Chaotic/fun atmosphere
Growth is fast and easy, almost natural
Phase 2 Stability
Purpose stays the same

Structure solidifies with policies, procedures, standards
Controls set in, standards are enforced
Management becomes more .professional.
Thinking about the future and planning is done at the top
Content
127
The Organisational Renewal Cycle

cont
Phase 3 Crisis
The environment changes

Standards are enforced from the top
People work harder
Results slip
Group runs out of steam, loses vitality
Phase 4 Renewal
Revisit basic purpose

Renew mission, values and vision
Redefine, question what the organisation is doing
Reconnect with customers/market
Forge new directions
Content
128
Outline for a Strategic Plan

Business mission.
Situation analysis.
Internal environmental analysis includes a discussion of
the ventures strengths and weaknesses.
External environmental analysis includes a discussion of
the ventures opportunities and threats
(industry and competitive analysis) in the market-place.
Goal formulation.
Strategy formulation.
Formulation of programmes to meet goals.
Implementation.
Feedback and control.
Content
129
Steps in strategic planning

Step 1
Evaluate your business
Step 2
Make choices
Step 3
Establish priorities
Step 4
Develop an action plan
Step 5
Implement the plan

Content
130
Business Ethics
The very basis of business ethics refers to an
idea of how business fits into modern society
as a whole: a social philosophy of
business.
An effective code of ethics should integrate

into a broad philosophy of a company on
corporate services and responsibilities and is
a part of its mission statement.
Content
131
Chapter 9 Financial Management in

Small Business
There is always plenty of capital for those who can

create practical plans for using it. N. Hill
Content
132
Learning Objectives
Understand the importance of financial
management
Learn the functions of financial management
Explain working capital management and various
working capital schemes.
Learn book keeping and accounting policies
Understand financial statements.balance sheet,
profit and loss account, cash flow statement
Understand the meaning, purpose, and significance
of financial ratio analysis
Get familiar with commonly applied methods of
depreciation, accrual, and prepayment adjustment
Content
133
Functions of Financial Management

(I) Managerial finance functions for small industries are as
given below.
Estimating financial requirement

Identifying sources of finance
Raising of finance
Proper use of finance
Control of finance
(II) Routine finance functions are listed below.
Supervision of cash receipts and payments

Safeguarding cash balances
Record keeping (i.e. accounting)
Custody and safeguarding of securities, insurance policies, and other
important documents
Taking care of mechanical details of outside finance
Regular return of borrowed funds
Content
134
Working capital cycle

CASH
Receivables
Raw
materials
Finished
goods
Work in
proress
Content
135
Working Capital Management

A simple method of estimating the working
capital
is
based
on
the
average
manufacturing cycle.
The cost formulas used for the valuation of
stock
Are (a) FIFO, (b) LIFO, and (c) WAC
Some of the important ratios used for
managing working capital are (a) Debtors
turnover ratio; (b) Creditors velocity ratio; (c)
Stock turnover ratio; (d) Current ratio; and (e)
Stock-working capital ratio.
Content
136
ACCOUNTING AND BOOK KEEPING

The various stages in accounting process
are:
documentation,
recording,
classifying,
summarising, and bifurcation.
The important books to be maintained by a
SSI are: purchase book, sales book, cash
book, journal, and ledger.
Content
137
Components of Financial Statements

Balance sheet
Profit and loss account or income
statement
Cash flow statement
Content
138
Features of a Cash Flow Statement
Prepared for a given period.

Comparative position.
Vertically drawn.
Cash flows from operating, investing and financing
activities.
Reconciliation with the opening and closing
balances of cash and cash equivalents.
Indirect method for cash flows from operating
activities.
Signed by the person who prepared it and auditors.
A derived statement.
Content
139
Important financial ratios
Return on investment (ROI) ratios

Solvency ratios
Liquidity ratios
Turnover ratios
Profitability ratios
Du Pont analysis
Capital Market ratios
Content
140
EXERCISES
Activity 1: Divide the class into small group
of four to six students. Collect the annual
report of a local SSI. Study the annual report
and examine the financial statements of the
enterprise and prepare a 20- minute Power
Point presentation on financial management
in a small business and present in the class.
Request your professor to lend his
supervision for this exercise.
Problem 1: A proforma cost sheet of a
company provides the following particulars.
Content
141
EXERCISES CONT
S.
No.
1
2
3
4
5
6
Elements of
Cost
Raw material
Direct labour
Overheads
Total cost
Profit
Selling price
Amount per Unit

80
30
60
170
30
200
Content
142
EXERCISES CONT
The following further particulars are available.
Raw materials are in stock for one month
Credit allowed by suppliers is one month
Credit allowed to customers is two months
Lag in payment of wages a week and a half
Lag in payment of overheads is one month
Materials are in process for an average of half
month
Finished goods are in stock for an average of one
month
of output is sold against cash
Content
143
Cash in hand and at bank is expected to be

Rs 25,000. Prepare a statement showing the
working capital needed to finance a level of
activity of 1,04,000 units of product.
You may assume that production is carried on
evenly throughout the year. Wages and
overheads accrue similarly and a period of
four weeks is equivalent to a month.
Content
144
Chapter 10 - Marketing Management

in Small Business
Customers are:
* The most important people in any business.
* Not dependent on us. We are dependent on them.
* Not an interruption of our work. They are the purpose of it.
- Dont ever forget it!
Content
145
Learning Objectives
To understand the importance of marketing in
SSI
To identify the common marketing problems
faced by SSI
To identify the marketing process of SSI
To understand the significance of service
marketing
To identify the prevailing export environment
and
procedures,
formalities,
and
documentation
required for exports
Content
146
IMPORTANCE OF MARKETING
Marketing makes or breaks a small
enterprise.
Marketing can be defined as a process which
identifies, anticipates, and satisfies customer
needs efficiently and profitably in keeping with
the objectives of the enterprise.
Common marketing problems faced by smallscale industries are: lack of brand image, lack
of sales force, product quality, credit sales,
low prices, and local and limited market.
Content
147
CUSTOMER RELATIONSHIP MANAGEMENT

CRM focuses on meeting the individual needs of
customers. The skill requires building a customer
database and doing data mining to detect trends,
segments, and individual needs.
The business, as a whole, engages in different
marketing activities. The combination of all such
activities is called a marketing mix. Though there
are many elements in a marketing mix, a popular
classification consists of 4 Ps -product,
promotion, price and place.
Content
148
Customer Satisfaction Index

CSI is generally calculated based on market
research. It is a known that, a satisfied
customer will influence five more persons to
buy the product/service. Whereas a
dissatisfied customer will express his
emotions to eleven persons. In case of 2
percent customer complaints
The CSI is calculated as

SI = 98*5.2*11/5=93.6%
Content
149
Differences between Goods and Services

GOODS
SERVICES
Tangible
Standardised
Production separate
from consumption
Non-perishable
Intangible
Heterogeneous
Simultaneous
production and
consumption
Perishable
Content
150
Marketing Management in Small Business

Sales Contract
Seller
(Exporter)
Letter of
Credit
Bank
Application for
Letter of Credit
Production of
Export Goods
Buyer
(Importer)
Customers
Clearance
Shipment of
Export Goods
Payment
Customers
Clearance
Content
151
Documents Required for Exporting
Bills of Exchange
Bills of Lading
Commercial Invoice
Original Letter of Credit, if any
Customs Invoice
Insurance Policy/Certificate
Packing List
Foreign Exchange Declaration Forms
Bank Certificate of Export Realisation
Other relevant documents
Content
152
Various Organisations Supporting Exports

Policy and service support organisation
Commodity specialisation organisation
Training and reasearch institutions
Trading/service corporations
Financial institutions
Export promotion zones
Content
153
Chapter 11 - Production Management in

Small Business
The power that enables the firm to have some influence on price
insures that imitators will not pass on the resulting gains to the public
before the outlay for development can be recouped. In this way market
power protects the incentive to technical development.
- J. K. Galbraith
Content
154
Learning Objectives
Explain production management in small
business enterprise
Discuss the functions of materials
management
Understand the various productivity
improvement techniques
Learn the concept of break-even analysis
Introduce the TQM approach to business
Content
155
PRODUCTION MANAGEMENT
Production System: A system whose
function is to convert a set of inputs into a set
of desired outputs.
Production Management: It refers to the
application of management principles to the
production function in an enterprise.
Content
156
A simple production system

Inputs
Conversion
Process
Output
Land
Goods
Building
Services
Machines
Labour
Control
Capital
Management
Materials
Others
Content
157
Objectives of a Good Layout

Provide enough production capacity.
Reduce material handling costs.
Reduce congestion that impedes the
movement of people or material.
Reduce hazards to personnel.
Utilise labour efficiently.
Increase employee morale.
Reduce accidents.
Utilise available space efficiently and
effectively.
Content
158
Objectives of a Good Layout cont

Provide for volume and product flexibility.
Provide ease of supervision.
Facilitate coordination and face-to-face
communication where appropriate.
Provide for employee safety and health.
Allow ease of maintenance.
Allow high machine/equipment utilisation.
Improve productivity.
Content
159
Objectives of Production Planning & Control

To deliver quality goods in required quantities to the
customer in the required delivery schedule
.to achieve maximum customer satisfaction at
minimum possible cost.
To ensure optimum utilisation of all resources.
To ensure production of quality resources.
To minimise the product throughput time or
production/manufacturing cycle time.
To maintain flexibility in manufacturing operations.
To maintain optimum inventory levels.
To coordinate between labour and machines and
various supporting departments.
Content
160
Objectives of Production Planning & Control

cont
To ensure effective cost reduction and cost

control.
To plan for plant capacities for future
requirements.
To remove bottlenecks at all stages of
production and to solve problems related to
production.
To prepare production schedules and ensure
that promised delivery dates are met.
To establish routes and schedules for work.
To contribute to the profit of the enterprise.
Content
161
Elements of Production Planning and

Control
Production Planning and
Control
Production
planning
Estimating
Routing
Scheduling
Loading
Production
planning
Dispatching
Expediting
Evaluating and
Corrective action
Content
162
Materials management
Materials management refers to the
movement of production materials from the
stage of their acquisition to the stage of their
consumption.
The two main functions of materials
management are:
purchase management
inventory management
Content
163
Purchase cycle
(a) Recognition of need.
(b) Description of need.
(c) A suitable source is selected for the supply; sometimes
a source has to be developed.
(d) Price and availability are determined.
(e) A purchase order is prepared and sent to the supplier.
(f) Acceptance of the purchase order is obtained from the
supplier.
(g) Follow up is done to ensure timely delivery of the
material.
(h) Receive the material, check the invoice, approve it for
making payment to the supplier.
(i) Supplier receives the payment.
Content
164
Inventory Costs
Ordering costs
Carrying costs
Financial costs
Content
165
Inventory Control Techniques

(a) Always Better Control (ABC)
(b) High, Medium and Low (HML)
(c) Vital, Essential, and Desirable (VED)
(d) Scarce, Difficult, and Easy to obtain (SDE)
(e) Fast moving, Slow moving, and Non-moving (FSN)
(f) Economic Order Quantity (EOQ)
(g) Max-Minimum System
(h) Two Bin System
(i) Materials Requirement Planning (MRP)
(j) Just-in-time (JIT)
Content
166
PRODUCTIVITY
Productivity = Output/Input
Maintenance
is
that
function
of
manufacturing management that is concerned
with the day-to-day need of keeping the
physical plant in good operating condition.
Content
167
Maintenance
(a) Breakdown maintenance
(b) Preventive maintenance
(c) Predictive maintenance
(d) Routine maintenance

(e) Planned maintenance
(f) Total productive maintenance (TPM)
Content
168
Objectives of Maintenance Management

Minimising the loss of productive time
because of equipment failure.
Minimising repair time and repair cost.
Minimising the loss due to production
stoppages.
Efficient use of maintenance personnel and
equipment.
Prolonging the life of capital assets by
minimising the rate of wear and tear.
Content
169
Objectives of Maintenance Management

cont
To keep all assets of the enterprise in good

working condition.
To maximise efficiency and economy in
production through optimum use of facilities.
To minimise accidents through regular
inspection and repair of safety devices.
To minimise the total maintenance cost.
To improve quality and productivity.
Content
170
BREAK-EVEN ANALYSIS
The total cost incurred by the unit can be
classified as
Fixed cost
Variable cost
Break-even is the number of units that must

be sold in order to produce a profit of zero
(but will recover all associated cost).
BEP =
Fixed cost / ( unit price variable

unit cost )
Content
171
TOTAL QUALITY MANAGEMENT

Quality Defined
According to ISO 8402: Quality vocabulary,
quality is The totality of features and
characteristics of a product or service that bear
on its ability to satisfy stated or implied needs.
Broadly, quality is:
Fitness for use (Juran)

Grade
Degree of preference
Degree of excellence
Conformance to requirements (Philip Crosby)
Content
172
Universal Process for Managing Quality

Quality Planning
Quality Control
Quality Improvement
Establish quality goals
Choose control subjects
Prove the need
Identify customers
Choose units to measure
Identify projects
Discover customer needs
Set goals
Organise project teams
Develop product features
Create a sensor
Diagnose the causes
Develop process features
Measure actual
performance
Provide remedies, prove

that the emedies are
effective
Establish process controls Interpret the difference

Transfer to operations
Take action on the

difference
Deal with the resistance

Change and control hold
the gains
Content
173
Total quality management

TQM provides the overall concept that fosters
continuous improvement in an organisation.
The TQM philosophy stresses a systematic,
integrated,
consistent,
organisation-wide
perspective
involving
everyone
and
everything. It focuses primarily on total
satisfaction for both the internal and external
customers,
within
a
management
environment
that
seeks
continuous
improvement of all systems and processes.
Content
174
Quality Improvement Tools

Part 1 : The Seven Statistical Tools
Part 2 : The New Seven Tools
Part 3 : Other Quality Improvement Tools
Content
175
Five pillars of TQM

Product
Product
Process
Heard
aspects
System
People
Suitability
Process
Soft
aspects
Leadership
Content
176
Quality System Standards

Standard
Title
Scope
ISO 90002000
Quality
Management
Provides fundamentals of quality management
Systems system and specifies quality management terms
Fundamentals
and definitions
and Vocabulary
ISO 90012000
Quality
Management
Systems
Requirements
Specifies
requirements
for
a
quality
management system where an organisation
needs to demonstrate its capability to meet
customer requirements for product and/or
services and assessment of that capability by
internal and external parties
ISO 90042000
Quality
Management
Systems Guidance for
Performance
Improvement
Provides guidance on quality management

systems as a means for continual improvement
of processes that contribute to the satisfaction of
the organisations customers and other
interested parties
Content
177
Quality Management Principles
Customer focused organisation

Leadership
Involvement of people
Process approach
Systems approach to management
Continuous improvement
Factual approach to decision making
Mutually beneficial supplier relationship
Content
178
Quality Management System Continual

Improvements
Content
179
ISO 9001:2000
ISO 9001:2000 Quality Management SystemsRequirements
The title no longer includes the term Quality
assurance. This is probably because the term
somehow had connotations with the manufacturing
system only. The new standard tries to be more
generally applicable and to be understood more
easily.
The requirements not only address quality
assurance of the product or service conformity, the
emphasis has been shifted to the need for an
organisation to demonstrate its capability to achieve
customer satisfaction.
Content
180
Quality Management Systems Requirements
Contents
1.
2.
3.
4.
Scope
Normative Reference
Terms and Definitions
Quality Management Systems
4.1 General Requirements
4.2 Documentation Requirements
Content
181

cont
5. Management Responsibility
5.1 Management Commitment
5.2 Customer Focus
5.3 Quality Policy
5.4 Planning (Objectives and QMS planning)
5.5 Responsibility, Authority and Communication (R&A ,
MR,Int. Com.)
5.6 Management Review (Gen., Input, Output)
6. Resource Management
6.1 Provision of Resources
6.2 Human Resources (General, Competence, Awareness,
and Training)
6.3 Infrastructure
6.4 Work Environment
Content
182

cont
7. Product Realisation
7.1 Planning of Product Realisation
7.2 Customer Related Processes (Requirements
Determination and Review, Communication)
7.3 Design and Development
7.4 Purchasing
7.5 Production and Service Provision (Control of
Production and Service Provision, Validation of
Processes, Identification and Traceability, Customer
Property, Preservation of Product)
7.6 Control of Monitoring and Measuring Devices.
Content
183

cont
8. Measurement, Analysis, and Improvement

8.1 General
8.2 Monitoring and Measurement (Customer
Satisfaction, Internal Audit, Processes,
Product)
8.3 Control of Non-conforming Product
8.4 Analysis of Data
8.5 Improvement (Continual Improvement,
Corrective Action, Preventive Action)
Content
184
Steps in Preparation and Implementation of

ISO 9001
Content
185
Steps in Preparation and Implementation of

ISO 9001 cont
Content
186
ENVIRONMENTAL MANAGEMENT SYSTEM

The ISO 14000 document is titled
Environmental
Management
System
General Guidelines on Principles, Systems
and Supporting Techniques. It outlines
system elements, with advice on how to
initiate, implement, improve, and sustain the
system. By following its guidelines and the
core elements of the environmental
management system specification, ISO
14001, your organisation will have a
framework to balance and integrate
environmental and economic interests. Content
187
ISO 14000 Series
Content
188
ISO 14000 Series cont
Content
189
Benefits of Environmental Management System
1. Protect human health and the environment from

the potential impacts of its activities, product,
and services
2. Assist in maintaining and improving the quality
of the environment
3. Meet customers environmental expectations
4. Maintain good public and community relations
5. Satisfy investor criteria and improve access to
capital
6. Provide insurance at a reasonable cost
Content
190
Benefits of Environmental Management System

cont
7. Gain an enhanced image and market share

8. Satisfy vendor certification criteria
9. Improve cost control
10. Limit liabilities
11. Provide resource conservation
12. Provide effective technology development and
transfer
13. Provide confidence to interested parties (and
shareholders)
Content
191
Environmental Management Systems

Requirements
Contents
1. Scope
2. Normative References
3. Definitions
4. EMS Requirements
4.1 General Requirements
4.2 Environmental Policy
4.3 Planning
4.3.1 Environmental Aspects
4.3.2 Legal and Other Requirements
4.3.3 Objectives and Targets
4.3.4 Environmental Management Programme(s)
Content
192
Environmental Management Systems

Requirements cont
4.4 Implementation and Operation
4.4.1 Structure and Responsibility
4.4.2 Training, Awareness, and Competency
4.4.3 Communication
4.4.4 EMS Documentation
4.4.5 Document Control
4.4.6 Operational Control
4.4.7 Emergency Preparedness and Response
4.5 Checking and Corrective Action
4.5.1 Monitoring and Measuring
4.5.2 Non-conformance and Corrective and Preventive
Action
4.5.3 Records
4.5.4 EMS Audit
4.6 Management Review
Content
193
Chapter 12 - Human Resource

Management in Small Business
All the activities of any enterprise are initiated and determined by the persons
who make up that institution. Plants, offices, computers, automated
equipment, and all else that a modern firm uses are unproductive except for
human effort and direction. Of all the tasks of management, managing the
human component is the central and most important task, because all else
depends on how well it is done. - Renesis Likert
Content
194
Learning Objectives
Learn the concepts of HRM
Identify the importance of HRM in small
business
Learn the various functions of HRD
Discuss the industrial land labour laws
relevant to small business
Content
195
Functions of Human Resource Development
Recruitment
Selection
Promotion
Pay
Performance assessment
Grading structures
Training and development
Welfare
Communication
Employee relations
Dismissal
Personnel administration
Content
196
Human Resource Development

For a small enterprise, the following aspects
of human resource development are
important:
(a) Manpower planning
(b) Recruitment, selection and placement
(c) Performance appraisal and development
(d) Employee compensation
(e) Motivation
(f) Communication
Content
197
Job Description Chart

Job: Title: Billing clerk
Supervisor: Store manager
Summary: Responsible for receiving payments against
delivery of goods from godown, prepares and processes
paperwork, maintains requisite documents
Duties and Responsibilities:
Receiving and placing stocks in store

Checks invoices against the goods received
Inspection of goods received
Codification and documentation
Job Specification:
Education: Graduate
Experience: Not compulsory
Skills: Knowledge of computers
Content
198
Human Resource Management

Human Resource Management (HRM) can be
defined as a strategic and coherent approach to the
management of an organisations most valued
assets - the people working there who individually
and collectively contribute to the achievement of its
objectives. HRD is that component of HRM which
deals with the development of human resources.
For a small enterprise, the following aspects of
human resource development are important.
Manpower planning
Recruitment, selection, and placement
Performance appraisal and development
Employee compensation
Motivation
Communication
Content
199
INDUSTRIAL RELATIONS, LABOUR LAWS, AND ENVIRONMENTAL

AND POLLUTION CONTROL LAWS
Industrial Relations, Labour Laws, and

Environmental and Pollution Control Laws
Laws regulating the conditions of work in
factories and establishments
General laws, applicable to all factories and
establishments: Factories Act, 1948
Specific laws, applicable to specific industries,
like Mines Act, 1952, Indian Merchant Shipping
Act, 1923, and Plantation Labour Act, 1998
Content
200
INDUSTRIAL RELATIONS, LABOUR LAWS, AND ENVIRONMENTAL

AND POLLUTION CONTROL LAWS
Laws relating to wages

Minimum Wages Act, 1948
Payment of wages Act, 1936
Law relating to social security measures

Workmens Compensation Act, 1923
Employees State Insurance (ESI) Act, 1948
Employees Provident Fund (EPF) Act and Family
Pension Fund Act, 1952
Content
201
Thank You.
Content
202

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Entrepreneurship Development and Small Business Enterprises

Chapter 1 - Modern Small

Entrepreneurship Development and Small Business Enterprises

ROLE OF SMALL-SCALE INDUSTRIES

The Importance of Small-scale Industries

Entrepreneurship Development and Small Business Enterprises

Impact of Globalisation and the WTO on SSI

Investment Ceiling for Small-Scale Industries

Historical cost of plant and machinery

At least 50 per cent of its output should go

Obligation to export 30 per cent of

51 per cent equity holding by women

Service and business

Entrepreneurship Development and Small Business Enterprises

Evolution on Investment Limits for Smallscale Industries

Up to Rs 0.5 million in fixed assets

Up to Rs 0.5 million in fixed assets

Up to Rs 0.75 million in plant and machinery

Up to Rs 1 million in plant and machinery

Up to Rs 2 million in plant and machinery

Up to Rs 3.5 million in plant and machinery

Up to Rs 6 million in plant and machinery

Up to Rs 30 million in plant and machinery

Up to Rs 10 million in plant and machinery

Entrepreneurship Development and Small Business Enterprises

Indias SSI sector is divided into seven industry

Modern Sector: Power looms and residual SSI

Performance of SSI Units during the 1980s

Performance of Small-scale Industries

Comparative Performance of SSIs in Terms

Average growth rate (%)

Entrepreneurship Development and Small Business Enterprises

Overall Performance of Small-scale Sector

Third All India Census on SSI

Third All India Census on SSI cont

Third All India Census on SSI cont

Sector-wise Distribution of Working and Closed

Entrepreneurship Development and Small Business Enterprises

Percentage distribution of Registered SSI

Unregistered SSI Sector

Unregistered SSI Sector cont

Unregistered SSI Sector cont

The average employment was 2.05 and the employment

Total SSI sector

Total SSI sector cont

Total SSI sector cont

Sickness in SSI sector

Sickness in SSI sector

Out of the units having loan outstanding with

Sickness in SSI sector

Combining the three yardsticks used to

Sickness in SSI sector

The States of Kerala, Tamil Nadu, Andhra

Third All India Census On SSI

Small and Medium Enterprise (SME)

Definition of SMEs in Various Countries

External and Internal Problems Faced

What differentiates an entrepreneur? To visualize a