Unit No. I Introduction to Entrepreneurship B. Tech. (Mech.

)-VII

Syllabus: (10 Hrs)

a) Concept, meaning and definitions of entrepreneur and entrepreneurship,
b) Importance and significance of growth of entrepreneurial activity,
c) History of entrepreneurship development in India,
d) Corporate entrepreneurship (intrapreneurship),
e) Social entrepreneurship,
f) Characteristics and qualities of entrepreneurs,
g) Factors influencing entrepreneurial development and motivation,
h) Market Survey: Methods, Importance in Entrepreneurial development,
i) Classification and types of entrepreneurs.
________________________________________________________________________________
a) Concept, meaning and definitions of entrepreneur and entrepreneurship
Entrepreneurship:
• Entrepreneurship is the process of setting up one’s own business as distinct from pursuing any
other economic activity, be it employment or practicing some profession.
• An entity, new or existing that provides a new product or service or that develops and uses new
methods to produce or deliver existing goods and services at lower cost
• The process of setting up a business is known as entrepreneurship.
• Entrepreneurship is the ability and readiness to develop, organize and run a business enterprise,
along with any of its uncertainties in order to make a profit.
• In economics, entrepreneurship connected with land, labour, natural resources and capital can
generate a profit. The entrepreneurial vision is defined by discovery and risk-taking and is an
indispensable part of a nation’s capacity to succeed in an ever-changing and more competitive
global marketplace.
• The most prominent example of entrepreneurship is the starting of new businesses.
• Entrepreneurship that proves to be successful in taking on the risks of creating a startup is
rewarded with profits, fame, and continued growth opportunities.
• Entrepreneurship is highly risky but also can be highly rewarding, as it serves to generate
economic wealth, growth, and innovation.

It is interesting to note that entrepreneurship besides providing self-employment to the

entrepreneur is responsible to a great extent for creation and expansion of opportunities for the
other two economic activities, that is, employment and profession. (Can you think why and
how?) Further, each business gives rise to other businesses– the suppliers of raw materials and

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Unit No. I Introduction to Entrepreneurship B. Tech. (Mech.)-VII

components, service providers (be it transport, courier, telecom, distributor middlemen and
advertising firms, accounting firms and advocates etc.
And, in the process, entrepreneurship becomes crucial for overall economic development of a
nation. Given its important role in the overall scheme of economic development, it is interesting
to note that not many persons opt for a career in entrepreneurship. Traditionally, it was believed
that entrepreneurs are born. No society can wait for the chance of ‘birth’ of entrepreneurs to
pursue its developmental plans. In fact, plans for economic development would bear little fruit
unless entrepreneurship development is regarded as a deliberate process of making people
aware of entrepreneurship as a career at an early age and creating situations where they may
actually make a choice to become entrepreneurs. When you make this choice, you become a
job-provider rather than a job-seeker, besides enjoying a host of other financial and
psychological rewards. Taking to entrepreneurship is surely more a matter of aspiring to become
an entrepreneur rather as being born as one.

History:
The word ‘entrepreneur' is derived from the French word ‘entreprendre’ which means ‘to undertake’.
In the early 16th century the French men who organised and led military expeditions were referred to as
‘entrepreneur’.
After 1700,the term was applied to other types of adventures, mainly civil engineering like constructions of
roads etc.

Entrepreneur:
• The person who set-up his business is called an entrepreneur
• The entrepreneur is defined as someone who has the ability and desire to establish, administer
and succeed in a startup venture along with risk entitled to it, to make profits.
• Kirzner(1973) : The entrepreneur ia one who perceives what others not seen and acts upon that
perception.
• The entrepreneurs are often known as a source of new ideas or innovators, and bring new ideas
in the market by replacing old with a new invention.
• Entrepreneurs play a key role in any economy, using the skills and initiative necessary to
anticipate needs and bringing good new ideas to market.

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Unit No. I Introduction to Entrepreneurship B. Tech. (Mech.)-VII

• An entrepreneur creates a firm to realize their idea, known as entrepreneurship, which

aggregates capital and labor in order to produce goods or services for profit.
• In a nutshell, anyone who has the will and determination to start a new company and deals with
all the risks that go with it can become an Entrepreneur.

b) Importance and significance of growth of entrepreneurial activity

Entrepreneurship is important for a number of reasons, from promoting social change to driving innovation.
Entrepreneurs are frequently thought of as national assets to be cultivated, motivated, and remunerated to
the greatest possible extent. In fact, some of the most developed nations such as the United States are
world leaders due to their forward-thinking innovation, research, and entrepreneurial individuals.
Great entrepreneurs have the ability to change the way we live and work, on local and national bases.
Entrepreneurship is important, as it has the ability to improve standards of living and create wealth, not only
for the entrepreneurs but also for related businesses.
Entrepreneurs also help drive change with innovation, where new and improved products enable new
markets to be developed.
It also create jobs and contribute to a growing economy. The importance of entrepreneurship is not to be
understated.

c) History of entrepreneurship development in India

The history of entrepreneurship is important worldwide, even in India. In the pre colonial times the Indian
trade and business was at its peak. Indians were experts in smelting of metals such as brass and tin. Kanishka
Empire in the 1st century started nurturing Indian entrepreneurs and traders. Following that period, in
around 1600 A.D., India established its trade relationship with Roman Empire. Gold was pouring from all
sides. Then came the Portuguese and the English. They captured the Indian sea waters and slowly entered
the Indian business. They forced the entrepreneurs to become traders and they themselves took the role of
entrepreneurs. This was the main reason for the downfall of Indian business in the colonial times which had
its impact in the post-colonial times too. The colonial era make the Indian ideas and principles rigid. A region
of historic trade routes and vast empires, the Indian subcontinent was identified with its commercial and
cultural wealth for much of its long history. Gradually annexed by the British East India Company from the
early eighteenth century and colonized by the United Kingdom from the mid-nineteenth century, India
became an independent nation in 1947 after a struggle for independence that was marked by widespread
nonviolent resistance. It has the world's twelfth largest economy at market exchange rates and the fourth
largest in purchasing power. Economic reforms since 1991 have transformed it into one of the fastest
growing economies however, it still suffers from high levels of poverty, illiteracy, and malnutrition. For an

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entire generation from the 1950s until the 1980s, India followed socialist-inspired policies. The economy was
shackled by extensive regulation, protectionism, and public ownership, leading to pervasive corruption and
slow growth. Since 1991, the nation has moved towards a market-based system.
d) Corporate entrepreneurship (intrapreneurship)
Intrapreneurship is the act of behaving like an entrepreneur while working within a large organization.
Intrapreneurship is known as the practice of a corporate management style that integrates risk-taking and
innovation approaches, as well as the reward and motivational techniques, that are more traditionally
thought of as being the province of entrepreneurship.
The term intrapreneurship refers to a system that allows an employee to act like an entrepreneur within a
company or other organization. Intrapreneurs are self-motivated, proactive, and action-oriented people who
take the initiative to pursue an innovative product or service. An intrapreneur knows failure does not have a
personal cost as it does for an entrepreneur since the organization absorbs losses that arise from failure.
An intrapreneurship creates an entrepreneurial environment by allowing employees to use their
entrepreneurial skills for the benefit of both the company and the employee. It gives employees the
freedom to experiment, as well as the potential for growth within an organization.
Intrapreneurships foster autonomy and independence, while attempting to find the best resolution.
It's important for employers to recognize these employees. By not promoting intrapreneurship or
recognizing employees who demonstrate an intrapreneurial spirit can be detrimental to a brand or company.
Employers who encourage intrapreneurship stand to benefit because it leads to the success of the
department or the company as a whole. Keeping these employees can help lead to innovation and growth.
Companies that don't promote them may lose intrapreneurs to other companies, or they may end up
working for themselves.
Corporate entrepreneurship (intrapreneurship) Example:
Ford Motor Company
▰ Ford Motors is a pioneer in the automotive industry. Since their inception in 1903, the company has
managed to remain afloat (Planless, directionless, floating on water)despite the cut-throat
competition in the industry because it was embraced as one of the perfect intrapreneurship
examples.
▰ Each year 3,500 break-through innovative ideas come from the organization with a majority from
the non-research department, showing the participative culture that Ford has within the
organization.
▰ One such creative idea was from Doug Martin and John Rollinger. After observing a few drops of
water dripping from his car, they gave an idea that drinking water can be produced out of
condensed water coming out of the car’s air conditioning system. The condensed water is filtered

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and then passed on to a tap near the gearbox. When they created the prototype, they found that 64
ounces (1 ounce=approx. 28g) of water can be produced this way within an hour by a single vehicle.
Ford promoted these cars with an advertising campaign ‘Try On-The-Go H2O’.
e) Social entrepreneurship
• Social entrepreneurship is, at its most basic level, doing business for a social cause.
• Social entrepreneurship is an approach by individuals, groups, start-up companies or
entrepreneurs, in which they develop, fund and implement solutions to social, cultural, or
environmental issues.
• Social entrepreneurs combine commerce and social issues in a way that improves the
lives of people connected to the cause.
• A social entrepreneur is a person who pursues novel applications that have the potential to
solve community-based problems. These individuals are willing to take on the risk and
effort to create positive changes in society through their initiatives.
• Social entrepreneurs may believe that this practice is a way to connect you to your life's
purpose, help others find theirs, and make a difference in the world
• A social entrepreneur is interested in starting a business for the greater social good and
not just the pursuit of profits.
• Social entrepreneurs may seek to produce environmentally-friendly products, serve an
underserved community, or focus on philanthropic activities.
• Social entrepreneurship is a growing trend, alongside socially responsible investing (SRI)
and environmental, social, and governance (ESG) investing.
• While most entrepreneurs are motivated by the potential to earn a profit, the profit
motive does not prevent the ordinary entrepreneur from having a positive impact on
society.
• The main goal of a social entrepreneur is not to earn a profit. Rather, a social entrepreneur
seeks to implement widespread improvements in society. However, a social entrepreneur
must still be financially savvy to succeed in his or her cause.
• Social enterprise involves a financially sustainable earned-income activity that addresses
a social problem.
• Why financially sustainable?
o Sustain the social impact
o Reduce donor dependence and everything negative about that (unpredictability)
Social enterprises are not ordinary business enterprises.

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Difference Between Social & Business Entrepreneurship:

• Commercial Entrepreneurship
o Represents the identification, evolution, and exploitation of opportunities that
result in profit
o Create change in the society, but that isn’t the primary purpose of starting the
venture
o Wealth is the same as profit
• Social Entrepreneurship
o Refers to the identification, evolution, and exploitation of opportunity that result
in social value
o May generate profit, but for him/her that is not the primary reason for starting the
venture
o Wealth mainly encompasses creation of social and environment capital, then it
focuses on wealth
Functions of Social Entrepreneurship:
• Create and maintain a stable level of employment
• Create jobs and provide support to socially vulnerable groups
• Create social innovation and change in various areas, including education, health,
environment, and business development
• Social entrepreneurship reduces poverty risk
• Social entrepreneurship Examples:
• Providing banking services in underserved areas
• Helping children orphaned by epidemic disease.
• Microfinancing
• The introduction of freshwater services through the construction of new wells is another
example of social entrepreneurship. A social entrepreneur may have the goal of providing
access to communities that lack stable utilities of their own.
• In the modern era, social entrepreneurship is often combined with technology assets: for
example, bringing high-speed internet connectivity to remote communities so that school-
age children have more access to information and knowledge resources.

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The Difference Between Social Entrepreneur & Social Entrepreneurship:

• Social Entrepreneur • Social Entrepreneurship

• Anyone who starts a social enterprise • A process that starts with recognition of an
• Anyone who uses earned income to opportunity to deliver social benefit; can
deliver a social Mission mean starting a business or business
• Anyone who engages successfully in expansion
social innovation • It is practice that extends to firms and
communinities
• It has social impact as well as financial
impact

Harish Hande, co-founder and managing director of Solar Electric Light

Company (SELCO) India- A Social Entrepreneur
• Hande, whose company has provided sustainable energy products to underserved
households and businesses in the state of Karnataka since 1995
• Street vendor was spending Rs. 15 a day — about 10% to 15% of her income — to get
light from a kerosene lamp that allowed her to sell her vegetables after dark.
• The street vendor’s comment helped Hande understand that rather than reducing the cost
and quality of SELCO’s solar products to reflect the low incomes of rural and urban poor,
he needed to offer creative ways for poor customers to finance purchases while keeping
quality standards high.
• With a solar-powered light — purchased with, say, a loan at an interest rate of 14% — the
vendor would be spending nearly half of what she was on her kerosene lamp.
• “Affordable doesn’t mean low cost, but appropriate financing,” he says.
• “It is coming up with need-based technologies, rather than fitting the problem to the
solution.”
• Till date, Selco has contributed over 120,000 installations and has more than 25 operating
retail and service centres in Karnataka alone

f) Characteristics of entrepreneurs
• Passion for the Business

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Unit No. I Introduction to Entrepreneurship B. Tech. (Mech.)-VII

o The number one characteristic shared by successful entrepreneurs is a passion for

the business.
o This passion typically stems from the entrepreneur’s belief that the business will
positively influence people’s lives.
• Product/Customer Focus
o A second defining characteristic of successful entrepreneurs is a product/customer
focus.
o An entrepreneur’s keen focus on products and customers typically stems from the
fact that most entrepreneurs are, at heart, craftspeople.
• Tenacity Despite Failure
o Because entrepreneurs are typically trying something new, the failure rate is
naturally high. Entrepreneurship is a marathon.
o A defining characteristic for successful entrepreneurs’ is their ability to persevere
through setbacks and failures.
• Execution Intelligence
o The ability to fashion a solid business idea into a viable business is a key
characteristic of successful entrepreneurs.
o “ Ideas are easy, its execution is that’s hard” Jeff Bezos amazon founder.

Qualities of entrepreneurs:
• Inner Drive to Succeed
o Entrepreneurs are driven to succeed and expand their business.
o They see the bigger picture and are often very ambitious.
o Entrepreneurs set massive goals for themselves and stay committed to achieving
them regardless of the obstacles that get in the way.
• Strong Belief in themselves (Optimistic)
o Successful entrepreneurs have a healthy opinion of themselves and often have a
strong and assertive personality.
o They are focused and determined to achieve their goals and believe completely in
their ability to achieve them.
• Search for New Ideas and Innovation
o All entrepreneurs have a passionate desire to do things better and to improve their
products or service.

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o They are constantly looking for ways to improve. They're creative, innovative and
resourceful.
• Openness to Change
If something is not working for them they simply change. Entrepreneurs know the
importance of keeping on top of their industry and the only way to being number one is to
evolve and change with the times. They're up to date with the latest technology or service
techniques and are always ready to change if they see a new opportunity arise.

• Competitive by Nature
Successful entrepreneurs thrive on competition. The only way to reach their goals and
live up to their self imposed high standards is to compete with other successful
businesses.
• Highly Motivated and Energetic
Entrepreneurs are always on the move, full of energy and highly motivated. They are
driven to succeed and have an abundance of self motivation. The high standards and
ambition of many entrepreneurs demand that they have to be motivated!
• Accepting of Constructive Criticism and Rejection
o Innovative entrepreneurs are often at the forefront of their industry so they hear
the words "it can't be done" quite a bit.
o They readjust their path if the criticism is constructive and useful to their overall
plan, otherwise they will simply disregard the comments as pessimism.
o Also, the best entrepreneurs know that rejection and obstacles are a part of any
leading business and they deal with them appropriately.
• Hard Work
• Foresight
• Independence
• Desire for high achievement
• Good Organizer
g) Factors influencing entrepreneurial development and motivation
• Today, entrepreneurship development has become the necessity for All the Nations.
• The government in every country is paying attention to the development of
the entrepreneurs, by organizing various schemes and programmes, providing incentives

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and facilities and establishing various Institutions and organizations for entrepreneurial
development.
Motivational Factors:
• Motivation plays an important role in entrepreneurship development.
• It is an important internal desire and force, which inspires him to take up entrepreneurial
works and encourages him to achieve in his goals.
• The achievement motivation, power motivation, and expansion motivation are important
factors.
• If he has the interest, temperament, and commitment, he will be inspired to establish
enterprise
• An Entrepreneur has to accomplish various functions, like the establishment,
management, and operations of the industry.
• He has to remain alert against various challenges and external forces and has also to bear
various pressures and stresses.
• In such a situation, the individuals who have the capacity to struggle, have the potential to
become an entrepreneur.
Entrepreneurial Skills:
• Human, business, managerial and Technical skill for success.
• Project Skills-he has to collect various facts and information, formulate projects, consider
various stages of projects and to make investment decisions.
• Managerial Ability-He has to manage work planning, organize various activities, take
effective decisions, communicate skillfully, provide directions, exercise effective
control etc.
• Creative Thinking and ability to Grab opportunities
Entrepreneurial Knowledge:
• Knowledge of physical, social, cultural, political, legal, technological and ethical factors
of the environment.
• Knowledge about various issues, relating to the alternatives industries: the best alternative
amongst various alternatives; raw material to be used- foreign or domestic, production
process, distribution of products, competitive firms, etc.
• Knowledge of various Technological aspects, like suitable production technique, their
costs, and likely profits, of the industry to facilitate the development of entrepreneurship.

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Normative Behaviour:
• Normative behavior has three aspects namely bearing of risks, family expectations and
pressures, self-dependence and work culture, etc.
• The person’s tendency to bear risks and uncertainties implies that they are not afraid of
challenges and responsibilities. They work hard and these facilities prefer entrepreneurial
development.
• Family expectations or motivations also have an important role in entrepreneurship
development. If the head of the family and other members desire to earn a good amount
of wealth by doing Independent work and engaging all family members then it gains
social reputation, so establishment of own enterprise increases.
• The Desire of a person to lead Independent and self-dependent life is also helpful in
making a man entrepreneur and it facilitates overall entrepreneurship development. Such
persons believe in self-employment. Hence, persons having such a desire to become
successful in the establishment of an enterprise in project works, even without
suggestions, directions, and guidelines, from others.
• Work culture. In the societies, where people believe in ‘work is worship‘, intense desire
to work, and has interest and love for work, the development of the entrepreneur is fast
and substantial. On the contrary, the persons who believe in luck, and have no Desire and
concern for work and avoiding activeness, push the entrepreneurship backward. In such
situations, entrepreneurship development is very difficult.
Socialization:
• In the society where commitment for achievement is taught formally or informally in
schools, religious organizations, political parties, educational institutions.
• The qualities to accept challenges the entrepreneurial development is substantially high
and faster.
Economic and Business Environment:
• Economic and business environment, economic stability, competition, trade cycles,
prices, income levels, investments and savings position of the market, market
competition, and Monopoly market, communication and awareness towards the
environment, quality of entrepreneurs and innovations, etc.
Government Policies and Incentives:
• Various economic and business policies of the government, like

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• industrial policy, Licensing policy, agriculture policy, monetary and fiscal policy, Labour
policy, Export-Import policy, etc. also influence entrepreneurship development.
• If the economic policies of the government are suitable, progressive and sound, these may
encourage entrepreneurship development.
• The government may attract entrepreneurs by making them aware about its positive
approach towards enterprises/Industries through these policies and by providing them the
incentives and facilities etc.
• announcing and providing special concessions facilities and assistance towards backward
villages and areas
Economic Laws:
• Such laws and rules include
• Monopolies, restrictive and trade practices Act, Labour laws, business laws, industrial
laws, acts relating to various taxes, like Income Tax, sales tax, wealth tax, and various
other laws and rules.
Scientific and Technological Development:
• Technology, technological activities, and Technical research available in the country
results in scientific and technical development
• Through various new production methods, mount up production in the country, cost of
production costs of production reduces, production of new products become possible and
search of new raw materials and new markets is easily facilitated.
• All this ultimately affect the development of entrepreneurs.
• If the government pay adequate attention to the technical development of the country, the
development of entrepreneurs is quite fast and substantial.
Political and Administrative System:
• Approach of the government (communist, socialist, dictatorial) policies concerning public
welfare and Social Justice, donations, gifts received by political parties and public leaders
from business Institutions, political stability, defence policy for national security, foreign
policy, bureaucracy, government policies and rules, National Prestige, etc.
• For example, the liberal policies and practical rules for setting up of industries
Attitude of Big Entrepreneurs:
• The positive attitude of the existing big entrepreneurs encourages and negative attitude
discourages the small entrepreneurs.

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• If the Big Entrepreneur uses various types of facilities, like raw materials, semi-finished
products, Machinery, Tools, Finance, Management services, and advice, etc. Available to
the small entrepreneurs, then they get encouraged.
Infrastructural Facilities:
• Supply of raw materials, communication, roads, water, electricity, constructions of
Industrial Area, Supply of sources of energy, Insurance, godowns, and financial services,
etc.
• Mechanism of Identifying and Developing Entrepreneurs:
• The society which is capable of identifying the entrepreneurial potential of its young
generation may develop their entrepreneurial feelings by engaging them in creative
activities.
• In India, identification and development of new entrepreneurs is now the responsibility of
district industries centers.
Entrepreneurship Oriented Education System:
• These include schools, colleges, universities, Technical Institutes, management institutes,
and entrepreneurial development institutes, etc., which conduct various business and
entrepreneurship oriented courses.
Role of Banks and Specific Financial Institutions:
• Entrepreneurial Development Institute, Entrepreneurship development boards, National
Research and Development Corporation(NRDC), National Entrepreneurship and small
business development institute, Nationalized and commercial banks and state financial
corporation have played a significant role in entrepreneurship development.
• These banks and Financial Institutions encourages Entrepreneurship by way of providing
finances at concessional rates, Approving the projects of the entrepreneurs quickly and by
providing loan facilities for Research and investigation etc.
Training Facilities:
• Various organizations and Institutions conduct training programs for the development of
entrepreneurial abilities and capacities among people.
• Under these programmes, exchange of thoughts, ideas, and experiences take place and
conferences, seminars and group discussions are held.
Supporting Institutions:

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• The functions of these institutions are to provide assistance to the entrepreneur

in marketing, management, raw materials, machinery, training, exports, modernization,
and other matters.
• These institutions and Agencies also provide services of surveys, Technical Education,
business counseling, machine designing, product development, research projects,
development, and investigation, etc.

h) Market Survey: Methods, Importance in Entrepreneurial development

Market Survey:
• The study of the spending characteristics and purchasing power of the consumer who are
within your business's geographic area of operation;
• a research method for defining the market parameters of a business.
• Market survey research involves analyzing a given market in order to gain insight into the
buying potential and attributes of the target audience for a product or service.
• Whether you are leading a startup company or a tenured business, it is important to
understand the needs of your customers.
• What do they want out of a product/service?
• How much would they pay for the product/service?
• Where would they most likely shop to find the product/service?
• A market survey helps answer these questions directly from target consumers.
• In turn, this information can help build an effective marketing and advertising strategy as
well as contribute to enhancing the features of a new concept before entering the product
or service into the market.

Market Survey Goals and Objectives:

• Collect data surrounding a target market such as competitor analysis, pricing trends, and
customer expectations.
• To directly collect feedback from the target audience to understand their characteristics,
expectations, and requirements.
Purpose of Market Survey:
• Gain critical customer feedback: The main purpose of the market survey is to offer
marketing and business managers a platform to obtain critical information about their
consumers so that existing customers can be retained and new ones can be got onboard.

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To directly collect feedback from the target audience to understand their characteristics,
expectations, and requirements.
• Understand customer inclination towards purchasing products: Details such as whether
the customers will spend a certain amount of money for their products/services,
inclination levels among customers about upcoming features or products, what are their
thoughts about the competitor products etc.
• Enhance existing products and services: A market survey can also be implemented with
the purpose of improving existing products, analyze customer satisfaction levels along
with getting data about their perception of the market and build a buyer persona using
information from existing clientele database.
• Make well-informed business decisions: Data gathered using market surveys is
instrumental in making major changes in the business which reduces the degree of risks
involved in taking important business decisions.
• Identify the best pricing structure : A market survey also provides key insight into the
pricing structure of an inventive concept. Specifically, market survey research answers
whether a customer will spend a certain amount of money for the new concept and what
the customer’s opinion is about competitor’s prices.
• Understanding the demand and supply chain of the target market: A product is most likely
to be successful if it is developed by keeping in mind the demand and supply of the target
market. This way, marketers can obtain insights about market capabilities to absorb new
products and concepts to develop customer-centric products and features.
• Developing well-thought marketing plans: The World is a target market for an
organization, especially a well-established one. Getting data from the target market
through thorough market research using market surveys and segmentation can be a source
of creating concrete and long-term marketing plans.
• Figure out customer expectations and needs: All marketing activities revolve around
customer acquisition. All small and large organizations require market surveys to gather
feedback from their target audience regularly, using customer satisfaction tools such
as Net Promoter Score, Customer Effort Score, Customer Satisfaction Score (CSAT) etc.
Organizations can analyze customer feedback to measure customer experience,
satisfaction, expectations etc.
• Accurate launch of new products: Market surveys are influential in understanding where
to test new products or services. Market surveys provide marketers a platform to analyze

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the scope of success of upcoming products and make changes in strategizing the product
according to the feedback they receive.
• Obtain information about customer demographics: Customer demographics form the core
of any business and market surveys can be used to obtain intricate and sensitive details
about customer demographics such as race, ethnicity or family income.
Market Survey Methods:
• With concise and straightforward questionnaires, you can analyze a sample group that
represents your target market. The larger the sample, the more reliable your results will
be.
• In-person surveys are one-on-one interviews typically conducted in high-traffic locations
such as shopping malls. They allow you to present people with samples of products,
packaging, or advertising and gather immediate feedback. In-person surveys can generate
response rates of more than 90 percent, but they are costly.
• Telephone surveys are less expensive than in-person surveys, but costlier than mail.
However, due to consumer resistance to relentless telemarketing, convincing people to
participate in phone surveys has grown increasingly difficult. Telephone surveys
generally yield response rates of 50 to 60 percent.
• Mail surveys are a relatively inexpensive way to reach a broad audience. They're much
cheaper than in-person and phone surveys, but they only generate response rates of 3
percent to 15 percent. Despite the low return, mail surveys remain a cost-effective choice
for small businesses.
• Online surveys usually generate unpredictable response rates and unreliable data, because
you have no control over the pool of respondents. But an online survey is a simple,
inexpensive way to collect anecdotal evidence and gather customer opinions and
preferences.
Types of market surveys that are conducted by successful enterprises:
• Market Surveys for segmentation: An organization can spot existing and prospective
customers and understand why the customers have chosen their products/services and the
prospects have not yet made a purchase. This can lead to a structured market
segmentation and analysis.
• Market Surveys for exploring various aspects of the target market: Get information about
factors such as market size, demographic information such as age, gender, family income

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Unit No. I Introduction to Entrepreneurship B. Tech. (Mech.)-VII

etc. to lay out a roadmap by considering growth rate of the market, positioning, and
average market share.
• Market Surveys to probe into purchase procedure: How does a customer deciding on
making a purchase? What are the factors that convert product awareness into sales? This
type of market survey will unveil awareness, information, free trial, purchase, and repeat.
• Market Surveys to establish buyer persona: These surveys are to build a buyer persona by
knowing about customer preferences, inclination, and capabilities of purchasing a
product.
• Market Surveys to measure customer loyalty: What is the degree of loyalty that the
customers have towards and organization? The answer to this question can be obtained by
conducting a market survey.
• Market Surveys to analyze a new feature or concept: It is essential for an organization to
include market-compliant features and concepts. By carrying out a market survey to
understand which features to launch, will help all the teams involved in the feature
development process to do that with proper research.
• Market Surveys for competitor analysis: Healthy competition is always good for an
organization’s progress. Market surveys done with the motive of competitor analysis will
produce results about how does the target market weigh the organization’s
products/services in comparison to the others in the market.
• Market Surveys to understand the impact of sales activities: Sales activities are the
backbone of an organization and it becomes crucial to keep track of these activities.
Market surveys for sales activities will produce a report of the impact of sales activities,
whether their frequency needs to increase or any changes the audiences think should be
inculcated in the sales process.
• Market Surveys to assess prices for new products/services: Affordability of products also
is an aspect that drives the market for organizations. Price ranges, product variants to
cater multiple price ranges, target customers for each of the products etc.
• Market Surveys for evaluation of customer service: Good customer service can lead to
enhanced satisfaction levels among customers. Factors such as time taken to resolve
issues, the scope of improvement, best practices of customer service etc.

Classification and types of entrepreneurs

• Classification of Entrepreneurs according to the type of Business

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1. Business Entrepreneurs
2. Trading Entrepreneurs
3. Industrial Entrepreneurs
4. Corporate Entrepreneur
5. Agricultural Entrepreneur
6. Retail Entrepreneurs
7. Service Entrepreneur
8. Social Entrepreneur
• Classification of Entrepreneur according to the Stages of Development
1. First Generation Entrepreneur
2. Modern Entrepreneurs or Innovative Entrepreneurs
3. Classical Entrepreneur
4. Inherited Entrepreneurs
• Classification of Entrepreneurs according to Motivational Aspects
1. Pure Entrepreneur
2. Induced Entrepreneur
3. Motivated Entrepreneur
4. Spontaneous Entrepreneur
• Classification of Entrepreneurs according to Technological Aspects
1. Technical Entrepreneur
2. Non-Technical Entrepreneur
3. Professional Entrepreneur
• Classification of Entrepreneurs According to Clarence Danhof
1. Innovative Entrepreneur
2. Adaptive Entrepreneur
3. Fabian Entrepreneur
4. Drone Entrepreneurs
• Classification of Entrepreneurs according to the type of Business
1. BUSINESS ENTREPRENEURS
Business entrepreneurs we those who conceive an idea to for a new product or service
and then create a business to convert their ideas into reality. These entrepreneurs may be
found in small business units or big enterprises. They concentrate both on production and
marketing activities. Example: A Printing Press, bakery or a textile unit.

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2. TRADING ENTREPRENEURS
Trading Entrepreneurs are those who undertake trading activities. These entrepreneurs do not
concentrate on manufacturing activities. They give more emphasis on distribution and marketing
of goods. They identify potential markets, create demand for the product and influence people to
buy the product. Example: Agents and Wholesalers.
3. INDUSTRIAL ENTREPRENEURS
Industrial Entrepreneurs are those who concentrate in industrial and production activities. Trey
identify the needs of the customers and manufacture a product according to their needs. They are
generally a product-Oriented entrepreneur. Example: A manufacturer of Automobile spare parts,
computer accessories.
4. CORPORATE ENTREPRENEUR
Corporate entrepreneurs are those who exhibit innovative skills in organizing and managing
corporate undertaking. Example: A Trust registered under the Trust Act.
5. AGRICULTURAL ENTREPRENEUR
An agricultural entrepreneur is one who concentrates on agricultural activities. These
entrepreneurs concentrate on activities like raising agricultural production, marketing of
fertilizers etc.
6. RETAIL ENTREPRENEURS
Retail entrepreneurs are those who undertake trading activities. They have direct contact with
customers and hence they are customer oriented. Example: An entrepreneur running a
departmental store
7. SERVICE ENTREPRENEUR
A service entrepreneur is one who provides services to customers. They make profit by rendering
services. Example: An entrepreneur running a hotel or dry cleaning unit.
8. SOCIAL ENTREPRENEUR
A social entrepreneur is one who provides importance to the society by serving them. He
concentrates on social issues and does not aim to make profit. Example: A person running an
orphanage.
CLASSIFICATION OF ENTREPRENEUR ACCORDING TO THE STAGES OF
DEVELOPMENT:
1. FIRST GENERATION ENTREPRENEUR
A first generation entrepreneur is one who sets up an enterprise by his innovative skill. He
combines various factors of production and provides marketable product or services by adopting
innovative ideas. He is the first person to start an enterprise on his own. Though such a person
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may have the family background of some business, such entrepreneurs may also establish a
certain business which may be unrelated to their family business.
2. MODERN ENTREPRENEURS OR INNOVATIVE ENTREPRENEURS
A modern entrepreneur is a dynamic entrepreneur. He always looks for changes and responds to
the changing demand of the market. His business ventures suits the current marketing needs.
3. CLASSICAL ENTREPRENEUR
Classical entrepreneur is a stereo type entrepreneur. He aims at maximizing profits at a consistent
level. There may or may not be an element of growth. Survival of the firm is given more
importance by these entrepreneurs.
4. INHERITED ENTREPRENEURS
These entrepreneurs have inherited family business or possess experience from their family
business. These entrepreneurs may like to diversify a little from their family business.
CLASSIFICATION OF ENTREPRENEURS ACCORDING TO MOTIVATIONAL
ASPECTS:
1. PURE ENTREPRENEUR
A pure entrepreneur is a person who is motivated by psychological and economic factors.
Entrepreneurial task is undertaken by them due to certain reasons. Ability to handle risk, desire to
enjoy better status, desire to get recognition in the society, thirst for making money motivates a
person to take up entrepreneurial activities.
2. INDUCED ENTREPRENEUR
Induced entrepreneur are those who takes up entrepreneurial task due to the incentives and
subsides granted by the government. Financial and technical assistance provided by the
government motivates a person to start new ventures.
3. MOTIVATED ENTREPRENEUR
They are motivated by the desire far their self-fulfillment. They emerge because of the possibility
of producing and, selling new products. They are also motivated by economic factors.
4. SPONTANEOUS ENTREPRENEUR
A person, turns out to be an entrepreneur, because of the natural talent vested in him. These
entrepreneurs have self confidence and emerge as challengers. They take up entrepreneurial
activity in order to tap their talents. They have great self confidence in their talent and are highly
resourceful.
CLASSIFICATION OF ENTREPRENEURS ACCORDING TO TECHNOLOGICAL
ASPECTS:
1. TECHNICAL ENTREPRENEUR
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A technical entrepreneur is one who concentrates more on production activities. He has got
sound technical knowledge. He utilizes his technical knowledge and demonstrates his innovative
capabilities. He is also known as technocrat.
2. NON-TECHNICAL ENTREPRENEUR
A non-technical entrepreneur concentrates more on marketing activities. He tries to find out new
strategies for marketing goods. He also promotes his business by employing various marketing
methods.
3. PROFESSIONAL ENTREPRENEUR
Professional entrepreneur is a person who applies innovative ideas in setting up of a business. He
is interested in establishing the enterprises rather than managing it. Once the business is
established. the entrepreneur will sell the business to some one else.
CLASSIFICATION OF ENTREPRENEURS ACCORDING TO CLARENCE DANHOF:
1. INNOVATIVE ENTREPRENEUR
An innovative entrepreneur is one who introduces new product, new service or new market. An
innovative entrepreneur is also known as modern entrepreneur. An innovative entrepreneur can
work only when a certain level of development is reached. These entrepreneurs introduce new
changes and develop the business after a certain level of development is reached. They invent
new products. Such kind of entrepreneurs can be seen in developed countries, as large sum of
money can be diverted towards research and development purposes.
2. ADAPTIVE ENTREPRENEUR OR Imitating Entrepreneurs
Adaptive entrepreneur is one who adopts the successful innovations of innovative entrepreneur.
These entrepreneurs imitate the techniques and technologies innovated by others. These
entrepreneurs can be seen both in underdeveloped and developing countries. They also make
small changes in relevance to their market environment.
3. FABIAN ENTREPRENEUR
A fabian entrepreneur is one who responds to changes only when he is very clear that failure to
respond to changes would result in losses. Such entrepreneurs do not introduce new changes.
They also do not desire to adopt new methods. They are very shy and stick to old customs. They
are very cautious.
4. DRONE ENTREPRENEURS
These entrepreneurs do not make any changes. They refuse to utilize the opportunities and may
also suffer losses. They are very conventional. They refuse to introduce changes. They even
make losses but avoid changes. Sometimes they may be pushed out of the market.

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Unit No. I Introduction to Entrepreneurship B. Tech. (Mech.)-VII

Based on Ownership:
1. Private Entrepreneur:
A private entrepreneur is one who as an individual sets up a business enterprise. He / she it’s
the sole owner of the enterprise and bears the entire risk involved in it.
2. State Entrepreneur:
When the trading or industrial venture is undertaken by the State or the Government, it is called
‘state entrepreneur.’
2. Joint Entrepreneurs:
When a private entrepreneur and the Government jointly run a business enterprise, it is called
‘joint entrepreneurs.’
Based on Gender:
1. Men Entrepreneurs:
When business enterprises are owned, managed, and controlled by men, these are called ‘men
entrepreneurs.’
2. Women Entrepreneurs:
Women entrepreneurs are defined as the enterprises owned and controlled by a woman or women
having a minimum financial interest of 51 per cent of the capital and giving at least 51 per cent of
employment generated in the enterprises to women.
Based on the Size of Enterprise:
1. Small-Scale Entrepreneur:
An entrepreneur who has made investment in plant and machinery up to Rs 1.00 crore is called
‘small-scale entrepreneur.’
2. Medium-Scale Entrepreneur:
The entrepreneur who has made investment in plant and machinery above Rs 1.00 crore but
below Rs 5.00 crore is called ‘medium-scale entrepreneur.’
3. Large-Scale entrepreneur:
The entrepreneur who has made investment in plant and machinery more than Rs 5.00 crore is
called ‘large-scale entrepreneur.’

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TY (Mechanical) –EDP Notes

Unit-2:Entrepreneurship Development

Entrepreneurial development programmes (EDP): Introduction

• It is rightly remarked that entrepreneurs are not necessarily born, they can also be
developed through education, training and experience.
• Though entrepreneurial talent exist in every society but socio-economic
environment hinders the emergence of entrepreneurial talent. Entrepreneurship
requires an environment in which entrepreneur can learn and discharge his
assigned responsibility in an efficient manner and change his attitude.
• Entrepreneurial development seeks to provide constructive direction for those
who choose a career path different from traditional roles.
• The process of entrepreneurial development focuses on training, education,
reorientation and creation of conductive and healthy environment for the growth
of enterprise.

Entrepreneurial Development Programme means a programme conducted to help a

person in strengthening his entrepreneurial motive and in acquiring skill and
capabilities required for promoting and running an enterprise efficiently. A
programme which is conducted with a motive to promote potential entrepreneurs,
understanding of motives, motivational pattern, their impact on behaviour and
entrepreneurial value is termed as entrepreneurial development programme.
There are a number of programmes which give information to the prospective
entrepreneurs regarding new business idea, how to set up a new venture, how to
prepare a project report, sources of finance etc. These programmes should not be
confused with EDP; these are all a part of EDP. EDP is primarily concerned with
developing, motivating entrepreneurial talent and understanding the impact of
motivation on behaviour. A well designed EDP envisages three tiered approach:
1. Developing achievement motivation and sharpening entrepreneurial traits and
behavior.

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2. Guidance on industrial opportunities, incentives, facilities and rules and

regulations.
3. Developing managerial and operational capabilities.
Importance
Entrepreneurs are considered as agents of economic growth. They create wealth,
generate employment, provide new goods and services and raise the standard of
living. EDP is an effective way to develop entrepreneurs which can help in
accelerating the pace of socio-economic development, balanced regional growth, and
exploitation of locally available resources. It can also create gainful self-employment.
An EDP equips entrepreneurs and makes them competent to anticipate and deal with
a variety of problems that any entrepreneur may have to face. It gives confidence to
the entrepreneur to face uncertainties and take profitable risks. It prepares them to
deserve and make good use of various forms of assistance. EDP can be beneficial in
the following ways:

 Economic Growth: EDP is a tool of industrialisation and path to economic

growth through entrepreneurship.
 Balanced Regional Development: EDP helps in dispersal of economic
activities in different regions by providing training and other support to local
people.
Eliminates Poverty and Unemployment : EDPs provide opportunities for
self-employment and entrepreneurial careers.
 Optimum use of Local Resources : The optimum use of natural, financial
and human resources can be made in a country by training and educating the
entrepreneurs.
 Successful Launching of New Unit : EDP develops motivation, competence
and skills necessary for successful launching, management and growth of the
enterprise.
 Empowers New Generation Entrepreneurs : EDP, by inculcating
entrepreneurial capabilities and skill in the trainees, create new generation
entrepreneur who hitherto was not an entrepreneur.

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Objectives of Entrepreneurial Development Programme (EDP):

• To make people learn compliance with law.
• To develop and fortify entrepreneurial quality, i.e., motivation or need for
achievement.
• To develop small and medium scale enterprises in order to generate employment
and widen the scope of industrial ownership.
• To industrialize rural and backward sections of the society.
• To understand the merits and demerits of becoming an entrepreneur.
• To offer profitable employment opportunities to educated young men and women.
• To expand the sources of entrepreneurship.
• To investigate the environmental set-up relating to small industries and small
businesses.
• To design project for manufacturing a product.
• To increase the supply of entrepreneurs for quick industrial development.
• To prepare individuals to accept the uncertainty involved in running a business.
• To develop managerial skills among small entrepreneurs for improving the
performance of small-scale industries.

Phases of EDP:
All the EDPs mainly consist of three phases:
1. Pre-Training Phase
2. Training Phase
3. Post-Training Phase
Phase-1: Pre-Training Phase:
This step can be considered as the introductory phase in which the entrepreneurship
development programmes are launched. A wide spectrum of activities are performed
in this phase arc described below :
i) Identification of suitable location where the operations can be initiated like a
district.
ii) Selection of an individual as a course coordinator or project leader to coordinate
the EDP activities.

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iii) Organization of basic infrastructural facilities related to the programme.

iv) Conducting the environmental scanning or industrial survey in order to look for
better business opportunities.
v) Developing various plans associated with the programme, like :
a) Promotional activities by using electronic or print media, posters, leaflets, etc.
b) Contacting business experts, different agencies, NGOs that can become a part of
the programme, directly or indirectly.
c) Printing the application forms and availing them in different locations with the
instructions.
d) Establishing selection committee for screening of candidates.
e) Preparing budget and getting it approved from the management and arranging other
activities which are related to the programme.
f) Arranging and deciding the need-based elements in the syllabus of training
programme and to contact guest faculties for the training session.
vi) Looking for the assistance of various agencies such as DICs, banks, SISI, NSIC,
DM and so on.
vii) Conducting industrial motivational campaigns to increase the number of
applications.
Phase-2: Training Phase:
▰ The main function of any EDP is to impart training to future entrepreneurs and
guiding them for establishing the enterprise.

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Phase-3: Post-Training Phase:

▰ This phase is also Referred as the phase of follow-up assistance.
▰ In this phase, the candidates who have completed their programme successfully
are provided post-training assistance.
▰ This phase is very important as after the completion of training programme, most
of the entrepreneurs face a lot of hardship in the business plan implementation.
▰ Thus, with the help of various counselling sessions, the training organizations try
to extend their support to trainees.
Members like State Financial Corporation, commercial banks, training institutions
and District Industries Centre constituted all together to assist the entrepreneurs on
the basis of mentioned goals :

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• To assist trainees in a meaningful manner so that trainees can realize their

business plan.
• To analyse the development made by trainees in the project implementation.
• To evaluate the post-training approach.
• To provide escort services to the trainees with the help of various promotional and
financial institutions.

Assisting Institutes:
A number of government and private institutions are providing assistance in India to
entrepreneurs. Some of them are listed below :
• Small Industries Development Organisation (SIDO),
• Commercial Banks,
• National Alliance of Young Entrepreneurs (NAYE),
• National Institute for Entrepreneurship and small Business Development
(NIESBUD),
• Entrepreneurship Development Institute of India (EDI),
• India Investment Centre (LIC),
• Small-scale industrial Development Bank Of India (SIDBI), and
• Technical Consultancy Organisation (TCO).

Importance of Entrepreneurial Development Programme (EDP) :

1) Formation of Employment Opportunities
2) Provides Adequate Capital : Entrepreneur mobilizes idle savings of the people
into productive investment and thereby helps in the state of capital formation.
3) Proper Utilization of Local Resources: It facilitates in harnessing of locally
available resources which are abundant by providing training and education to
entrepreneurs.
4) Increased Per Capital Income
5) Improved Standard of Living: EDP helps in improving standard of living of the
people because innovation leads to production of goods and services in a wide sphere.
6) Economic Independence

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7) EDP facilitates in removal of industrial slums because it leads for

decentralization of industries.
8) It defuses/Reduces social tension by diverting unemployed youths for self
employment. Young youths feel frusteted in the absence of employment.
9) It facilitates balanced regional development as it enables development of
entrepreneurs in different areas of the state or county.
10) Facilitating Overall Development

Problems of entrepreneurship development programmes (EDPs):

1. No Policy at the National Level. Though Government of India is fully aware
about the importance of entrepreneurial development, yet we do not have a national
policy on entrepreneurship. It is expected that the government will formulate and
enforce a policy aimed at promoting balanced regional development of various areas
through promotion of entrepreneurship.
2. Problems at the Pre training Phase. Various problems faced in this phase are —
identification of business opportunities, finding & locating target group, selection of
trainee & trainers etc.
3. Over Estimation of Trainees. Under EDPs it is assumed that the trainees have
aptitude for self employment and training will motivate and enable the trainees in the
successful setting up and managing of their enterprises. These agencies thus
overestimate the aptitude and capabilities of the educated youth. Thus on one hand
the EDPs do not impart sufficient training and on the other financial institutions are
not prepared to finance these risky enterprises set up by the not so competent
entrepreneurs.
4. Duration of EDPs. An attempt is made during the conduct of EDPs to prepare
prospective entrepreneurs thoroughly for the various problems they will be
encountering during the setting up and running of their enterprises. Duration of most
of these EDPs varies between 4 to 6 weeks, which is too short a period to instill basic
managerial skills in the entrepreneurs. Thus the very objective to develop and
strengthen entrepreneurial qualities and motivation is defeated.

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5. Non Availability of Infrastructural Facilities. No prior planning is done for the

conduct of EDPs. EDPs conducted in rural and backward areas lack infrastructural
facilities like proper class room, suitable guest speakers, boarding and lodging etc.
6. Improper Methodology. The course contents are not standardized and most of the
agencies engaged in EDPs are themselves not fully clear about what they are
supposed to do for the attainment of pre-determined goals. This puts a question mark
on the utility of these programmes.
7. Mode of Selection. There is no uniform procedure adopted by various agencies for
the identification of prospective entrepreneurs. Organisations conducting EDPs prefer
those persons who have some project ideas of their own and thus this opportunity is
not provided to all the interested candidates.
8. Non Availability of Competent Faculty. Firstly there is problem of non
availability of competent teachers and even when they are available, they are not
prepared to take classes in small towns and backward areas. This naturally creates
problems for the agencies conducting EDP.
9. Poor Response of Financial Institutions. Entrepreneurs are not able to offer
collateral security for the grant of loans. Banks are not prepared to play with the
public money and hence they impose various conditions for the grant of loans. Those
entrepreneurs who fail to comply with the conditions are not able to get loan and
hence their dream of setting up their own enterprises is shattered. Helpful attitude of
lending institutions will go a long way in stimulating entrepreneurial climate.
Problems faced by entrepreneurs:
Cash Flow Management:
• Getting your business funded is one of the main issues that all business face and
have to tackle in order to survive.
• While you might have initial money saved up to start a business, they don’t
survive for long and you cannot just rely on the next sales check to arrive so you
can pay the bills and take care of the next step in business.
• A steady flow of cash is essential for small business to survive and you always
need to have extra funds to take care of rainy and in-between days.
Hiring employees & team building:

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 We all have faced interviews at one or other point of our lives and for many, it has
been one of the most stressful points in their lives.
 While we all have been in the above situation one point or the other, there are
very few of us who have conducted interviews and it is equally hard if not more
as the majority you have not done it before and thus have no idea how to go about
it.
 The situation is only more stressful by the fact that you are doing it as a new
entrepreneur and thus want to pick that perfect candidate that not only fits your
budget but is also proficient at the work they are being hired for.

Dealing with the unknown and self-doubt:

• Every entrepreneur, especially the ones that are just starting out, doubt themselves
and often question if their business will work, be profitable and survive with time.
• They also often doubt if their product will work and if the customers will accept
them.
• There is no getting away from these questions and none of them has a solid,
reliable answer till you are in that position.
• There are many unknown factors and many of your long-term plans often will
remain in flux depending on new developments that take place.
• Dealing with this volatility is one of the hardest parts of being a new entrepreneur
and all you can do is remain calm and deal with them as they come.
• Follow and promote work relaxation and instead of getting discouraged motivate
yourself and look at your list of goals and tasks to do today and try to achieve
them than worry about the future unknown that might or might not happen.
Decision-making:

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• One of the hardest and most stressful problems faced by entrepreneurs is decision
making.
• New entrepreneurs have a harder time making decisions as they often equate even
small decisions with how it will impact the company and its budget. Self-doubt
also makes them question the decisions they have made already and if it was the
right one.
• It’s is only with time that they learn to take hundreds of decisions a day, big and
small, without questioning themselves and often facing decision fatigue.

Facing Criticism:
• One of the constant problems faced by entrepreneurs is criticism. Be it about their
business ideas, small failures in business decision making or starting the business
in the first place.
• Even big entrepreneurs like Ratan Tata and NR Narayana Murthy have faced
criticism and still face them.
• As a new entrepreneur, you might face it more and would be constantly warned
about the various ways your business can fail. Sometimes these critics might even
get personal as they’ll feel jealous of and threatened by you.
• As a good entrepreneur, you need to learn to face them head-on and separate the
wheat from the chaff.

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• Basically, you need to look at genuine criticism, evaluate it and fix them so you
don’t face it again.
• Put aside unhelpful comments and ‘advice’ and use the genuine one to take your
business further up.
Finding customers:
• It’s really hard to attract customers for any company that is starting out especially
if they are a business with limiting marketing budget.
• This problem always plays on every entrepreneur’s mind and the fact that people
tend to stick with well-known brands they’re familiar with makes it harder for
them to sell their products.
• But new companies hold a big advantage over brands and that is their pricing is
much cheaper than their rivals.
• If they provide a high-quality product at a much cheaper rate than their rival, they
will not only be able to attract new customers but also retain their customer who
will become loyal to them over time.

Time management:
• Time management might be the biggest problem faced by entrepreneurs, who
wear many (and sometimes all) hats. If you only had more time, you could
accomplish so much more!
• The solution: Make time. Like money, it doesn’t grow on trees, so you have to be
smart about how you spend it. Here are some tips:
• Create goal lists: You should have a list of lifetime goals, broken down
into annual goals, broken down into monthly goals, then broken down into
weekly goals. Your weekly goals, then will be broken down into specific
tasks by day. In this manner, what is on your task list in any given day is
all you need to do to stay on track with your lifetime goals.
• If any tasks do not mesh with your goals, eliminate them.
• If any tasks do not absolutely have to be completed by you, delegate them.
• Consistently ask yourself: “Is what I’m doing right now the absolute best
use of my time?”

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Delegating Tasks:
• The challenge: You know you need to delegate or outsource tasks, but it
seems every time you do, something gets messed up, and you have to redo it
anyway.
• The solution: Find good employees and good outsourced contract help, for a
start. You might have to pay a little more for it, but the savings in time (and
the resulting earning potential) more than make up for it.
• Next, be specific as to what you want done. It will take a little more time
at first, but write down detailed steps listing exactly what you want your help
to do. Don’t make assumptions, and don’t assume your help will be able to
think for themselves right off the bat.
Choosing What to Sell:
• The challenge: You know you could make a mint if you just knew what products
and services to sell. You’re just unsure how to pick a niche.
• The solution: Admit that you’re weak in identifying prosperous niches, and
delegate the task to someone who is strong in this area. You don’t have to hire a
huge, expensive marketing firm; rather, recruit a freelance researcher who has
experience in whatever type of field you’re considering entering (retail e-
commerce, service industry, publishing, etc.). Have them conduct market research
and create a report with suggested niches, backed by potential profit margins and
a complete SWOT analysis: Strengths, Weaknesses, Opportunities and Threats.
• This isn’t to say you should have someone else decide for you; however, if you’re
not good at identifying niches, it makes sense to receive suggestions from
someone who is. You can then analyze the suggestions for yourself to determine
if you agree. Taking this step now can save you a lot of time, money and hassles
later — not to mention your entire business and livelihood.
Marketing Strategy:
• The challenge: You don’t know the best way to market your products and
services: print, online, mobile, advertising, etc. You want to maximize your return
on investment with efficient, targeted marketing that gets results.

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• The solution: Again, if you’re not adept (very good) at creating marketing
plans and placing ads, it’s a good idea to outsource your marketing strategy to
someone who is. At this point, all you need is a core marketing plan: Who is your
audience, and what marketing activities will you undertake to motivate
purchases? Give your planner a budget and tell them to craft a plan that efficiently
uses that budget to produce profits.
Capital:
• The challenge: You want to start or grow your business, but you have little capital
to do it with.
• The solution: There are many ways to earn funding, from traditional bank loans to
Kickstarter campaigns and self-fueled growth models.
• Instead of trying to launch a multimillion-dollar corporation overnight, focus on
your initial core customers. Continually work to find new customers, of course,
but consistently strive to be remarkable to those customers you already serve.
Word-of-mouth will spread, and more customers will come looking for you. As
they do, develop systems and business processes that allow you to delegate tasks
without sacrificing quality. Your business will grow slow and steady, and you’ll
be able to solve problems while they’re small.
Strapped Budget:
• The challenge: Even though cash flow is fine, it seems you never have enough in
your budget to market your company to its full potential.
• The solution: Nearly every entrepreneur struggles with their budget at one point or
another. The key is to prioritize your marketing efforts with efficiency in mind —
spend your money where it works — and reserve the rest for operating expenses
and experimenting with other marketing methods.
• Keep a close eye on your money, too: There may be areas you can skim to free up
more funds. Unless an expense is absolutely critical to your business and/or
represents an investment with an expected return, cut it. In fact, do this exercise:
See how lean you can run your business. You don’t have to actually do it, but cut
everything you can and see if you still feel you can run your business.
Business Growth:

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• The challenge: You’ve come to the point at which you can’t take on any more
work in your current structure.
• The solution: Create new processes that focus on task delegation. Many
entrepreneurs, used to wearing all the hats, find themselves in this position once
they’ve achieved a modicum of success. Because you’re doing everything, your
growth halts to a stop when it hits a self-imposed ceiling. The only way to break
through is to delegate tasks to others to take yourself out of the production end,
and segue into management and, finally, pure ownership.
Being the visionary:
▰ As the founder of your startup, you’ll be expected to come up with the ideas.
When a competitor emerges, it will be your responsibility to come up with a
response plan. When your team hits an impenetrable obstacle, your job will be to
come up with an alternative plan to move forward.
▰ This demands on-the-spot creative thinking, but entrepreneurs rarely have the
luxury of time. The less experience you have, the more pressure you’ll feel from
this, and the harder time you’ll have coming up with acceptable plans.
Loneliness:
▰ It’s a rarely mentioned problem of entrepreneurship, and many new business
owners aren’t prepared for it until it happens. Being an entrepreneur is lonely. It’s
a singular position, so you won’t have teammates to rely on (completely). You’ll
be working lots of hours, so you won’t see your family as often. And your
employees will be forced to remain at a bit of a distance.
Rule-making:
▰ It’s fun to be the boss until you have to enforce something. Sooner or later, you’ll
have to come up with the rules your business follows, from how many vacation
days your workers get to what the proper protocol is when filing a complaint
about a coworker. These details aren’t fun to create, and they aren’t fun to think
about, but they are necessary for every business.
Quitting Another Career:
▰ The challenge: Most of the new entrepreneurs leave their regular jobs in the
overwhelming joy of becoming self-independent. And that too with less than the

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amount in bank required for living at least a month or two even without any
payment whatsoever.
▰ The solution: Money is something inevitable for living. So, quit your present job
when you’ve at least the required amount for living a standard life as a financial
cushion and have a robust business plan, or when you’re earning a standard
amount from your new business endeavor.
Too Many Competitors:
▰ The challenge: Dealing with too many competitors in the same field.
▰ The solution: Bring in something trendy and new in the market. Customers flock
to a business that offers extensive product knowledge and a wide collection of the
products they’re looking for.
Finding Business Partners:
▰ The challenge: Finding reliable business partners is one of the most critical jobs
that a new entrepreneur has to perform. A wrong business partner will provide
you with a negative reputation and as your reputation will be connected to your
partner, you’ll be risking the success of your endeavor somehow.
▰ The solution: It’s difficult to judge your partner at the first sight, but if he/she has
the wrong intentions, it’s bound to be revealed gradually. The only way out is to
immediately dissolve the relationship with your partner.
Health:
▰ Entrepreneur should keep himself healthy, so that he can give his maximum time
for the business.
Facing rejection:
▰ You will be rejected for your idea, age, and experience in the business world. No
matter what you do, you can’t avoid the rejections. You will be rejected for one or
another thing.
▰ Only a person who has unshakable trust and unbreakable confidence in his idea
can survive the rejections in such a scenario.
▰ The toughest part of rejection is that you will not only be rejected by strangers,
but your friends and family will also reject you. Therefore, you need to stay
headstrong when faced with rejections.

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▰ You should seek the company of people who have a positive attitude and believe
in you and your idea. In addition to this, you can make friends with new
entrepreneurs out in the market.

Missing out on life:

▰ Missing out on life is a challenge that all entrepreneurs face, and it is not a
temporary challenge that they will face at the beginning of their careers. They will
face this challenge throughout the journey.
▰ Entrepreneurship is not easy. You will be required to put your all into becoming a
successful entrepreneur. There will be many incidents working alone in your
office on a festival night or a special day like your birthday. You will be required
to sacrifice your family time, and your leisure time to make your business
successful.
Challenge Faced by Ratan Tata:
▰ Ratan Tata also recalled another major challenge he faced after he took over as
the chairman of Tata Group. There was a major strike at the Tata Motors plant,
which turned violent, with workers beaten up and managers stabbed.
▰ “I stayed for four days at the plant to say that we are together. We overcame the
strike and started to work again,” Ratan Tata said.
▰ This empathetic approach paid rich dividends not just for Mr. Tata, but also for
Tata Motors as there were labour union agreements coming up and payment of
bonus to the workers. The management was not in favour of such payments, but
Ratan Tata was insistent on paying the bonus as the workers stood with them.
Fortunately, the workers voluntarily decided not to take the bonus. “This was a
psychological turnaround on the back of a rather dangerous situation,” Ratan Tata
said.

Options available to entrepreneurs:

1. Merger:

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One firm absorbs the assets and liabilities of the other firm in a merger. The
acquiring firm retains its identity. In many cases, control is shared between
the two management teams. Transactions were generally conducted on
friendly terms. The smaller companies merging into larger companies that
have greater brand recognition and market traction. Usually, shareholders
must approve the merger by a vote.

Merger negotiations:
• Friendly Acquisition:
The acquisition of a target company that is willing to be taken over. Usually,
the target will accommodate overtures and provide access to confidential
information to facilitate the scoping and due diligence processes.
• Hostile Takeover:
A takeover in which the target has no desire to be acquired and actively
rebuffs the acquirer and refuses to provide any confidential information.
The acquirer usually has already accumulated an interest in the target (20%
of the outstanding shares) and this preemptive investment indicates the
strength of resolve of the acquirer.
Types of Mergers:
• Horizontal Mergers
- Between competing companies
• Vertical Mergers
- Between buyer-seller relation-ship companies
• Conglomerate Mergers
- Neither competitors nor buyer-seller relationship
Advantages of Mergers:
1. Synergy: The most used word in M&A is synergy, which is the idea
that by combining business activities, performance will increase and

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costs will decrease. Essentially, a business will attempt to merge with

another business that has complementary strengths and weaknesses.
2. Revenue Synergy :
• Market power :Larger company will attract more customers
(more brand awareness).
• Complementary products .
• Reduce competion.
3. Cost Synergy
• Bulk discounts : be able to attract better prices.
• Market efficiency : one entity doing advertisements instead of two.
• Reduced fixed overhead costs : overlapping departments and
resources.
4. Financial Synergy
• Borrow in Bulk : get better rates (borrowing interest rates)
• Save in Bulk : get better rates (deposit saving rates)
• Diversification of Risk : more companies in portfolio, less
systemic risk.
• Offsetting tax losses.
5. Growth: Mergers can give the acquiring company an opportunity to
grow market share without having to really earn it by doing the work
themselves - instead, they buy a competitor's business for a price.
Usually, these are called horizontal mergers.

2. Ancillarisation:
An ancillary unit is defined as an Industrial undertakings having investment in fixed
assets, in plant & machinery whether held on ownership or on hire purchase not
exceeding Rs. 100 crore & engaged in :
 manufacturer of parts & components, sub-assemblies, tooling or intermediates

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 rendering of service or proposing to supply or render not less than 50 % of his

production or service to one or more other industrial undertaking for
production.

Major difference between SSI & ancillary is that unit setup which can be recognized
as a full fledge large company can be a part of ancillary but under SSI such unit can get
transformed into medium or large scale sectors. Major benefit of ancillarisation drive to a
country is that growth of employment, growth of GDP, growth of entrepreneurship.

3. Franchising:
– Franchising is a form of business organization in which a firm
that already has a successful product or service (franchisor)
licenses its trademark and method of doing business to another
business or individual (franchisee) in exchange for a franchise
fee and an ongoing royalty payment.
– Involves a business owner who licenses trademarks and
methods to an independent entrepreneur.
– Some franchisors are established firms (like McDonald’s) while
others are first-time enterprises being launched by
entrepreneurs.
 Franchisor
 Party in contract that specifies methods to be followed/terms to
be met by the other party.
 Franchisee
 An entrepreneur whose power is limited by a contractual
agreement with a franchising organization.
Two Types of Franchise Systems:
1. Product and Trademark Franchise

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– An arrangement under which the franchisor grants to the

franchisee the right to buy its products and use its trade name.
– This approach typically connects a single manufacturer with a
network of dealers or distributors.
• For example, General Motors has established a network
of dealers that sell GM cars and use the GM trademark in
their advertising and promotions.
• Other examples of product and trademark franchisors
include agricultural machinery dealers, soft drink
bottlers, and beer distributorships.
2. Business Format Franchise
– An arrangement under which the franchisor provides a formula
for doing business to the franchisee along with training,
advertising, and other forms of assistance.
– Fast-food restaurants, convenience stores, and motels are well-
known examples of business format franchises.
• Business format franchises are by far the most popular
form of franchising, particularly for entrepreneurial
firms.
Examples of Franchising in India:
• McDonald’s
• Dominos
• KFC
• Pizza Hut
• Subway
• Dunkin’ Donuts
• Taco Bell
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• Baskin Robbins
• Burger King
• Patanjali
• PMKVY Franchise(Pradhan Mantri Kushan Vikas Yojana)
• Dr. Batra’s Clinic
• First Cry
• Lenskart
• Amul Scoop
• DTDC Courier
•
When to Franchise? (From the Franchisor’s Point of View):
• Approach Franchising With Caution and Care
– Establishing a franchise system should be approached carefully
and deliberately.
– Franchising is a complicated business endeavor, and an
entrepreneur must look closely at all its aspects before deciding
to franchise.
• Regulations
– An entrepreneur should also be aware that over the years a
number of fraudulent franchise organizations have come and
gone and have left financially ruined franchise owners behind.
• When Is Franchising Most Appropriate?
– Franchising is most appropriate when a firm has a strong or
potentially strong trademark, a well-designed business method,
and a desire to grow.

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– A franchise system will ultimately fail if the franchisee’s brand

doesn’t add value for customers and its business method is
flawed or poorly developed.
Qualities Needed for Prospective Franchisees:
• Good work ethic
• Ability to follow instructions
• Ability to operate with minimal supervision
• Team oriented
• Experience in the industry in which the franchise competes
• Adequate financial resources and good credit history
• Ability to make suggestions without becoming confrontational
or upset if the suggestions are not adopted
• Represents the franchisor in a positive manner
Advantages and Disadvantages of Franchising as a Method of Business
Expansion:
Advantages:
• Rapid, low-cost market expansion
• Income from franchise fees and royalties
• Franchisee motivation
• Access to ideas and suggestions
• Cost savings
• Increased buying power
Disadvantages:

• Profit sharing
• Loss of control
• Friction with franchisees

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• Managing growth
• Differences in required business skills
• Legal expenses
The Costs Involved With Buying a Franchise:
• Initial Franchise Fee
– The initial fee varies depending on the franchisor.
• Capital Requirements
– The costs vary but may include the cost of buying real estate,
the cost of putting up a building, the purchase of inventory, and
the cost of obtaining a business license.
• Continuing Royalty Payment
– Is usually around 5% of monthly gross income.
• Advertising Fees
– Franchisees are often required to pay into a national or regional
advertising fund.
• Other Fees
– Other fees may be charged for various activities, including:
• Training additional staff
• Providing management expertise when needed
• Providing computer assistance
• Providing a host of other items or support services

Outsourcing:
▰ Outsourcing is the business practice of hiring a party outside a
company to perform services or create goods that were traditionally
performed in-house by the company's own employees and staff.
▰ Contracting other companies for services.
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Reasons/need for Outsourcing:

Companies use outsourcing due to following
• Outsourcing is a practice usually undertaken by companies as a cost-
cutting measure.
• Cut labor costs, including salaries for their personnel, overhead,
equipment, and technology.
• dial down and focus on the core aspects of the business
• spinning off the less critical operations to outside organizations
• improve efficiencies and
• gain speed
• The underlying principle is that because the third-party provider
focuses on that particular task, it is able to do it better, faster
and cheaper than the hiring company could.
The types of tasks that are best outsourced:
• Highly skilled, or executive, expertise. For example, you may not
need to pay a CFO’s (Chief Financial Officer) salary, but you could
have a CFO-level person to come in a few times each month to
provide financial analysis and ensure that the bookkeeper is handling
the books well.
• Highly repetitive tasks. Accounts payable, data entry and shipping
inventory, housekeeping could fall into this category.
• Specialized knowledge. E.g. IT support for your accounting system
or your network with the right skill set
Outsourcing Advantages:
 lower costs, increased efficiencies, saving time and money
 You Can Work Around the Clock

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 free up resources (i.e., cash, personnel, facilities) that can be

redirected to existing tasks or new projects that deliver higher
yields for the company than the functions that had been
outsourced.
 third-party providers can more quickly execute the outsourced
tasks
 Outsourcing internationally can help companies benefit from the
differences in labor and production costs among countries.
 Price dispersion in another country may entice a business to
relocate some or all of its operations to the cheaper country in
order to increase profitability and stay competitive within an
industry.
 Many large corporations have eliminated their entire in-house
customer service call centers, outsourcing that function to third-
party outfits located in lower-cost locations.
 Small businesses can tap into outside expertise
 Decreases overhead investment or debt
 Lowers regulatory compliance burdens
 Allows companies to start new projects quickly
 Core attractive to investors allows companies to direct more capital
into money-making activities
Disadvantages:
▰ As such, it can affect a wide range of jobs, ranging from customer
support to manufacturing to the back office.
▰ Communication difficulties,
▰ Security threats as sensitive data may be be misused, mishandled

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▰ additional legal duties

▰ Disruption of a labor force. One example that often comes to mind is
the manufacturing industry in America, where now a large extent of
production has moved internationally. In turn, higher-skilled
manufacturing jobs, such as robotics or precision machines, have
emerged at a greater scale.
▰ On the downside, communication between the company and outside
providers can be hard, and security threats can amp up when multiple
parties can access sensitive data.
▰ Companies may lose control over aspects of the outsourced tasks or
services. For instance, a company could lose control over the quality
of customer service provided when it outsources; even if the
company's contract with the provider stipulates certain quality
measures, the company might find it's more difficult to correct an
outsourced provider than it would be to correct an in-house team.
▰ Employees at companies that decide to outsource frequently see the
decision to outsource as a threat to their job security; in many cases,
that fear is justified as they lose their jobs to workers who may be paid
less and receive fewer benefits.

Cases on takeover, mergers and acquisitions in India and at global level.

1. Asian Paints- Ess Ess Bathroom Products

Asian paints signed a deal with Ess Ess Bathroom products Pvt Ltd to acquire its front

end sales business for an undisclosed sum in May, 2014.

“The company on May 14, 2014 has entered into a binding agreement with Ess Ess
Bathroom Products Pvt. Ltd and its promoters to acquire its entire front-end sales

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business including brands, network and sales infrastructure,” Asian Paints said in a filing

to the BSE on Wednesday.

Ess Ess produces high end products in bath and wash segment in India and taking them

over led to a 3.3% rise in share price for Asian paints.

2. RIL- Network 18 Media and Investments

Reliance Industries Limited (RIL) took over 78% shares in Network 18 in May 2104for

Rs 4,000 crores. Network 18 was founded by Raghav Behl and includes

moneycontrol.com, In.com, IBNLive.com, Firstpost.com, Cricketnext.in,

Homeshop18.com, Bookmyshow.com while TV18 group includes CNBC-TV18, CNN-

IBN, Colors, IBN7 and CNBC Awaaz.

3. Ranbaxy- Sun Pharmaceuticals

Sun Pharmaceutical Industries Limited, a multinational pharmaceutical company

headquartered in Mumbai, Maharashtra which manufactures and sells pharmaceutical

formulations and active pharmaceutical ingredients (APIs) primarily in India and the

United States bought the Ranbaxy Laboratories. The deal is expected to be completed in

December, 2014.Ranbaxy shareholders will get 4 shares of Sun Pharma for every 5

Ranbaxy shares held by them. The deal, worth $4 billion, will lead to a 16.4 dilution in

the equity capital of Sun Pharma.

4. Vodafone- Idea Merger

Special Economic Zone (SEZ):

 Special economic zones (SEZs) in India are areas that offer incentives to resident

businesses. SEZs typically offer competitive infrastructure, duty free exports, tax

incentives, and other measures designed to make it easier to conduct business.

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Accordingly, SEZs in India are a popular investment destination for many

multinationals, particularly exporters.

 SEZ or Special Economic Zone is an area in a country that is selected by the

government for its development. This area has economical laws completely

different from the laws of the country. These laws are made in such a manner so

that they are business friendly to attract people to set up manufacturing, trading or

service establishments. The establishments in SEZ can be established by foreign

or native investments and the products can be sent exported or sold within the
country.
The development of SEZs in India:

 The Indian government had long used export processing zones (EPZs) to promote

exports. In fact, Asia’s first EPZ was established in 1965 at Kandla, Gujarat state.

While these EPZs had a similar structure to SEZs, the government began to

establish SEZs in 2000 under the Foreign Trade Policy.

 The government sought to use SEZs to redress the infrastructural and bureaucratic

challenges that were seen to have limited the success of EPZs. The government’s

SEZs are structured closely on China’s successful model. They are designed to

encourage domestic and foreign investment, boost India’s exports, and create new

employment opportunities.

 The Special Economic Zone Act, 2005 further amended the country’s SEZ policy.

Many EPZs were converted to SEZs, with notable zones in Noida (Uttar Pradesh

state), Falta (West Bengal state), Visakhapatnam (Andhra Pradesh state), Chennai

(Tamil Nadu state), Cochin (Kerala state), Santa Cruz (Maharashtra state), Indore

(Madhya Pradesh), as well as Kandla and Surat (Gujarat),

 Since the Act’s promulgation, the Indian government has also accepted proposals
for additional, far smaller SEZs, which must be proposed by developers to the

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Indian Board of Approval. The SEZ Rules, 2006 lay down the complete

procedure to develop a proposed SEZ or establish a unit in an SEZ.

Goals in setting up SEZs/EPZs:

▰ To attract the foreign investment

▰ Develop an area by raising infrastructure and providing jobs to the local

population.

▰ Promote the technology and create skilled man power.

▰ To increase the economic growth of the country.

Provisions Under SEZ:

• 100% FDI for manufacturing sector

• No caps on foreign investments for SSI reserved items

• Income tax benefit

• Duty free import of domestic goods

• Exemption from CST

• Exemption from Income tax on investments

• Enhanced limit of 2.4 crore for managerial remuneration

• Applicability of labor laws

Evaluation of SEZ:

▰ Determine how resources are used

▰ Whether Employment opportunities are created

▰ Cost outweighs the benefit of SEZ

Disadvantages of SEZ:

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▰ Exploitation of laborers

▰ Loss of revenue for Government

▰ Fertile lands being used for establishing industrial units

$$$$$$$

N. B. Navale Sinhgad College of Engineering, Solapur

 Unit III Entrepreneurial Project Development

1. Idea generation – sources and methods:

Idea Generation is the foundation of the process of discovering new sustainable
business opportunities New ideas often arise from simple questions like ‘What is
this?’, ‘What is it for?’, ‘What could it be for?’ Questioning the basic uses of utensils
we use in everyday life and common customs and rules opens up space for many new
opportunities. Therefore, looking at things from a different angle is the first step to
innovate and invent new solutions. This activity aims to boost participant’s creativity
and help them to develop creative ideas that make a difference.
Idea Generation is a process of deliberately brainstorming. There are a number of
tools and considerations that can help generate powerful ideas. These tools have been
shown to be particularly relevant to the pursuit of sustainability-driven ideas. In
addition, this section provides participant with important considerations for the
development of sustainable products/services and will bring their attention to the
major opportunity areas for sustainable businesses.
Sources:
Literature as Idea and Information Sources :
A. Books :
• Handbooks: The engineering field publishes a variety of handbooks on data,
procedures and technical information. These publications are usually available
through the library. Examples are Mark’s Standard Handbook of Mechanical
Engineering and the Tool and Manufacturing Engineers Handbook published by the
Society of Manufacturing Engineers. The latter handbook includes a number of
volumes covering various topics such as materials, finishing and coating, machining,
and design for manufacturability.
• Textbooks: Books are frequently a good source of information. Although technical
information may not be the most up to date by the time a book is published, even
some very old texts can sometimes provide or at least stimulate some interesting
ideas. Some old ideas can find a new life through novel materials, processing or
design methods.
• Industry manuals: Many engineering associations produce manuals that provide
general (e.g., design procedures) and specific (e.g., motors, bearings) information
about standard products, parts and procedures. Nuts and bolts, for example, are
described in the SAE Handbook. Periodicals and Technical Reports
• Trade Magazines: There are a number of trade magazines that cover general design
issues or are targeted at a specialized technical field. These magazines are often a
source of solutions for current problems. Besides the articles in these magazines, the
advertisements can provide a fruitful source of ideas. As it is difficult to pinpoint
specific information in trade magazines, it is a good practice to make a habit of
regularly reading or at least scanning these publications so information can be located
when required.
• Research Journals: Research journals directly related to the specific area of the
problem to be solved may provide modelling and analysis of specific problems as
well as more general information that can lead to a design solution. Examples of these
journals are Journal of Engineering Design, ASME Journal of Heat Transfer, and
Artificial Intelligence in Engineering, Design and Manufacturing.
B. Databases:
Databases provide a mechanism by which articles from hundreds of technical
journals spanning numerous years can be search for a specific subject. The usability
of these databases has been greatly enhanced in recent years by computerization.
Examples of these databases include The Engineering Index and The National
Technical Information Service. These databases can be searched by general
categories or specific key words can be used for more targeted searches.
Directories
• Thomas Register: The Thomas Register of American Manufacturers is a set of
volumes that provide information about manufacturers of a multitude of products and
services.
• Fraser’s Canadian Trade Directory: Similar to the Thomas Register, Fraser’s
Canadian Trade Directory provides information about Canadian providers of products
and services. It is available in both hard copy and CD-ROM formats, and can also be
accessed through the Internet at www.frasers.com where searches can be conducted
within the categories of company, product/service or brand name.
• Yellow Pages: The yellow pages are another source for suppliers and manufacturers.
If availability from local suppliers is insufficient, yellow pages for other cities can
often be found at the library or on the Internet.
• Catalogues: There are hundreds of catalogues of parts, assemblies and materials
available through vendors. These catalogues are often available through workshops
and resource centres, or can be ordered by mailing away request cards often included
in trade publications. Other Literature Sources
• World Wide Web: Searching the Internet can lead to websites belonging to vendors,
manufacturers, consultants, design companies, professional organizations and
educational centres, to name a few. Almost every organization of one type or another
has a website and the information that is often provided on these websites is
remarkable. Information found on the Internet is often more current than what is
published, and often provides an e-mail address to which questions and requests for
additional information can be sent. As anyone can create a website, caution should be
used when utilizing information that it has been obtained from a reputable source.
2. Sources of Ideas & Information Sources of Ideas & Information.
• Brochures: Marketing publications available from competitors or for related
products can sometimes provide valuable information. People as Idea and
Information Sources An extremely valuable source of ideas that often gets overlooked
is people. It is truly amazing the viable ideas that can come from not only subject
experts, but also the most unlikely sources including the person sitting next to you on
the plane or a small child. Designers should never be afraid to ask others for ideas.
Even if someone does not have any solutions to offer, they may know where to locate
information or a person who can provide information. This is called networking and
can be one of the most powerful tools in business today.
• Colleagues: Colleagues are usually a very approachable source of ideas. They may
be people within the same company, contacts within other organizations or former
classmates
. • Consultants: Consultants are generally people who are experts in a certain area.
Although mostly paid for there expertise, many willingly will answer questions and
provide information as long as it is not in conflict with their commitments and doesn’t
require a great deal of time. Consultants can generally be located through word-of-
mouth, professional directories, yellow pages, educational institutions or the Internet.
• Vendors: Although vendors typically are interested in selling their product, many
value the development of relationships and will therefore often be a willing source of
ideas and even samples. Vendors are an excellent resource as they often are current in
technology and have the opportunity to visit a variety of companies where they can
view different ways of doing things.
• Customers: Customers are an excellent source of ideas. Often they have conducted
their own research before committing to working with a team of designers on a
specific project. They may have seen similar products in use and have ideas on
different concepts that could be employed.
• Lead users: These people are those that had a need for a product long before the
general population. Lead users have often created adaptations or invented their own
solutions to satisfy their requirements until a new product comes along.
• Friends/family: Many designers find ideas for projects when casually talking to
friends and family. Sometimes people who have little knowledge of the technology or
the specific problem to be solved may look at things from a different perspective and
propose creative solutions.
3. Organizations as Idea and Information Sources
• Government: There are numerous sources within all levels of government both
within Canada and other countries such as the United States. Many departments,
including the Transportation and Safety Board, the National Bureau of Standards and
the Department of National Defence, have standards and guidelines based on
extensive research. Engineering organizations throughout the world make extensive
use of the Military Standards produced by the U.S. Department of Defense, many of
which can be accessed through libraries or downloaded from the Internet. The
National Technical Information Service, a branch of the U.S. Department of
Commerce, is a source for worldwide scientific, technical, engineering and business
related information. Much of this information can be obtained through their Internet
site www.ntis.gov. Her Majesty’s Stationary Office (www.hmso.gov.uk) is a similar
source for publications created within the government of the United Kingdom.
• Non-profit laboratories and associations: Organizations such as the Canadian
Standards Association, Underwriters Laboratories, American Society for Testing and
Materials, and American Standards Association can provides standards and guidelines
at a nominal fee. Often products must be tested against and comply with these
standards before they can be offered commercially.
• Professional Organizations: Groups such as Association of Professional Engineers,
Geologists and Geophysicists of Alberta (APEGGA) and Society of Manufacturing
Engineers (SME) often have publications and codes available. These organizations
typically can identify and provide contact information for experts on a given subject.
Other Idea and Information Sources
• Nature: Many innovative technical solutions are based on principles found in nature.
Birds have provided concepts for winged flight as fish have for submarines.
Honeycombs have provided examples of lightweight but strong structures and the
arch of the human foot demonstrates the effectiveness of a keystone bridge structure
for supporting heavy loads. Velcro™, an extensively used fastening device, was
based on the gripping capabilities of a burr.
• Patents: Patents are an excellent source of technical ideas. Although the use of
protected products may be prohibited or require the payment of a royalty, expired and
foreign patents without global coverage can be used. Reviewing restricted patents
may spawn innovative new ideas that do not Sources of Ideas & Information Sources
of Ideas & Information. The Mechanical Design Process (Ullman) explains the
process for researching patents.
• Analogies: The creative technique of using analogies involves examining the
similarities between the current design problem and another similar problem.
Basically, the design team completes the phase “This situation is like…”, collects
solution ideas for the analogous problem then transfers these ideas to the original
problem. The analogous problem can be another technical example or one from
nature.
• The book Guide to Basic Information Sources in Engineering by Mount is one
reference that highlights additional sources for information. Many engineering design
books also provide suggestions for sources of ideas and information.
Methods:
1. SCAMPER: SCAMPER is an idea generation technique that utilizes action verbs
as stimuli. It is a well-known kind of checklist developed by Bob Eberie that assists
the person in coming up with ideas either for modifications that can be made on an
existing product or for making a new product. SCAMPER is an acronym with each
letter standing for an action verb which in turn stands for a prompt for creative ideas.
S – Substitute C – Combine A – Adapt M – Modify P – Put to another use E –
Eliminate
R – Reverse
2. Brainstorming: This process involves engendering a huge number of solutions for
a specific problem (idea) with emphasis being on the number of ideas. In the course
of brainstorming, there is no assessment of ideas. So, people can speak out their ideas
freely without fear of criticism. Even bizarre/strange ideas are accepted with open
hands. In fact, the crazier the idea, the better. Taming down is easier than thinking up.
Frequently, ideas are blended to create one good idea as indicated by the slogan
“1+1=3.” Brainstorming can be done both individually and in groups. The typical
brainstorming group comprises six to ten people.
3. Mindmapping: Mindmapping is a graphical technique for imagining connections
between various pieces of information or ideas. Each fact or idea is written down and
then connected by curves or lines to its minor or major (previous or following) fact or
idea, thus building a web of relationships. It was Tony Buzan, a UK researcher, who
developed the technique “mind mapping” discussed in his book ‘Use your Head’
(1972). Mind mapping is utilized in brainstorming, project planning, problem solving
and note taking. As is the case with other mapping methods, the intention behind
brain mapping too is to capture attention and to gain and frame information to enable
sharing of concepts and ideas.
To get started with mindmapping, the participant just has to write a key phrase or
word in the middle of the page. Then, he must write anything else that comes to his
mind on the very same page. After that, he must try to make connections as
mentioned in the previous paragraph.
4. Synectics: Synectics is a creative idea generation and problem solving technique
that arouses thought processes that the subject may not be aware of. It is a manner of
approaching problem-solving and creativity in a rational manner. The credit for
coming up with the technique which had its beginning in the Arthur D. Little
Invention Design Unit, goes to William J.J. Gordon and George M. Prince.The
Synectics study endeavored to investigate the creative process while it is in progress.
According to J.J Gordon, three key assumptions are associated with Synectics
research.It is possible to describe and teach the creative process. Invention processes
in sciences and the arts are analogous and triggered by the very same “psychic”
processes.Group and individual creativity are analogous.
5. Storyboarding: Storyboarding has to do with developing a visual story to explain
or explore. Storyboards can help creative people represent information they gained
during research. Pictures, quotes from the user, and other pertinent information are
fixed on cork board, or any comparable surface, to stand for a scenario and to assist
with comprehending the relationships between various ideas.
6. Role playing: In the role playing technique, each participant can take on a
personality or role different from his own. As the technique is fun, it can help people
reduce their inhibitions and come out with unexpected ideas.
7. Attribute listing: Attribute listing is an analytical approach to recognize new
forms of a system or product by identifying/recognizing areas of improvement. To
figure out how to enhance a particular product, it is broken into parts, physical
features of each component are noted, and all functions of each component are
explained and studied to see whether any change or recombination would damage or
improve the product.
8. Visualization and visual prompts: Visualization is about thinking of challenges
visually so as to better comprehend the issue. It is a process of incubation and
illumination where the participant takes a break from the problem at hand and
concentrates on something wholly different while his mind subconsciously continues
to work on the idea. This grows into a phase of illumination where the participant
suddenly gets a diversity of solutions and he rapidly writes them down, thereby
creating fresh parallel lines of thought. Picture prompts help a lot when it comes to
enabling one’s brain to establish connections. These prompts can help to surface
emotions, feelings and intuitions. This makes them particularly useful for
brainstorming solutions to innovative challenges involving people, and issues with a
deep psychological or emotional root cause.
To get started with using picture prompts, the facilitator distributes a set of pre-
selected images – each participant gets one. He also asks the participants to write
down whatever ideas come to their mind when they look at the image in their
possession. According to Bryan Mattimore (presently co-founder of The Growth
Engine Company), the images should be visually interesting, portraying a multiplicity
of subject matter and must depict people in lots of varied kinds of relationships and
interactions with other people.
After this, participants pair off and use additional time, sharing and talking about the
ideas they have come up with and brainstorming more solutions to the existing
problem/challenge. Lastly, the various pairs present their ideas to the rest of the
group.
Mattimore suggests tailoring the visuals to the character of the challenge the
participants have to solve. So, if the challenge pertains to the manufacturing industry,
you could consider having images of an industrial nature. However, you should
definitely include some irrelevant or random images as well because it may be these
kinds of images that trigger the most innovative solutions.
9. Morphological analysis: Morphological analysis has to do with recognizing the
structural aspects of a problem and studying the relationships among them. For
example: Imagine the problem is transporting an object from one place to another by
way of a powered vehicle. The significant dimensions are: the kind of vehicle (cart,
sling, bed, chair); the power source (internal-combustion engine, pressed air, electric
motor); and the medium (air, hard surface, rails, rollers, oil, water). Thus, a cart-kind
of vehicle moving over rough services with an internal-combustion engine to power it
is the automobile. The expectation is that it would be possible to determine some
novel combinations.
10. Forced relationships: It is an easy technique involving the joining of totally
different ideas to come up with a fresh idea. Though the solution may not be strictly
unique, it frequently results in an assortment of combinations that are often useful. A
lot of products we see today are the output of forced relationships (such as a digital
watch that also has a calculator, musical birthday cards and Swiss army knife). Most
of these ideas may not be revolutionary discoveries but they are still advantageous
products and usually have a prospective market in society. Robert Olson provided an
example for forced analogy in his book ‘The Art of Creative Thinking.’ He compares
different aspects of a corporate organization structure to the structure of a matchbox.
11. Daydreaming: Though mostly not met with approval, daydreaming is truly one
of the most fundamental ways to trigger great ideas. The word “daydream” itself
involuntarily triggers an uninhibited and playful thought process, incorporating the
participant’s creativity and resourcefulness to play around with the present problem.
It enables a person to establish an emotional connection with the problem, which is
beneficial in terms of coming up with a wonderful idea. The focus of productive
daydreaming is a particular goal irrespective of whether it seems to be an impractical
task. Plenty of famous inventors have engaged in daydreaming in the past, thereby
setting off ideas that contributed to life altering inventions. The airplane is the most
notable example for this. If the Wright brothers had not let their imagination run wild
thinking about flight, we would probably still be traveling by ferry.
12. Reverse thinking: As the term ‘reverse thinking’ itself suggests, instead of
adopting the logical, normal manner of looking at a challenge, you reverse it and
think about opposite ideas. For example: ‘how can I double my fan base?’ can change
into ‘how do I make sure I have no fans at all?’ You may notice that the majority of
participants would find it easier to produce ideas for the ‘negative challenge’ simply
because it is much more fun. However, don’t spend too much time on the reverse
idea-generation – about 10 to 15 wrong ideas is fine. After one session is over, you
can either continue in the reverse idea atmosphere with a new challenge or else do the
reversal once more to make it stronger. An example for the latter is “I am never going
to update any of my social networks” changing into “I am going to always update all
of my social networks.”
13. Questioning assumptions: The majority of industries have an orthodoxy –
unspoken but deeply-held beliefs that everyone stands by for getting things done.
Sadly, they fail to realize that by questioning assumptions at every step of service or
product development, they can actually enable the birth of fresh possibilities and
ideas. Here’s how Mattimore suggests one going about questioning assumptions: The
participants should start by settling on the framework for the creative challenge. After
this, they should produce 20 to 30 assumptions (irrespective of whether they are true
or false). The next step is to select several assumptions from the many generated, and
utilize them as idea triggers and thought starters to engender fresh ideas.
14. Accidental genius: Accidental genius is a relatively new technique that utilizes
writing to trigger the best ideas, content and insight.
15. Brainwriting: Brainwriting is easy. Instead of asking the participants to shout out
ideas, they are told to pen down their ideas pertaining to a specific problem or
question on sheets of paper, for a small number of minutes. After that, each
participant can pass their ideas over to someone else. This someone else reads the
ideas on the paper and adds some new ones. Following another few minutes, the
individual participants are again made to pass their papers to someone else and so the
process continues. After about 15 minutes, you or someone else can collect the sheets
from them and post them for instant discussion.
16. Wishing: This technique can be begun by asking for the unattainable and then
brainstorming ideas to make it or at least an approximation of it, a reality. Start by
making the wishes tangible. There should be collaboration among the members of the
team to produce 20 to 30 wishes pertaining to your business. Everyone’s imagination
should be encouraged to run wild – the more bizarre the idea, the better. There should
be no restrictions on thinking.
The next step is concentrating on a number of these unattainable wishes and
utilizing them as creative stimuli to trigger ideas that are new but more practical.
Mattimore suggests getting the team to challenge the problem from diverse
perspectives (imagine how a person from another planet or from another industry or
profession would view it) or reflect on it. This type of role playing assists with
moving away from conventional thinking patterns to see fresh possibilities.
17. Socializing: If employees only hang around with colleagues and friends, they
could find themselves in a thinking rut. Let them utilize all those LinkedIn
connections to begin some fantastic conversations. Refreshing perspectives will assist
with bringing out new thinking and probably, one or two lightning bolts. Socializing
in the context of ideation can also be about talking to others on topics that have
nothing whatsoever to do with the present problem.
18. Collaboration: As the term indicates, collaboration is about two or more people
joining hands in working for a common goal. Designers frequently work in groups
and engage in collaborative creation in the course of the whole creative process.

Creativity:
Creativity is the ability to think about a task or a problem in a new or different way,
or the ability to use the imagination to generate new ideas. Creativity enables you
to solve complex problems or find interesting ways to approach tasks. If you are
creative, you look at things from a unique perspective. Few definitions of the
creativity are:

1. Lotherington, • the merging of ideas which have not been

2008 merged before.
• new ideas are formed by developing current ones
within our minds.

2. Dorf and • the ability to use the imagination to develop new

Byers, 2005 ideas, new things or new solutions

3. Matherly & • the generation of ideas that result in improved

Goldsmith, efficiency or effectiveness of a system.
1985

4. May, 1975 • the process of bringing something new into

being.

CREATIVITY, INNOVATION & ENTREPRENEURSHIP:

 Creativity is the process of generating unique and useful ideas.
 Innovation will take place when there is a creative idea generation.
 Innovation is about taking the creative/unique new idea and turning it into
something of value
 Innovation requires discipline and action to evaluate the ideas, test them, modify
them and then apply them. It is through their disciplined actions that turn an idea
into something of value.
 Creative entrepreneurs observe people’s problem and see opportunities. These
entrepreneurs then innovate by applying creative solutions to people’s problems
to better enhance people’s quality of life.
 Entrepreneurship is the commercialization of creativity.
 Entrepreneurship occurs when an individual or organization:
 Sees the potential in an idea that can be developed for the marketplace or user
groups
 Is prepared to take the necessary risks to stir things up and get things out of their
neat or comfortable spaces
 Has the skills (or access to them), confidence, determination, and the funds (or
access to them) to carry out the innovation that is required to turn the idea into
reality.
Steps in Creativity:
1. Preparation
2. Incubation
3. Illumination
4. Verification
1. Preparation:
The creative process begins with preparation: gathering information
and materials, identifying sources of inspiration, and acquiring
knowledge about the project or problem at hand. This is often an
internal process (thinking deeply to generate and engage with ideas)
 as well as an external one (going out into the world to gather the
necessary data, resources, materials, and expertise).
2. Incubation:
Next, the ideas and information gathered in stage 1 marinate(soak) in
the mind. As ideas slowly simmer(Boil at low temp), the work
deepens and new connections are formed. During this period of
germination, the artist takes their focus off the problem and allows the
mind to rest. While the conscious mind wanders (roams), the
unconscious engages in what Einstein called “combinatory play”:
taking diverse ideas and influences and finding new ways to bring
them together.
3. Illumination/Insight:
 Following the period of incubation the creative ideas occur suddenly.
Consequently the obscure thing becomes clear. This sudden flash of
solution is known as illumination and is similar to ‘aha (eureka)’
experience.
 Eureka or aha moments are sudden realizations that expand our
understanding of the world and ourselves, conferring both personal
growth and practical advantage.
 For example, Archimedes found solution to the crown problem. He
realized while taking a bath that he can use displaced water to assess
the density of the king's crown and, therefore, its gold content
4. Verification/Evaluation:
 Though the solution is found in illumination stage, it is necessary to
verify whether that solution is correct or not. Hence in this last stage
evaluation of the solution is done. If the solution is not satisfactory the
thinker will go back to creative process from the beginning.
 If it is satisfactory, the same will be accepted and if necessary, minor
modification may also be made in solution.

Invention Vs Innovation:
 In its purest sense, “invention” can be defined as the creation of a
product or introduction of a process for the first time.
 “Innovation,” on the other hand, occurs if someone improves on or
makes a significant contribution to an existing product, process or
service.
SWOT analysis:
A SWOT analysis (alternatively SWOT matrix) is a structured planning method
used to evaluate the strengths, weaknesses, opportunities and threats involved in
a project or in a business venture. A SWOT analysis can be carried out for a product,
place, industry or person. It involves specifying the objective of the business venture
or project and identifying the internal and external factors that are favorable and
unfavorable to achieve that objective. Some authors credit SWOT to Albert
Humphrey, who led a convention at the Stanford Research Institute (now SRI
International) in the 1960s and 1970s using data from Fortune
500companies. However, Humphrey himself does not claim the creation of SWOT,
and the origins remain obscure. The degree to which the internal environment of the
firm matches with the external environment is expressed by the concept of strategic
fit. Strengths: characteristics of the business or project that give it an advantage over
others.
 Weaknesses: characteristics that place the business or project at a
disadvantage relative to others.
 Opportunities: elements that the project could exploit to its advantage.
 Threats: elements in the environment that could cause trouble for the business
or project.
 Identification of SWOTs is important because they can inform later steps in
planning to achieve the objective. First, the decision makers should consider
whether the objective is attainable, given the SWOTs. If the objective is not attainable
a different objective must be selected and the process repeated. Users of SWOT
analysis need to ask and answer questions that generate meaningful information for
each category (strengths, weaknesses, opportunities, and threats) to make the analysis
useful and find their competitive advantage.

When should you use a SWOT analysis?

You won’t always need an in-depth SWOT analysis. It’s most useful for large,
general overviews of situations, scenarios, or your business.

A SWOT analysis is most helpful:

 Before you implement a large change—including as part of a larger change

management plan
 When you launch a new company initiative
 If you’d like to identify opportunities for growth and improvement
 Any time you want a full overview of your business performance
 If you need to identify business performance from different perspectives

SWOT analyses are general for a reason—so they can be applied to almost any
scenario, project, or business.
Lean Canvas Model
Lean Canvas is a one-page business plan method created by Ash Maurya, which is
adapted from the Business Model Canvas by Alexander Osterwalder. The plan features a
number of blocks to help you map out some key points that will help you turn a business
idea into something more concrete. The Lean Canvas is created especially for
entrepreneurs to make it easier for them to get a clear and simple idea of what they’re
doing.
Problem
Understanding the key problems of your customers is essential. You use this section to
list the top problems that your different customer segments experience that you’re aiming
to solve.

Customer Segments
Understanding who your customers are is a vital step. You can’t know what their main
problems are if you don’t know who they are. In the customer segments section, you need
to write down who your target audience is, which might include several customer
segments. Your customers and their problems are tied together, so you will probably need
to think about both at the same time.
Unique Value Proposition
This section sits in the middle of the canvas because it’s what you are proposing to offer
to your customers. It sets out the unique value that your business will provide. You need
to think about what makes your brand, product or service different from others who are
trying to solve the same problems as you.
Solution
What’s the answer to your customers’ problems that you’re going to offer them? You
won’t always have the perfect solution right away, but the purpose of creating a business
plan is to help you get started. If you want to find the solution to your problem, don’t
assume it will just come to you. Talk to your customer segments to find out what they
want and need.
Channels
What channels are you going to use to reach your customers? These are the marketing
and advertising methods that you’re going to use, from digital marketing such as SEO to
more traditional channels, like radio, print and TV.
Revenue Streams
Where is your money going to come from? How are you going to price your products or
services? Your pricing model is an important part of what you’re offering, and it’s
something you’re going to need to research and test. How much are people willing to
pay, and what’s the minimum you can charge to meet your goals?
Cost Structure
These are the costs that your business will have in order to run and market your product.
It could include market research, technology, staff costs, and more. With an idea of your
one-off and recurring costs, you can try to work out a rough estimate of how many
customers you will need to break even.
Key Metrics
Your key metrics are what you will use to monitor how your business is performing. You
can identify some key activities that you want to watch closely to see how people are
interacting with and using your business and its products/services.
Unfair Advantage
Your unfair advantage is what you have that no other business has. It can’t be copied or
bought, so it will help you to stand out from the rest. This is the last step in the process
and is often the most difficult. Your unfair advantage could be many things, from an
unbeatable staff to endorsements from experts.
It’s worth taking time to think about it and identify something that you can do that others
can’t buy.

Preparation of project plan:

 A Business Plan identifies key areas of your business so you can maximize the time
you spend on generating income.
 Key investors will want to look at your Business Plan before providing capital.
 A Business Plan helps you start and keep your business on a successful path.
 You should prepare a Business Plan, although, in reality, many small business
owners do not.

Components of an ideal business plan:

A business plan is a written narrative, typically 25 to 35 pages long, that describes
what a new business plans to accomplish and how it plans to accomplish it. For most new
ventures, the business plan is a dual purpose document used both inside and outside the
firm. a. Inside the firm, the plan helps the company develop a “road map” to follow in
executing its strategies and plans. b. Outside the firm, it introduces potential investors and
other stakeholders to the business opportunity the firm is pursuing and how it plans
to pursue it.
1. Market plan: A marketing plan is a comprehensive blueprint which outlines an
organization's overall marketing efforts. A marketing process can be realized by the
marketing mix, which is outlined in step 4. The last step in the process is the marketing
controlling. The marketing plan can function from two points: strategy and tactics (P.
Kotler, K.L. Keller). In most organizations, "strategic planning" is an annual process,
typically covering just the year ahead. Occasionally, a few organizations may look at a
practical plan which stretches three or more years ahead

2. Financial plan:
The financial plan is a necessary part of evaluating a new investment opportunity. With it
you develop an estimate of your profit potential. It can even become an operating plan for
the financial management of the venture. In this section, describe the current financial
status and present forecasts of future financial statements. If you are using the business
plan to seek financing, cover the type and amount of financing planned (and its
repayment terms) as well as the potential return on investment. The financial portion of
your business plan will be examined closely by those interested in joining you, investing
in the venture, or lending you money, so it must be thorough. They will want to know
how you will use invested funds to create a successful venture. Forecasts of product
demand, revenues, and expenses for new ventures will draw on the market research you
conducted. Your projections are only as good as your assumptions, so make sure they are
valid and realistic. Document as much as you possibly can, including how you developed
your assumptions. Purdue Extension publication Fatal Business Planning Assumptions
(EC-734) discusses financial and general planning assumptions. Provide projections for
two to four years in the future, including:

 Forecasted income (monthly for first two years, then by quarter or year
thereafter),

 Forecasted cash flows by month (monthly for first two years, then by quarter or
year thereafter),

 Forecasted balance sheet for all years (year-end), and

 Breakeven analysis.

Many small businesses will have very limited revenue for the first two years of operation.
Most small businesses will not make a real profit for at least two to three years. Without
significant financial reserves, your venture is likely to fail. You can use a convincing
business plan to gain capital needed to get beyond the initial difficult years. If the purpose
of your plan is to seek funding, request those funds, and describe how they will be used.
3. Operational plan: The operating portion of the plan deals specifically with the
internal organizational structure, operations, and equipment you will need to operate your
venture. You should discuss how the business will be owned and managed, your
personnel and physical resource needs, and the legal issues you will have.
4. HR plan:
Purpose: The Human Resources section demonstrates how you will determine your HR
needs, fill them, manage your staff and pay them.
Staffing
 Organizational chart (show reporting structure).
 Job descriptions (show what people do).
 Job specifications (show the skills and knowledge required to do each job).
 Recruiting – Where will you find good people?
 Management – How will you treat those good people?
 Compensation – How much will you pay your people? This includes base wages,
commissions, bonuses and other incentives. (Don’t forget your statutory benefits
of EI, CPP, WCB & Holiday pay, in addition to any benefits you plan to add.)
 Human resources risks. Look at contingent plans for loss of key personnel, labour
shortages or strikes. Professionals & Mentors
 Accountant
 Lawyer
 Bank Services
 Business Advisors and Mentors (it can be helpful to provide single-paragraph
biographies on key business advisors.) Legal & Administrative
 Legal Form (proprietorship, partnership, corporation, cooperative).
 Share Distribution (Corporation Only)
 Directors & Officers (Corporation Only)
 Buy Sell Agreement (Corporation and Partnerships Only)
  List of key legal agreements such as contracts, leases, agreements, franchise
agreements, personal loan guarantees etc. The actual documentation is often put
into the appendix of the business plan.
 Insurance/Risk management.
Project formulation –
Project report significance and contents:
 Below is the sequence of standard format which should be followed while
preparing new business project report:
 Background of the business
 Customer's profile
 Long and short term Corporate Objectives
 To perform a viability assessment of the proposed new business ideas in terms of
marketability, technical feasibility, financing and authorities
 To be able to prepare a relevant business plan
 To recognize fundamental startup issues
 Market Analysis
 Brief discussion on the type of market, chief influencers, players, etc
 Market description
 Reasons for starting business in a particular market
 Target clients
 Advantages of the services offered by the new business
 Market consumption patterns
 Past and existing supply location
 Production prospects and limitations
 Exports and Imports
 Price structure
 Flexibility of demand
 Client behavior, purposes, intentions, impetus, approaches, inclinations and needs
 Supply network and marketing rules formulated by the government
 Government and technical limitations imposed on the promotion of the product
  Financial Assessment
 Investment expenditure and value of the entire project
 Methods of investment
 Anticipated productivity
 Money flows of the project report
 Investment value evaluated in context of different points of merit
 Estimated financial ranking
 Marketing Assessment
 Product
 Price
 Place
 Promotion
 Operational Plan
 Business models
 Production of goods and services
 Financial Plan
 Management Structure
 Business structure (Ownership, staff, etc)
 SWOT Analysis
 Significant Success aspects depending on Strengths, Weaknesses, Opportunities
and Threats to be faced by the firm in future
 Appendices
 Break-Even Assessment
 Profit and Loss Synopsis
 Fund Flow Summary
Project appraisal –Aspects and methods:
Project appraisal is a generic term that refers to the process of assessing, in a
structured way, the case for proceeding with a project or proposal. In short, project
appraisal is the effort of calculating a project's viability. It often involves comparing
various options, using economic appraisal or some other decision analysis technique.
Process includes following points:
 Initial Assessment
 Define problem and long-list
 Consult and short-list
 Evaluate alternative
 Compare and select Project appraisal
Aspects and methods:
(a) Economic oriented appraisal: Economic appraisal is a type of decision method
applied to a project, programme or policy that takes into account a wide range of costs
and benefits, denominated in monetary terms or for which a monetary equivalent can be
estimated. Economic Appraisal is a key tool for achieving value for money and satisfying
requirements for decision accountability. It is a systematic process for examining
alternative uses of resources, focusing on assessment of needs, objectives, options, costs,
benefits, risks, funding, affordability and other factors relevant to decisions.
(b) Financial appraisal:
Financial appraisal is a method used to evaluate the viability of a proposed project by
assessing the value of net cash flows that result from its implementation.
Projects may involve asset construction, purchase, lease or sale and may be financed in a
wide variety of ways - grants, borrowings, revenues, supplier finance or a combination of
these. The sponsoring agency should undertake a structured, internal but independent
review of the project's expected returns. The reviewer should be satisfied with the
treatments of: outputs and outcomes of the project; range and realism of options
considered; completeness of the list of costs and impacts and their appropriate valuation;
adequacy of the investigation of the sensitivity of the results to variations in key
parameters; risks faced by the project as well as the implications of such risks to equity
and debt parties; the rate at which cash flows have been discounted;
identification of where the impacts associated with the project fall; and, identification of
the parties responsible for project implementation and for monitoring the execution of the
project and its results.
(c) Market oriented appraisal:
 Based on several studies that examined the relationship between competitive
advantage and market orientation consists of three behavioral components: customer
orientation, competition orientation, and inter functional coordination, and two decision
criteria: long term focus and profitability. For the authors, customer orientation and
competition orientation include all activities involved in acquiring information about
buyers and competitors in the target market and its dissemination throughout the
company. Inter functional coordination, the third behavioural component, is based on
information about customers and competitors and includes the coordinated efforts of the
entire company to create value for customers. In short, the three behavioural components
of market orientation activities include the acquisition and dissemination of market
information and coordination of efforts to create value for customers.
d) Technological feasibility:
It is one of the first studies that must be conducted after the project has been identified. In
large engineering projects consulting agencies that have large staffs of engineers and
technicians conduct technical studies dealing with the projects. In individual agricultural
projects financed by local agricultural credit corporations, the technical staff composed of
specialized agricultural engineers, irrigation and construction engineers, and other
technicians are responsible for conducting such feasibility studies.
e) Managerial competency:
This supports the integration of human resources planning with business planning by
allowing organizations to assess the current human resource capacity based on their
competencies against the capacity needed to achieve the vision, mission and business
goals of the organization. Targeted human resource strategies, plans and programs to
address gaps (e.g., hiring and staffing; learning; career development; succession
management; etc.) are then designed, developed and implemented to close the gaps.

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Unit IV. Small and Medium Enterprises & Support

a) Meaning and definition of micro, small & medium enterprises:

MSME stands for Micro, Small, and Medium Enterprises. In accordance with the Micro,
Small, and Medium Enterprises Development (MSMED) Act in 2006, the enterprises are
classified into two divisions.
1. Manufacturing enterprises – engaged in the manufacturing or production of goods
in any industry
2. Service enterprises – engaged in providing or rendering services
As per this act, MSMEs are the enterprises involved in the processing, production, and
preservation of goods and commodities.

Which company comes under MSME?

 MSME covers only manufacturing and service industries. Trading companies are
not covered by the scheme. MSME is to support startups with subsidies and
benefits, trading companies are just like middlemen, a link between manufacturer
and customer. Hence not covered under the scheme.

b) MSME: UdyogAadhaar, Role, Importance, Registration etc.

Udyog Aadhaar (also called as Aadhaar for Business) is a unique 12-digit Government
identification number provided by the Ministry of MSME for the small and medium
enterprises to register themselves as MSME.

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Udyog Aadhar and Udyam Registration:
 Udyam Registration and Udyog Aadhar both are the same from July 2020 because
from July Udyog Aadhar Registration is converted into the udyam registration process.
 Udyog Aadhar only requires the aadhar card and pan of the applicant for the process
of registration and it provides instant self certification as per old MSME criteria but
Udyam Registration requires only Aadhaar card of the applicant and Provide verified
certification as per the new MSME criteria.
 Udyog Aadhar is not integrated with other government portal like Gem portal but
Udyam Registration is fully integrated and registered during the Udyam Registration.
 Udyog Aadhar has a short form as compared to Udyam Registration but on the Udyam
Portal there is a long form and it requires the details from the Income tax & gst for the
registration process.
 Udyog Aadhar can be applied without Aadhar Mobile Link Facility but Udyam
Registration requires only the Aadhar card which is linked with a mobile number.

As per the notification issued by the ministry of micro small-medium enterprises on 1st
June 2020, MSMEs will now be known as Udyam. And the registration process for an
organization as an Udyam will be called Udyam Enrollment Registration.
Government Udyam Registration portal is a self-declaration basis portal without adding or
uploading any document/ certificate/ paper.

Any person who intends to establish micro, small, or medium businesses will have to file
for Udyam registration in the online Udyam Registration Portals. The business will
subsequently be issued an Udyam Registration Number and an e-certificate namely,
‘Udyam Registration Certificate’. As per the notification of the ministry of the msme, all
the existing Indian companies and enterprises shall file and register as Udyam on or
before 31st Mar 2021. The old Udyog Aadhaar Memorandum can be upgraded to Udyam
Registration by verifying/seeding the PAN.

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Udyam Registration benefits:
1. Interest rate Subsidy on Bank loans
2. Collateral free loans from banks
3. Protection against delayed payments, against material/services supplied
4. Special beneficial reservation policies in the manufacturing/ production sector
5. Ease of obtaining registrations, licenses, and approvals.
6. MSME Registered entity gets eligible for CLCSS (credit linked capital subsidy
scheme)
7. International trade fair special consideration
8. Government security deposit (EMD) waiver (Useful while participating tenders)
9. Electricity bills concession
10. Stamp duty and registration fees waiver
11. ISO certification fees reimbursement
12. Direct tax laws rules exemption
13. NSIC (National Small Industries Corporation) performance and credit rating fees
subsidy
14. Patent registration subsidy
15. Barcode registration subsidy
16. Industrial Promotion Subsidy (IPS) Subsidy Eligibility

Qualification for Udyam:

Each kind of business element is qualified to acquire the Udyam registration certificate.
1. Proprietorship
2. Hindu Undivided Family (HUF)
3. One Person Company (OPC)
4. Partnership firm
5. Limited liability partnership (LLP)
6. Private limited or limited company
7. Co-operative Societies or
8. Any association of persons

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Sample Udyam Registration Certificate:

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c) Ownership patterns: sole proprietorship, partnership, private limited company
• Business Ownership Options Include:
– Sole Proprietorship
– Partnership
– Corporation
– Corporation (for-profit)
– Nonprofit Corporation (not-for-profit)
– Limited Liability Company (LLC)
– Cooperative.
– Private Limited Company
Your choice of ownership can affect taxation and government involvement.

Sole Proprietorship:
• For many new businesses, the best initial ownership structure is either a sole
proprietorship or -- if more than one owner is involved then a partnership.
• A business owned and operated by one person.
• The owner is responsible for all operations of the business and assumes all the risk.
• A sole proprietorship is a one-person business that is not registered with the state
like a limited liability company (LLC) or corporation.
• You don't have to do anything special or file any papers to set up a sole
proprietorship -- you create one just by going into business for yourself. Legally, a
sole proprietorship is inseparable from its owner -- the business and the owner are
one and the same.
• This means the owner of the business reports business income and losses on his or
her personal tax return and is personally liable for any business-related obligations,
such as debts or court judgments.
Advantages of a sole proprietorship:
• Owner makes all decisions
• Owner is his or her own boss
• Owner keeps all the profits
• All financial information can be kept secret
• This type of business is easy to start or close
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• Flexibility
• Tax Advantages
• Ability to act quickly and make decisions
Disadvantages of a sole proprietorship:
• Owner has responsibility for all debts
• Costs and time commitment can be high
• Funding can be difficult to obtain
• Owner is responsible for all aspects of the business
• Owner doesn’t have fringe benefits (an extra thing that is given to an employee in
addition to the money he/she earns.) provided

Partnership:
• A form of business organization in which two or more people own and operate the
business together
• A partnership is simply a business owned by two or more people that haven’t filed
papers to become a corporation or a limited liability company (LLC).
• You don't have to file any paperwork to form a partnership -- the arrangement
begins as soon as you start a business with another person.
• As in a sole proprietorship, the partnership's owners pay taxes on their shares of
the business income on their personal tax returns and they are each personally liable
for the entire amount of any business debts and claims.
• Sole proprietorships and partnerships make sense in a business where personal
liability isn't a big worry -- for example, a small service business in which you are
unlikely to be sued and for which you won't be borrowing much money for
inventory or other costs.
Advantages of a partnership:
• Partners co-own the business
• Combined resources
• They share responsibilities
• They may have greater financial resources than sole proprietors
• They share business losses
• They share time commitment
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• Tax advantages
• Decreased competition
Disadvantages of a Partnership:
• Partners have unlimited personal liability for all the other partners
• Partners may have conflicts
• Profits are shared
• Partnerships are more difficult to close down than sole proprietorships
• Uncertain life/transferability
• If one partner makes a mistake, all partners are responsible
Limited liability partnerships (LLPs) :
LLPs allow for a partnership structure where each partner's liabilities are limited
to the amount they put into the business. ... Limited liability means that if the
partnership fails, then creditors cannot go after a partner's personal assets or
income.
Nonprofit Organization (not-for-profit) :
• In India, there are three different types of non-profit organisation exists as per type
of registration with authorities. They are – Trusts, Societies and Non-profit
Companies under section 8 of the Companies Act, 2013.
• A nonprofit organization is formed to carry out a charitable, educational, religious,
literary, or scientific purpose.
• A nonprofit can raise much-needed funds by soliciting public and private grant
money and donations from individuals and companies.
• The federal and state governments do not generally tax nonprofit organizations on
money they take in that is related to their nonprofit purpose, because of the benefits
they contribute to society.
Formation of a Trust and registration:
• Trusts can be differentiated into Public or Private Trust.
• If it is for the benefit of a substantial section of people, it can be called a Public
Trust, whereas a Private Trust could be for the benefit of a limited number of people
having a specific objective.
• A Trust could be formed with a minimum member of at-least two and no limit in a
maximum number of members.
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• It can be formed under the State Act, if any, or under Bombay Trust Act, 1950 and
needs to be registered under the Deputy Registrar or Charity Commissioner, as the
case may be, with the State into which it belongs to, for eligibility of tax exemption.
• A Trust is to be authored by a person in the form of a Trust deed with specific
objectives.
• A “trustee” means a person alone or in association with other persons, the Trust
property is vested into. Generally, Indian citizens are chosen as trustees, though
there is no prohibition against foreigners serving in this capacity.
• Trust could be registered for different objectives, such as Providing relief to poverty
or distress; rendering education; medical help; social welfare and public benefit like
recreation facilities etc.

Limitation to trustee
• Trust property cannot be used by a trustee of a public Trust for their own interest
or private advantage, though Trust property is vested to the trustees.
• There could not be any agreement by a trustee, in which a personal interest of him
that conflicts or could possibly conflict with the interests of the beneficiaries of the
trust (beneficiaries’ interests, the trustees are bound to protect).
• An object of a Trust is generally irrevocable in India. If a Trust becomes inoperative
for considerable duration, the Charity Commissioner could undertake a revival
process for the same. In case, there is a difficulty to operate a Trust with its object
as mentioned in the Trust deed, the object could be modified as near as possible, to
the original object of the Trust in concurrence with the authority.

Formation of a Society and registration:

• Societies in India is governed by the Societies Registration Act 1860 as well as
State Act notified for different states.
• A Society can be formed by at least seven individuals or Institutions with a common
object of like ‘any literary, scientific, or charitable purpose’ as per the Societies
Registration Act 1860.

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• A Memorandum of Association is required to be submitted to Registrar of Societies
by the members, willing to form a Society. Registration is required to legalize the
Society and to obtain income tax exemption.
• A Memorandum of Association requires to contain the following: the name of the
society to be registered; the object of the society, i.e the basic purpose to form the
Society; the names, addresses, and occupations of the governing body members.
• The governing body members are elected or selected as per Rules framed by the
Society and are responsible for management of all the affairs of the Society. Framed
rules and regulations of the society, certified by at least three members, is required
to be submitted, along with the Memorandum of Association to the Registrar of
Societies, under whose jurisdiction the Society falls into.
• Any Indian can be a member of a Society and there is no bar to include a Foreigner
in a Society.

Types of a Societies(eligible under the Societies Registration Act 1860):

It can be formed for any
• charitable purpose;
• Societies for utilization of military orphan funds
• it may be formed to promote science, literature, or fine arts; for knowledge
dissemination on various subjects including Politics; a Society can be established
for maintenance of libraries or reading-rooms for use among the members or for
public;
• Society for museums and galleries of paintings and other works of art is possible,
collections of natural history, mechanical and philosophical inventions,
instruments, or designs

Non-profit Companies under section 8 of the Companies Act 2013:

• A non-profit Company can be formed under the provision of section 8 of the
Companies Act, 2013
• The provision under the section is for Companies having a charitable object- like
promotion of education, research, commerce, art, science, sports, social welfare,
charity, protection of environment, religion, or any similar other objects.
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• A Company is required to invest all its profit or other income to the promotion of
its objects and intends to prohibit payment of dividends to its members.
• Minimum three individuals or legally recognised body in the form of body
corporate or Firms etc. are required to form a section 8 company.
• The founders or promoters of the Company, to be formed, needs to submit
application to the Regional Director of the Company Law Board along with copies
of the Memorandum of Association and Articles of Association of the proposed
company
When To Consider Forming a Society?
It is the ideal organisational body if you want an elected body to manage it.
If the members do not want to be bound in perpetuity to it, a society allows for an easy
exit of its members.
If your choice is dependent upon which one of the three is easiest to wind up, then you
should go for forming a society. Comparatively a society is easier to wind up than
booths trusts and Section 8 companies.

When To Consider Forming a Trust?

In case more than one family member is running the business.
If you want the trustee to hold office for his or her lifetime without the need for an
election.
Privacy in activity as well as flexibility in the division of benefits.

Reasons For Forming a Section 8 Company

If the purpose is for executing a wide range of activities.
To gain reliability and credibility as it is an approved establishment by the central
government.
To achieve the legal structure of a company without the need for high capital.

Co-operatives:
• A cooperative (also known as a co-op) is a business owned and controlled by those
who use its services.

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• A cooperative (also known as co-operative, co-op, or coop) is
"an autonomous association of persons united voluntarily to meet their common
economic, social, and cultural needs and aspirations through a jointly-
owned enterprise".
• Individuals and firms who belong to the cooperative join together to market
products, purchase supplies, and provide services for its members. If run correctly,
cooperatives increase profits for its producer-members and lower costs for its
consumer-members. Cooperatives are fairly common in the agricultural
community.

E.g. AMUL

Other Co-operative Examples:

1. Indian Farmers Fertilizer Cooperative Limited (IFFCO)
2. Kerala Dinesh Beedi workers’ Central Co-op Society
3. Kerala Co-operative Milk Marketing Federation (KCMMF)
4. Pratibha Mahila Sahakari Bank
5. Orissa State Cooperative Milk Producers’ Federation
6. Sugar Factories

What is a Company?
The company refers to that voluntary association of persons which is established with an
aim of achieving common objectives.
It is a separate legal entity, i.e. one should not confuse between the company and its
members as both are different personalities in the eyes of law.
Also, it is characterized by perpetual succession, common seal, capacity to sue and be sued,
and capital that is divided into transferable shares.
A joint-stock company formed under the Indian Companies Statute, 2013

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About public limited company:

• Not all PLCs are listed on a stock exchange. A company may choose not to list on
an exchange or may not meet the requirements for listing.
• With respect to public limited companies, the shareholders are free to buy and sell
the shares to anyone. So, if you hold shares in a public company, you can trade
them through the stock market, provided the public limited company is listed on it.
• Can we buy/sell shares of unlisted public limited companies?

d) Steps in setting up a small unit

Starting an Small scale Industry is a complex job. The potential entrepreneur has to
pass through a number of steps in a step-by-step approach to achieve his goal of
stetting up an SSI.
In fact, Deciding and motivating the self is the first bedrock upon which the
establishment concept of an enterprise is entirely posited.

Step 1: Decision to be Self-Employed

This is the most crucial decision a youth has to take, shunning wage employment and
opting for self-employment or entrepreneurship to steps to start small scale industries.
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Step 2: Analyzing Strengths, Weakness, Opportunities and Threats
The Potential entrepreneur has to analyze his strengths, weakness, opportunities and
Threats, while deciding to go for entrepreneur career. It is also call SWOT analysis
Step 3: Scanning of Business Environment
It is always essential on the part of the entrepreneur to study and understand the
prevailing business environment.
In order to ensure success if his enterprise, entrepreneur should scan the business
opportunities and threats in the environment.
Step 4: Training
Before going to start the enterprise, the potential entrepreneur must assess his own
deficiencies which he can compensate through training.
He can avail the facilities of various training institutes like EDI, NIESBUS, IEDs
existing in our country.
Step 5: Product Selection
The most important steps to start small scale industries is to decide what business to
venture into, the product or range of products that shell be selected for manufacture and
in what quantity.
The level of activity will help in determining the size of business and thus form of
ownership.
Step 6: Market Survey
It is important convenient to manufacture an item but difficult to sell.
Market survey implies systematic collection of data by the entrepreneur about the
product for manufacture, demand-supply lag, extent of competition, frequency of
demand, pattern and design of demand, its potential share in the marketing pricing,
distribution policy etc.
Step 7: Form of organization
A firm can be constituted as proprietorship, partnership, limited company, cooperative
society, etc.
This will depend upon the type, purpose and size of entrepreneur’s business.
Step 8: Location
The next step will be to decide the location where the unit is to be established. This size
of plot, covered and open area and the exact site will have to be decided.
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Step 9: Technology
Information on all available technologies should be collected by the entrepreneur and
the most suitable one to be identified.
Step 10: Machinery and Equipment
Having chosen the technology, the machinery and equipment required for
manufacturing the chosen products have to be decided.
Step 11: Project Report Preparation
This the most important steps to start small scale industries. After deciding the form of
the ownership, location, technology,
Step 12: Project Appraisal
machinery, and equipment, the entrepreneurs should be ready to prepare his project
report the feasibility study.
A project report that may now be prepared will be helpful in formulating the
production, marketing, financial and management plans.
Project appraisal implies the assessment of a project. It is technique for ex-ante (based
on forecasts rather than actual results) analysis of a scheme or project.
While preparing to set up an enterprise, the entrepreneur has to carefully appraise the
project form the standpoint of economic, financial, technical, market, managerial and
social aspects to arrive at the most socially-feasible enterprise.
The following appraisals can be performed at the preliminary level :-
Economical appraisal
Financial appraisal
Management appraisal
Organizational appraisal
Market appraisal
Technical appraisal
Step 13: Finance
Finance is the lifeblood of the enterprise. Entrepreneur has to take certain steps and
follow specified norms of the financial institutions and banks to obtain it.
Step 14: Provisional Registration
It is always worthwhile to get the unit registered with the government.

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The entrepreneur has to obtain the prescribed application from the provisional
registration under DIC or Directorate of industries.
This will enable the entrepreneur to avail various government facilities, incentives, and
assistance schemes including financial assistance from NSIC/SFCs/KVIC.
Step 15: Technical Know-How
Technical know-how may be arranged for setting up enterprise.
Facilities are also available to SSI for making technical know-how arrangements
including turn-key jobs.
Step 16: Power and water connection
The sites, where the enterprise will be located, should either have adequate power
connections or this should be arranged.
Entrepreneur can calculate the total power requirement and water connection will have
to be obtained
Step 17: Installation of Machinery
Having completed the above formalities, the next step is to procure the machinery for
installation.
Machinery should preferably be installed as per the plan layout.
Step 18: Recruitment of Manpower
Once machines are installed, the need for manpower arises to run them.
This presupposes the skilled, unskilled and semiskilled labour, administrative staff etc.
Step 19: Procurement of Raw materials
Raw materials are the important ingredients for running an enterprise. The labour will
require raw materials to work upon the installed machinery.
Step 20: Production
The unit established should have an organizational setup. To operate optimally, the
organization should employ its manpower, machinery and methods effectively.
There should not be any wastage of manpower, machinery and materials. Production
of the proposed item should be taken up in two stages.
Trial production will help tackling problems confronted in production and test
marketing of the product.
Commercial production should be commenced after the test-marketing of the product.
Step 21: Marketing
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Marketing is the most important activity as far as the entrepreneurial development is
concerned.
Various aspects like how to reach the customer, distribution channels, commission
structure, pricing, advertising, publicity etc., have to be decided by the entrepreneur.
Marketing is in two stages namely:
Test stage:
Commercial marketing stage:
Test marketing is necessary to save the enterprise from going into disrepute in case the
product launched is not well accepted by the customers.
Commercial marketing can be undertaken. The entrepreneur can contact the small
industries marketing cooperation.
Step 22: Quality assurance
Before marketing, the product quality certification from BIS (Bureau of Indian
standards) or AGMARK/HALLMARK etc.
If there is no quality standards specified for the products, the entrepreneur should
evolve his own quality control parameters.
Step 23: Permanent Registration
After the small scale unit goes into production and marketing, it becomes eligible to
get permanent registration based on its provisional registration from DIC.
Step 24: Market Research
There is strong need for continuous market research to assess needs and areas for
modification, up-gradation and growth.

e) Role of Central and state Government in Subsidies

• A subsidy is a benefit given to an individual, business, or institution, usually by the
government. It can be direct (such as cash payments) or indirect (such as tax
breaks). The subsidy is typically given to remove some type of burden, and it is
often considered to be in the overall interest of the public, given to promote a social
good or an economic policy.
• Government subsidies help an industry by paying for part of the cost of the
production of a good or service by offering tax credits or reimbursements or by
paying for part of the cost a consumer would pay to purchase a good or service.
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Effect of Subsidies on Supply:
• Governments seek to implement subsidies to encourage production and
consumption in specific industries. When government subsidies are implemented
to the supplier, an industry is able to allow its producers to produce more goods and
services. This increases the overall supply of that good or service, which increases
the quantity demanded of that good or service and lowers the overall price of the
good or service.
• In this sense, when the government gives subsidies to the supplier, what results in
a win-win situation for both the supplier and the consumer. Essentially, the supplier
is benefitting as if the good were selling at a higher price and is able to produce
more of the product. Meanwhile, consumers get to enjoy the product for what would
be a comparatively cheaper price, since suppliers do not need to charge exorbitant
rates to break even on production.
• Since the government helps suppliers through tax credits or reimbursements, the
lower overall price of their goods and services is more than offset by the savings
they receive.
Tax Credits:
• On the consumer side, government subsidies can help potential consumers with the
cost of a good or service, usually through tax credits. For example, a great example
of this is the transition to more renewable sources of energy. With still nascent
models of green economics, the current demand to purchase new energy-saving
technology is low. In order to sway consumer interest, government subsidies or tax
credits can help with this high cost of adoption. When consumers refit their houses
with solar panels, the government will provide a tax credit to individuals and
families to offset the high price of purchasing the new solar panels.
• In this sense, consumer-targeted subsidies will not necessarily increase supply,
since producers aren't being motivated or compensated to produce more. However,
tax credits will offset higher prices for consumers so that the margin still goes back
to producers.
• In the same vein, some states also provide a tax credit or subsidy for buying an
electric or hybrid vehicle. This helps the renewable energy industry by allowing

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more consumers to purchase the products associated with that industry, without
having to absorb the entire cost.
• Thus, Government subsidies can help an industry on both the supplier side and the
consumer side, no matter on which end they are implemented. To implement
subsidies, governments need to raise taxes or reallocate taxes from existing budgets.
There is also an argument that incentives in the form of subsidies actually reduce
the incentives of firms to cut costs. However, whether it's by increasing supply
through supplier-side subsidies, or helping consumers with high costs of adoption
through tax credits, it's clear that government intervention in market economics has
real-life impacts on both parties alike.

f) Funding options available:

Aangel investors, venture capitalists, commercial banks, financial
institutions, Bank loan Procedure and documents required

Aangel investors:
• An angel investor (also known as a business angel, informal investor, angel
funder, private investor, or seed investor) is an individual who provides capital for
a business or businesses start-up, usually in exchange for convertible
debt or ownership equity.

• Angel investors usually give support to start-ups at the initial moments (where risks
of the start-ups failing are relatively high) and when most investors are not prepared
to back them.
• An angel investor is a person who invests in a new or small business venture,
providing capital for start-up or expansion. Angel investors are typically
individuals who have spare cash available and are looking for a higher rate of return
than would be given by more traditional investments. An angel investor typically
looks for a return of around 25 to 60 percent.
• Angel investors are individuals who seek to invest at the early stages of startups.
These types of investments are risky and usually do not represent more than 10%
of the angel investor's portfolio. Most angel investors have excess funds available

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and are looking for a higher rate of return than those provided by traditional
investment opportunities.
• Angel investors provide more favorable terms compared to other lenders, since they
usually invest in the entrepreneur starting the business rather than the viability of
the business. Angel investors are focused on helping startups take their first steps,
rather than the possible profit they may get from the business.
Sources of Angel Investing:
• Since angel investors are typically wealthy individuals, it’s not uncommon for
business owners to want to seek them out for funding. So, how do you find angel
investors? A few sources of funding include:
• Angel List: An online platform that helps business owners find investors.
• Angel Investment Network: An online network with over 279,000 investors.
Business owners can create a profile and promote their business. If there are
interested angels, they’ll invest.
• LinkedIn: Professional social networks, like LinkedIn, can give you a direct way to
contact an angel investor.
• Local business groups or schools: Check local business schools or organizations in
your area to see if they can put you in touch with an angel investor.
• Crowdfunding: A form of an online investing group, crowdfunding involves raising
funding by having large groups of individuals invest small amounts.
Advantages and Disadvantages of Angel Investors:
• The big advantage is that financing from angel investments is much less risky than
debt financing. Unlike a loan, invested capital does not have to be paid back in the
event of business failure. And, most angel investors understand business and take
a long-term view. Also, an angel investor is often looking for a personal opportunity
as well as an investment.
• The primary disadvantage of using angel investors is the loss of complete control
as a part-owner. Your angel investor will have a say in how the business is run and
will also receive a portion of the profits when the business is sold. With debt
financing, the lending institution has no control over the operations of your
company and takes no share of the profits.

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Venture capitalists:
• A venture capitalist (VC) is a private equity investor that provides capital to
companies with high growth potential in exchange for an equity stake. This could
be funding startup ventures or supporting small companies that wish to expand but
do not have access to equities markets.
Understanding Venture Capitalists:
• Venture capitalist firms are usually formed as limited partnerships (LPs) where the
partners invest in the VC fund. The fund normally has a committee that is tasked
with making investment decisions. Once promising emerging growth companies
have been identified, the pooled investor capital is deployed to fund these firms in
exchange for a sizable stake of equity.
• Contrary to common belief. VCs do not normally fund startups from the onset.
Rather, they seek to target firms that are at the stage where they are looking to
commercialize their idea. The VC fund will buy a stake in these firms, nurture their
growth, and look to cash out with a substantial return on investment (ROI).
• Venture capitalists typically look for companies with a strong management team, a
large potential market, and a unique product or service with a strong competitive
advantage. They also look for opportunities in industries that they are familiar with,
and the chance to own a large percentage of the company so that they can influence
its direction.
• VCs are willing to risk investing in such companies because they can earn a massive
return on their investments if these companies are a success. However, VCs
experience high rates of failure due to the uncertainty that is involved with new and
unproven companies.

Differences between angel investors and venture capitalists:

An angel investor works alone, while venture capitalists are part of a company.
• Angel investors, sometimes known as business angels, are individuals who invest
their finances in a startup. Angels are rich, often influential individuals who choose
to invest in high-potential companies in exchange for an equity stake. Given that
they are investing their own money and there is always an inherent risk, it's highly

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unlikely that an angel will invest in a business owner who isn't willing to give away
a part of their company.
• Venture capital firms, on the other hand, comprise a group of professional investors.
Their capital will come from individuals, corporations, pension funds and
foundations. These investors are known as limited partners. General partners, on
the other hand, are those who work closely with founders or entrepreneurs; they are
responsible for managing the fund and ensuring the company is developing in a
healthy way.

Commercial banks:
• The term commercial bank refers to a financial institution that accepts deposits,
offers checking account services, makes various loans, and offers basic financial
products like certificates of deposit (CDs) and savings accounts to individuals and
small businesses. A commercial bank is where most people do their banking.
• Commercial banks make money by providing and earning interest from loans such
as mortgages, auto loans, business loans, and personal loans. Customer deposits
provide banks with the capital to make these loans.
• Commercial banks offer consumers and small to mid-sized businesses with basic
banking services including deposit accounts and loans.
• Commercial banks make money from a variety of fees and by earning interest
income from loans.
• Commercial banks have traditionally been located in physical locations, but a
growing number now operate exclusively online.
• Commercial banks are important to the economy because they create capital, credit,
and liquidity in the market.
• E.g. SBI, ICICI, HDFC, AXIS etc.

Financial institutions:
• A financial institution (FI) is a company engaged in the business of dealing with
financial and monetary transactions such as deposits, loans, investments, and
currency exchange. Financial institutions encompass a broad range of business

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operations within the financial services sector including banks, trust companies,
insurance companies, brokerage firms, and investment dealers.
• The major categories of financial institutions include central banks, retail and
commercial banks, internet banks, credit unions, savings, and loans associations,
investment banks, investment companies, brokerage firms, insurance companies,
and mortgage companies.
• Financial institutions, like commercial banks. It facilitates bank deposits, locker
service, loans, checking accounts, and different financial products like savings
accounts, bank overdrafts, and certificates of deposits. Help their customers by
providing savings and deposit services.
Commercial Banks VS Financial Institutions:
• Financial institutions can be divided into two types: banking financial institutions
and non-banking financial institutions. Banking financial institutions include
commercial banks whose primary role is to accept deposits and make loans. Non-
banking financial institutions include investment banks, insurance companies,
finance firms, leasing companies, etc.
• The main difference between other financial institutions and banks is that other
financial institutions cannot accept deposits into savings and demand deposit
accounts, while the same is the core businesses for banks.
List of All India Financial Institutions:
1. Industrial Development Bank of India (IDBI)
2. Industrial Finance Corporation of India (IFCI)
3. Export - Import Bank of India (Exim Bank)
4. Industrial Reconstruction Bank of India (IRBI) now (Industrial Investment
Bank of India)
5. National Bank for Agriculture and Rural Development (NABARD)
6. Small Industries Development Bank of India (SIDBI)
7. National Housing Bank (NHB)
8. Unit Trust of India (UTI)
9. Life Insurance Corporation of India (LIC)
10. General Insurance Corporation of India (GIC)
11. Risk Capital and Technology Finance Corporation Ltd. (RCTC)
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12. Technology Development and Information Company of India Ltd. (TDICI)
13. Tourism Finance Corporation of India Ltd. (TFCI)
14. Shipping Credit and Investment Company of India Ltd. (SCICI)
15. Discount and Finance House of India Ltd. (DFHI)
16. Securities Trading Corporation of India Ltd. (STCI)
17. Power Finance Corporation Ltd.
18. Rural Electrification Corporation Ltd.
19. Indian Railways Finance Corporation Ltd.
20. Infrastructure Development Finance Co. Ltd.
21. Housing and Urban Development Corporation Ltd. (HUDCO)
22. Indian Renewable Energy Development Agency Ltd. (IREDA)

Bank loan Procedure and documents required:

Nowadays, getting a loan is not as easy as it was before. The financial-economic crisis that
hit several years ago has made banks restrict lending to small businesses. It is therefore
very important for you to know the necessary steps for getting a business loan from a bank
so you can improve your chance of getting an approval. Here are seven steps to take when
applying for a business loan from the bank.

• Have a proper business plan

• State how you want to spend your finances
• State the amount of money you need
• Be keen on your credit score: A credit score of 700 and above is excellent. If your score
is below 680, it would be hard for you to get a loan
• Clean up your credit report : Sometimes there could be errors in your credit report and
if you are not careful, it might negatively affect your credit score. In case you notice
some errors, contact a credit reporting agency immediately to rectify and raise the
score by removing the discrepancies, otherwise no loan will be approved by a bank
when your credit rating is low.
• Assess all your lending options
Choose the bank that offers loans at low interest rates and offers the most flexible approval
guidelines.
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• Keep proper financial records
Getting a business loan from a bank becomes easier when you have proper financial
statements. Banks will always want to check your balance sheet, cash flow statements and
income statements so as to ascertain whether you have the ability to repay the loan or not.
This means that if you have not been keeping these records, it is time to start since they
could be of help in future when applying for a loan.

g) Support agencies: SIDBI, SISI, NABARD, DIC, MCED, EDII, NIESBUD, EPC
etc. – Their role in the Development of SMEs:

Small Industries Development Bank of India (SIDBI):

• Small Industries Development Bank of India (SIDBI) is the apex regulatory
body for overall licensing and regulation of micro, small and medium enterprise
finance companies in India. It is under the jurisdiction of Ministry of
Finance , Government of India headquartered at Lucknow and having its offices all
over the country. Its purpose is to provide refinance facilities to banks and financial
institutions and engage in term lending and working capital finance to industries,
and serves as the principal financial institution in the Micro, Small and Medium
Enterprises (MSME) sector.
• SIDBI is active in the development of Micro Finance Institutions through SIDBI
Foundation for Micro Credit, and assists in extending microfinance through the
Micro Finance Institution (MFI) route. Its promotion & development program
focuses on rural enterprises promotion and entrepreneurship development.
• In order to increase and support money supply to the MSE sector, it operates a
refinance program known as Institutional Finance program. Under this program,
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SIDBI extends Term Loan assistance to Banks, Small Finance Banks and Non-
Banking Financial Companies. Besides the refinance operations, SIDBI also lends
directly to MSMEs.

Small Industries Service Institute (SISI):

• The small industries service institutes (SISI’s) are set-up one in each state to
provide consultancy and training to small and prospective entrepreneurs.
• The activities of SISs are co-ordinated by the industrial management training
division of the DC, SSI office (New Delhi). In all there are 28 SISI’s and 30 Branch
SISI’s set up in state capitals and other places all over the country.
• SISI has wide spectrum of technological, management and administrative tasks to
perform.

Functions of SISI:

1. To assist existing and prospective entrepreneurs through technical and managerial

counseling such as help in selecting the appropriate machinery and equipment, adoption
of recognized standards of testing, quality performance etc;
2. Conducting EDPs all over the country;
3. To advise the Central and State governments on policy matters relating to small industry
development;
4. To assist in testing of raw materials and products of SSIs, their inspection and quality
control;
5. To provide market information to the SSI’s;
6. To recommend SSI’s for financial assistance from financial institutions;
7. To enlist entrepreneurs for participation in Government stores purchase programme;
8. Conduct economic and technical surveys and prepare techno-economic feasible reports
for selected areas and industries.
9. Identify the potential for ancillary development through sub-contract exchanges;
10. Organize seminars, Workshops and Industries Clinics for the benefit of entrepreneurs.

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Other Functions of SISI:
• The Small Industries Service Institutes have been generally organizing the various
types of EDPs on specialized courses for different target groups like energy
conservation, pollution control, Technology up-gradation, Quality improvement,
Material handling, Management technique etc.
• General EDP for educated unemployed youth, ex-service personnel etc. for a
duration of four weeks.
• In these programmes, classroom lectures and discussions are held on issues such as
facilities and assistance available from State and Central government agencies,
banks, financial institutions and National Small Industries Corporation.
• Apart from this, exposure is given on information regarding market survey, product
identification and selection, technologies involved, management of small
enterprises, particularly in matters relating to financial management, marketing,
packaging and exports.
• The participants also interact with successful small scale entrepreneurs as a part of
their experience sharing Information of quality; possibilities of diversification and
expansion are also given.
• The entrepreneurs are helped to prepare Project Reports based on their own
observations and studies for obtaining financial assistance as may be required.
• Such courses have benefitted many entrepreneurs to set up units of their own
choice.

National Bank for Agriculture and Rural Development (NABARD):

• The National Bank for Agriculture and Rural Development (NABARD) was
established in 1982 for providing credit for the promotion of agriculture, small-
scale industries, cottage and village industries, handicrafts and other rural crafts and
other allied economic activities in rural areas with a view to promote integrated
rural development and secure prosperity of rural areas.
Management of NABARD..
• In terms of the Act, the Board of Directors will consist of 15 members to be
appointed by the Central Government in consultation with the Reserve Bank.
Besides the chairman and the managing director, three directors from the Central
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Board of the Reserve Bank, three officials of the Central Government, two officials
of the State Governments and five directors from experts in rural economics, rural
development, handicrafts and village and cottage industries etc. and persons with
experience in the working of co-operative banks and commercial banks.
Functions of NABARD..
i. NABARD provides short-term refinance assistance for periods not exceeding 18 months
to state co-operative banks, regional rural banks and other financial institutions for a
wide range of purposes including marketing and trading relating to rural economy.
These short term loans can be converted by the NABARD into medium term loans for
periods not exceeding seven years under conditions of drought, famine or other natural
calamities, military operations or enemy action.
ii. NABARD can grant medium-terms loans to the State Co-operative Banks and Regional
Rural Banks for periods extending from 18 months to 7 years for agriculture and rural
development.
iii. NABARD is empowered to provide by way of refinance assistance long term loans
extending up to maximum period of 25 years to the State Land Development Bank,
Regional Rural Banks, Scheduled Commercial Banks, State Co-operative Banks or any
other financial institution approved by the Reserve Bank for giving loans to artisans,
small-scale industries, village and cottage industries etc.

District Industries Centre (DIC):

• The 'District Industries Centre' (DICs) programme was started by the central
government in 1978 with the objective of providing a focal point for promoting
small, tiny, cottage and village industries in a particular area and to make available
to them all necessary services and facilities at one place.
• The finances for setting up DICs in a state are contributed equally by the particular
state government and the central government.
• To facilitate the process of small enterprise development, DICs have been entrusted
with most of the administrative and financial powers.
• For purpose of allotment of land, work sheds, raw materials etc., DICs functions
under the 'Directorate of Industries’.

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• Each DIC is headed by a General Manager who is assisted by four functional
managers and three project managers

Activities of District Industries Centre (DIC..)

i. Economic Investigation
ii. Plant and Machinery
iii. Research, education and training
iv. Raw materials
v. Credit facilities
vi. Marketing assistance
vii. Cottage industries

Objectives of District Industries Centre (DIC):

i. Accelerate the overall efforts for industrialization of the district.
ii. Rural industrialization and development of rural industries and handicrafts.
iii. Attainment of economic equality in various regions of the district.
iv. Providing the benefit of the government schemes to the new entrepreneurs.
v. Centralization of procedures required to start a new industrial unit and minimization-
of the efforts and time required to obtain various permissions, licenses, registrations,
subsidies etc.

Functions of District Industries Centre (DIC)..

i. Acts as the focal point of the industrialization of the district.
ii. Prepares the industrial profile of the district with respect to :
iii. Statistics and information about existing industrial units in the district in the large,
Medium, small as well as co-operative sectors.
iv. Opportunity guidance to entrepreneurs.
v. Compilation of information about local sources of raw materials and their availability.
vi. Manpower assessment with respect to skilled, semi-skilled workers.
vii. Assessment of availability of infrastructure facilities like quality testing, research and
development, transport, prototype development, warehouse etc.

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viii. Organizes entrepreneurship development training programs.
ix. Provides information about various government schemes, subsidies, grants and
assistance available from the other corporations set up for promotion of industries.
x. Gives SSI registration.
xi. Prepares techno-economic feasibility report.
xii. Advices the entrepreneurs on investments.
xiii. Acts as a link between the entrepreneurs and the lead bank of the district.
xiv. Implements government sponsored schemes for educated unemployed people like
Pradhan Mantri Rozgar Yojana (PMRY) scheme, Jawahar Rojgar Yojana, etc.
xv. Helps entrepreneurs in obtaining licenses from the Electricity Board, Water Supply
Board, No Objection Certificates etc.
xvi. Assist the entrepreneur to procure imported machinery and raw materials.
xvii. Organizes marketing outlets in liaison with other government agencies.

Maharashtra Centre for Entrepreneurship Development (MCED):

• Maharashtra Centre for Entrepreneurship Development (MCED) is involved in
Entrepreneurship Development activities all over Maharashtra since 1988
entrepreneur development trainings and assist them in identification of suitable
loans, establishment of the enterprise, obtaining necessary permissions etc. MCED
also provides help in overcoming various managerial, financial, operational
problems faced during functioning of the enterprise.
• The purpose of identifying industrial opportunities in advance was to help the EDP
participant identifying the projects, which could match their skills and
temperament, with a view to prepare a list of viable projects to publicize the
programme.
Activities of MCED:
1.Provides basic study training.
2.Training of submission of the proposal to the sponsoring agency.
3.Programme announcement in local newspapers and Radio, TV etc.
4.Meeting with local bodies’ corporation and agencies, DIC officials / local
associations.

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5.Banks for assistance in identification of the participants /identification of faculty /
guest faculty for EDPs.
6.Visits to various organizations by course coordinator.
7.Programme publicity through supporting of organizations.
8.Circular / letters to various organizations

Training programmes by MCED..:

To create self-employment, MCED is conducting following training programmes:
• Entrepreneurship Development Programme.
• Development Programmes for Self Employment.
• Entrepreneurship Awareness Camps.
• Certificate Course for Developing Competent Personnel for SSI Management.
• Trainers Training Programme.
• Teachers Training Programmes.
• School/ College level entrepreneurship Development Programme.
• Organization of exhibitions / Discussions / Workshops.

Entrepreneurship Development Institute of India (EDII):

• located Ahmedabad, Gujarat, India. Established in 1983, the institute offers
master's degree programmes in Entrepreneurship, a fellowship programme and a
number of entrepreneurship training programmes.
• EDII offers a four-year full-time Fellow Program in Management (FPM) course, a
two-year PGDM program in Business Entrepreneurship (PGDM-BE), and
Development Studies (DS) with the intake of 120 seats in each discipline. PGDM-
BE Program is approved by AICTE and Ministry of Human Resource Development
(MHRD), Dept. of Higher Education, Govt. of India and Accredited by the National
Board of Accreditation. EDII is honored with AICTE Award for Supporting Start-
Ups.
• Entrepreneurship Development Institute of India (EDII), is promoted by apex
financial institutions – the IDBI Bank Ltd., IFCI Ltd., ICICI Bank Ltd. and the State
Bank of India (SBI), with support from the Government of Gujarat. The

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Government of Gujarat pledged 23 acres of land on which stands the majestic and
sprawling EDII campus.
• To pursue its mission, EDII has helped set up 12 state-level exclusive Entrepreneurship
Development Centres and Institutes. One of the satisfying achievements, however, was
taking entrepreneurship to a large number of schools, colleges, science and technology
institutions and management schools in several states by including entrepreneurship
inputs in their curricula. In view of EDII’s expertise in entrepreneurship, the University
Grants Commission had also assigned EDII the task of developing curriculum on
entrepreneurship and the Gujarat Textbook Board assigned to it the task of developing
textbooks on entrepreneurship for 11th and 12th standards.

The National Institute for Entrepreneurship and Small Business Development

(NIESBUD):
• The National Institute for Entrepreneurship and Small Business
Development(NIESBUD) was established in 1983 by the ministry of industry(now
ministry of small scale industries), Govt of India, as an apex body for coordinating
and overseeing the activities of various institutions/agencies engaged in
entrepreneurship development particularly in the area of small industry and small
business.
• NIESBUD was registered as a society under the government of Indian societies
Registration Act, 1860.
• It started up its functioning from 6thJuly 1983, it was established by the government
of India as an apex body for coordinating and overseeing the activities of various
institutions and agencies engaged in entrepreneurship development, it was mainly
in the areas of small industry and small business
• The policy, direction and guidance to the Institute is provided by its Governing
Council whose Chairman is the Minister of SSI.
• "Setting the standards in Entrepreneurship and Small Business development since
1983" To evolve standardized materials and processes for selection, training,
support and sustenance of entrepreneurs, potential and existing.

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Activities of NIESBUD..
•Assisting/supporting EDPs
•Training for trainers/promoters Creation & capacity building of EDP Institutions.
•Small business focus
•National/international forum for exchange of ideas & expressions.
•Developing entrepreneurial culture.
•National entrepreneurship development board (NEDB) Services to affiliate
members.
•Sustaining entrepreneurship
•Evolving effective training strategies and methodology
•Standardizing model syllabus for training various target groups.
•Formulating scientific selection procedures.
•Developing training aids, manuals, and tools.
•Facilitating and supporting Central/state/other agencies in executing
entrepreneurship development programmes.
•Conducting such programmes for promoters, trainers, and entrepreneurs who are
not undertaken by other agencies.
•Maximizing benefits and accelerating the process of entrepreneurship
development.

Objectives of NIESBUD..
•To evolve standardized materials and processes for selection, training, support and
sustenance of entrepreneurs, potential and existing.
•To help/support and affiliate institutions/organizations in carrying out training and other
entrepreneurship development related activities
•To serve as an apex national level resource institute for accelerating the process of
entrepreneurship development ensuring its impact across the country and among all strata
of the society.
•To provide vital information and support to trainers, promoters and entrepreneurs by
organizing research and documentation relevant to entrepreneurship development.
•To train trainers, promoters and consultants in various areas of entrepreneurship
development.
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•To provide national/international forums for interaction and exchange of experiences
helpful for policy formulation and modification at various levels.
•To offer consultancy nationally/internationally for promotion of entrepreneurship and
small business development.
•To share internationally experience and expertise in entrepreneurship development.
•To share experience and expertise in entrepreneurship development across National
frontiers.

Export Promotion Councils(EPC):

• Export Promotion Councils are set up by the Government of India to assist Indian
exporters in expanding their businesses to the international markets.
• The main role of a council is to promote the product category that it handles and
support exporters in that industry.
• Presently, there are fourteen Export Promotion Councils under the administrative
control of the Department of Commerce.
• These Councils are registered as non-profit organizations under the Companies
Act/ Societies Registration Act.
• The Councils perform both advisory and executive functions.
• The role and functions of these Councils are guided by the Foreign Trade Policy,
2009-14. These Councils are also the registering authorities for exporters under
the Foreign Trade Policy 2009-14.
Eg. Carpet Export Promotion Council

The National Entrepreneurship Development Board (NEDB):

Objectives
• The main objective of the National Entrepreneurship Development Board (NEDB)
Scheme is promotion of entrepreneurship for encouraging self-employment in
small scale industries and small business.
Activities of NEDB:
•To identify and remove entry barriers for potential entrepreneurs(first generation and
new entrepreneurs) including study on entrepreneurship development.

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•To focus on existing entrepreneurs in micro, tiny and small sector and identify and
remove constraints to survivals, growth and continuously improve performance.
•To facilitate the consolidation, growth and diversification of existing entrepreneurial
venture in all possible ways.
•To support skill up gradation and renewal of learning processes among practicing
entrepreneurs and managers of micro, tiny, small and medium enterprises.
•To sensitize to support agencies in the area of entrepreneurship about the current
requirement of growth.
•To act as catalyst to institutionalize entrepreneurship development by supporting and
strengthening state level institutions for entrepreneurship development as most
entrepreneurship related activities take place at the grass root level and removing
various constraints to their effective functioning.
•Setting up of incubators by entrepreneurship development institutions and other
organizations devoted to the promotion of entrepreneurship development

h) Technology business incubation (TBI) centers

• Technology Business incubator (TBI) is an entity, which helps technology-based
start-up businesses with all the necessary resources/support that the start-up needs
to evolve and grow into a mature business. Typically, TBIs provide budding
entrepreneurs all necessary infrastructure support, technology/prototype
development support, research assistance, help in getting funding, business
consulting assistance, marketing assistance and do whatever is necessary to make
the start-up a success.

The primary goal of a business incubator is to facilitate economic development by

improving survival and growth of new entrepreneurial units. Incubators accelerate
the development of young entrepreneurial units from ‘idea stage’ to independent
self-sustaining successful business. The concept has benefited many countries in
utilizing technology as a means for their economic development.
• In the form of a business centre, the TBI provides incubatees an initial place of
operation equipped with supportive environment in which services such as
assistance in technology, hands-on management, mentoring, business plan
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development, exposure to Venture Capital and Institutional Capital and all other
operational business/finance related needs involved in starting and growing a
technology company.
• TBIs also facilitate speedy commercialization of research outputs
• A technology business incubator (or TBI) is a type of business incubator focused
on supporting startups which use modern technologies as the primary means of
innovation. In several countries, including India, China, and the Philippines there
have been government initiatives to support TBIs. Organizations under the title of
Technology Business Incubator often receive funding or other forms of support
from the national government.
Services provided by TBI:
• Market survey/ marketing assistance
• Business planning and training
• Organizing management/ technical assistance
• Assistance in obtaining statutory approvals
• Information dissemination on product ideas/technologies
• Syndicating finances
• Arranging legal and IPR services
• Using facilities of the Host Institute (HI) at nominal charges
• Work space for a limited period
• Common facilities of TBI such as communication, conference, computers

Objectives of TBI:
• Creation of technology based new enterprises
• Creating value added jobs & services
• Facilitating transfer of technology
• Fostering the entrepreneurial spirit
• Speedy commercialization of R&D output
• Specialized services to existing SMEs
Criteria for selection of location:
• Ideally a TBI should be located near a source of technology and knowledge i.e.
around R&D Institutions/Academic Institutions or it should have strong links with
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such institutions to ensure optimal use of the already existing expertise and facilities
thus keeping the cost of the TBI on lower side. Locating TBIs in such location could
also reduce time lag between technology development and its commercialization.
• Further, as the success of a TBI largely depends on its location and management
besides quality of tenant enterprises, few aspects relating to the Host Institution
(HI) need to be kept in view while selecting location of the TBI.
Qualities required in Host institution(HI):
• R&D track record and subsequent commercialization of R&D output
• Dedicated team of R&D persons
• Industrial milieu (Social Environment) in the region
• Proximity to other R&D/academic institutions
• Infrastructure, facilities and expertise available
• Strong commitment and willingness of the HI
Thrust Areas:
Each TBI would focus on not more than 2-3 thrust areas. The thrust areas for a TBI
would be identified based on the following:
• Expertise and facilities available in the HI
• Track record of the HI in the chosen areas
• Industrial climate in the region
• Market potential/demand in the region
To begin with, TBIs are proposed to be promoted in following selected thrust areas which
have potential for faster growth:
• Information & Communication Technology (ICT)/Internet of Things (IOT)
• Healthcare
• Manufacturing
• Agriculture and allied fields
• Clean-Tech
• Energy
• Water
• Services
Sponsorship:

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The TBI may be promoted by the selected HI and DST jointly. The HI has to provide the
requisite land and building for the TBI. Other related and interested agencies could also be
involved as sponsors.

Activities:
Each TBI would be required to plan and undertake specified activities based on the
identified thrust areas. However, the following set of activities is suggested as general
guidelines:
• Provide specialized services to existing SMEs in the region
• Facilitate technology commercialization
• Consultancy
• Training including short courses
• Technology related IPR issues, legal and quality assurance services
• Marketing
• Assistance in obtaining and other clearances
• Common facilities
• Assistance in preparation of business plans
• Technology shows/ technology clinics/ trade fairs
Role of the HI:
• The Host Institution has to play an important role not only in the establishment of
the TBI project but also in its smooth and efficient functioning. Only those
institutions/ organizations that can provide land and built-up space for TBI and are
also willing to share available facilities and expertise would be considered for
setting up of the TBI.
• Host Institute should demonstrate its commitment and responsibility towards the
TBI project. The HI will provide a suitable built up area where-in the TBI could be
set up besides provision of utilities such as electricity and water. The HI will also
ensure availability of following facilities to the tenants of the TBI on mutually
agreed charges:
• Lab/testing facilities
• Library
• Mainframe computer
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• Faculty support
Self Sufficiency:
• Each TBI is expected to become self-sufficient within a period of five years from
the date of sanction of the project.
• The TBI should, however, start earning from the very first year of its operation.
• The TBI should appoint a Project Manager with relevant experience and exposure
to the business environment.
E.g. SINE Business Incubator of IIT Bombay

i) Export Potential of SMEs, Export procedure, Incentives and facilities to exports

entrepreneurs

The sustainable export growth has been considered crucial for maintaining and accelerating
the GDP growth impetus, which also contributes to the increase in the employment
opportunities and eradication of poverty. Also, it is impossible for any country to frame the
strategy to cover all the export products simultaneously, due to the lack of available human
and financial resources. Export promotion, one of the important components of a country’s
foreign trade policy focuses on the promotion and development of the best potential
markets for the industry. Export Promotion refer to the various incentive programs
designed to attract more firms into the exporting by offering the help in product and market
identification and development, pre-shipment and post-shipment financing, training,
payment guaranty schemes, trade fairs, trade visits, foreign representation, etc.Various
Export Promotional Schemes have been introduced by the government of India as a result
of theexpected delay in the implementation of the liberalization of the imports and
reduction in the transaction costs, with the focus of the small, medium and long terms
periods of the strategy. The government of India provides assistance to the private sector
businesses through the wide array of the services, from simply providing information about
current opportunities in the world market to providing specialized assistance to design and
implementation of the marketing programmes and sales campaigns abroad, often described
as the ‘export promotion’ or ‘export development’. The basic objective of export promotion
activities is to encourage increased sales of the products available currently available for
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export, by concentrating all promotional efforts on the existing production with the aim to
increase the value of foreign sales by a given target. These activities are usually carried out
by the trade promotion organizations, i.e., the TPOs. TPOs, in most of the countries,
concentrate their effort on export promotion, comprising of the set of the actions and
activities to encourage increased sales of products that are currently available for export.
Export procedure:
• In general, an export procedure initiates with the willingness to send the goods and
services to other foreign nations at some price, these procedures of export are stated
below:
Step 1. Enquiry, Quotation and Receipt of Order
• The Indian exporter will receive the order either directly from the importer or
through the indent houses.
Step 2. Obtaining License
• After receiving the order from the importer, the Indian exporter is required to obtain
an export license from the Government of India, for this the exporter needs to apply
to the Export Trade Control Authority and get a valid license for this.
• Obtain Import-Export Code(IEC) number from the Directorate General Foreign
Trade (DGFT) or Regional Import-Export Licensing Authority.
• Get registered with the appropriate export promotion council.
• Get registered with Export Credit and Guarantee Corporation to minimize the risk
of non-payment
Step 3. Assessing the importer’s credit worthiness and securing a guarantee for payments
(Letter of Credit)
• The exporter then asks the importer for the letter of credit, if the importer does not
send the letter of credit along with the order.
Step-3.1 Obtaining pre-shipment finance:
• Once all the above procedures are accomplished, the exporter approaches his/her
bank to obtain pre-shipping finance to procure necessary items required for the
production of the goods ordered and other related activities like packaging and
transportation of goods to the port of shipment, delivery of goods, etc.
Step 3.2 Pre-shipment inspection:

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• The government of India wants an assurance that only A-one quality goods are
being exported from India. For this, various Inspection Agencies have been set up
under the Export Quality Control and Inspection Act of 1963. After producing or
procuring the goods, an exporter requires to obtain a pre-shipment inspection
certificate from the concerned authorized Inspection Agency. The inspection
certificate ensures the quality of the goods and is one of the important documents
required at the time of export.
Step 4. Fixing the Exchange Rate
• The rate at which the home currency can be exchanged with the foreign currency is
then fixed. The foreign exchange rate fluctuates from time to time so they need to
fix the rate of exchange.
Step 5. Foreign Exchange Formalities
• As per the Foreign Exchange Regulation Act of India (FERA), every exporter of
the goods is required to furnish a declaration in the form prescribed in a manner in
the Act.
Step 6. Preparation for Executing the Order
• The exporter should make required arrangements to execute the order
Step 7. Formalities by a Forwarding Agent (freight forwarders)
• Then the formalities are to be performed by the agent which includes obtaining a
permit from the customs department, preparing the shipping bill, paying the dues
after disclosing the required details of the product being exported.
Step-7.1 Insurance of goods:
• The exporter obtains an insurance policy for the goods to be exported to avoid
transit-related risks. The insurance protects the insurer against any risk of loss or
damage to the goods caused due to sea perils at the time of transit.
Step 8. Bill of Lading
• The Indian exporter of the goods presents the receipt copy to the shipping company
and issues the Bill of Lading.
Step 9. Shipment Advice to the Importer
• The Indian exporter sends shipment advice to the importer of the goods to inform
him about the shipment of the goods.
Step 10. Presentation of Documents to the Bank
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• The Indian exporter needs to confirm that he possesses all the necessary shipping
documents.
Step 11. The Realization of Export Proceeds
• The exporter of the goods need to comply with banking formalities after submission
of the bill of exchange.
Documents required in an export transaction:
Documents related to goods
Export Invoice: An export invoice is a bill prepared by the seller giving information about
the quantity of bill, the number of packages, the amount of bill, the name of the destination
port, terms of delivery, etc.
Packing list: The packing list states the number of packs and the nature of goods contained
within the packages.
Certificate of origin: A certificate of origin specifies the name of the country in which
goods are being produced. It helps the exporter to avail of the benefits given by the importer
country to an exporter of some specific countries.
Certificate of inspection: A certificate of inspection acts as a guarantee that goods to be
exported are of good quality. Such a certificate is issued by government authorized
agencies, such as the Export Inspection Council of India (EICI).

Documents related to shipment :

• Mate’s receipt: A Mate’s receipt is issued by the captain of the ship to the Port
Superintendent after the goods are loaded on the ship. Port Superintendent, on
receipt of port charges, passes on the receipt to the exporter or the Clearing and
forwarding (C&F)
• agent. The mate’s receipt is important for computing freight charges.
• Shipping Bill: A shipping bill is issued by an export firm that gives details of the
goods, the name and address of the exporter, the name of the loading port, the name
of the destination, and so on. The shipping bill is the most important document
required to obtain customs clearance.
• Bill of lading: After the computation of freight charges, the shipping company
issues a bill of lading issued as proof of accepting and delivering the goods to their

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destination. When the transit is done through the airways, Airway Bill is issued
instead of the bill of lading.
• Marine insurance policy: Marine insurance policy is a certificate issued by an
insurance company as a promise to indemnify any loss of the insured goods in case
of transit-related tragedies.
Documents related to payment:
• Letter of credit: A letter of credit is a guarantee given by the importer’s bank that
in case of non-payment by an importer, the bank shall pay a certain amount of
export bill to the exporter’s bank on the behalf of the importer.
• Bill of exchange: Bill of exchange is a financial instrument drawn by an exporter
in the name of the importer for demanding a payment related to the export
consignment. The exporter’s bank transfers the necessary documents to the
importer only after acceptance of a bill of exchange.
• Bank certificate of payment: Bank certificate of payment is a certificate to ensure
that the important documents related to a particular export consignment have been
transferred to the importer and the payment has been received.
Incentives & facilities to exports Entrepreneurs:
Export incentives are certain benefits exporters receive from the government as
acknowledgement for bringing in foreign exchange and as compensation for the costs they
incur on sending goods and services out of the country. Export incentives can take the form
of:
• Subsidies that lower export prices
• Tax concessions such as duty exemptions (which enable duty-free import of inputs
for export production) and duty remissions (which enable post-export
replenishment of duty on inputs used in export product)
• Credit facilities such as low-cost loans
• Financial guarantees such as provisions covering bad loans (Loans from a bank that
have not paid interest for more than 90 days)
• In India, export incentives are in line with the government’s flagship “Make in
India” and “Atmanirbhar Bharat” (Self-sufficient India) programmes.
• The former aims to transform India into a manufacturing major while the latter
advocates self-sufficiency. These incentives are highlighted in a document called
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the foreign trade policy, which is a set of guidelines and strategies for the import
and export of goods and services.
• The ECGC Limited (Export Credit Guarantee Corporation of India ) is a
government owned export credit provider. It is under the ownership of Ministry of
Commerce and Industry, Government of India based in Mumbai, Maharashtra. It
provides export credit insurance support to Indian exporters
• Merchandise Exports from India Scheme (MEIS): The scheme extends benefits to
more than 5000 export items and the duty credit scrips (export promotion benefit
offered by the Government of India under the Foreign Trade Policy (FTP) 2015-
20) are provided which help exporters in payment of Customs Duties for import of
inputs or goods, payment of excise duties on domestic procurement of inputs or
goods, payment of service tax on procurement of services. etc. All scrips issued
under MEIS and the goods imported against these scrips are fully transferable.
Government is planning to replace MEIS with ‘Remission of Duties or Taxes on
Export Products’.
• Export Promotion Capital Goods Scheme (EPCG): This facilitates import of capital
goods and spares required for pre-production, production and post-production at
zero import duty for the purpose of production of export goods. EPCG license is
provided if an exporter commits to export goods worth six times of duty saved
under the scheme and this commitment is to be fulfilled in six years from
authorization issue date.
• Market Access Initiative Scheme: The scheme aims to provide financial guidance
to eligible agencies for undertaking direct and indirect marketing activities like
market research, capacity building, branding, and compliances in importing
markets.
• Advance Authorization Scheme: Allows duty free import (a type of duty exemption
scheme introduced by the Government of India) of those inputs which are used for
making export products and in addition, fuel, oil, energy, catalysts which are
consumed/utilised to obtain export product, may also be allowed.

j) Types of Taxes and Taxation benefits for SME sector

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There are two main categories of taxes:
• Direct taxes and
• Indirect taxes
• which are further sub-divided into other categories There are also minor cess taxes
that fall into different sub-categories.
Direct Tax:
• Direct tax is tax that are to be paid directly to the government by the individual or
legal entity. Direct taxes are overlooked by the Central Board of Direct Taxes
(CBDT). Direct taxes cannot be transferred to any other individual or legal entity.
• Sub-categories of Direct Taxes
– Income tax:
– Capital gains:
– Securities transaction Tax:
– Prerequisite Tax:
– Corporate tax:
1. Income tax: This is the tax that is levied on the annual income or the profits which
is directly paid to the government. Everyone who earns any kind of income is liable
to pay income tax. For individuals below 60 years of age, the tax exemption limit
is Rs.2.5 lakh per annum. For individuals between the age of 60 and 80, the tax
exemption limit is Rs.3 lakh. For individuals above the age of 80, the tax exemption
limit is Rs.5 lakh. There are different tax slabs for different income amounts.
• Apart from individuals, legal entities are also liable to pay taxes. These include all
Artificial Judicial Persons, Hindu Undivided Family (HUF), Body of Individuals
(BOI), Association of Persons (AOP), companies, local firms, and local authorities.
2. Capital gains: Capital gains tax is levied on the sale of a property or money received
through an investment. It could be from either short-term or long-term capital gains from
an investment. This includes all exchanges made in kind that is weighed against its value.
3. Securities transaction Tax: STT is levied on stock market and securities trading. The
tax is levied on the price of the share as well as securities traded on the ISE (Indian Stock
Exchange).
4. Prerequisite Tax: These are taxes that are levied on the different benefits and perks that
are provided by a company to its employees.
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5. Corporate tax: The income tax paid by a company is defined as the corporate tax. It is
based on the different slabs that the revenue falls under.

Indirect tax:
• Taxes that are levied on services and products are called indirect tax. Indirect taxes
are collected by the seller of the service or product. The tax is added to the price of
the products and services. It increases the price of the product or service.
• There is only one indirect tax levied by the government currently. This is
called GST or the Goods and Services Tax.
GST:
• GST: This is a consumption tax that is levied on the supply of services and goods
in India. Every step of the production process of any goods or value-added services
is subject to the imposition of GST. It is supposed to be refunded to the parties that
are involved in the production process (and not the final consumer).
• GST resulted in the elimination of other kinds of taxes and charges such as Value
Added Tax (VAT), octroi, customs duty, Central Value Added Tax (CENVAT), as
well as customs and excise taxes.
• The products or services that are not taxed under GST are electricity, alcoholic
drinks, and petroleum products. These are taxed as per the previous tax regime by
the individual state governments.
List of taxes for small businesses owners:
• Income tax. Federal and state taxes, as applicable.
• Self-employment tax. This covers social security and Medicare. Most small
businesses will need to pay this tax, which is currently 15.3 percent.
• Payroll taxes. A small business must pay 7.25 percent of an employee’s gross
payroll. Unemployment and workers compensation taxes may be extra.
• Capital gains taxes. This is taxation on investments or sale of your assets. Assets
held for more than a year are taxed 0, 15 or 20 percent, depending on overall income
(higher rates apply to higher incomes). Assets held for less than a year are
considered part of the business’ income and taxed according to income brackets.

Taxation benefits for SME sector:

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Reduce your tax liability by accounting for interest paid
• When you take an SME loan for your business, you can reduce your annual tax
liability via the interest component of the loan. The interest you pay on the loan is
the cost of borrowing the loan. This amount is what you pay your lender in addition
to the principal you have borrowed. It counts as a business expense and lowers your
taxable amount, in turn reducing your tax liability.
Claim depreciation on assets
• Over time, the value of the assets you purchase reduces or depreciates. This happens
due to general wear and tear and factors such as technological advancements. As a
taxpayer, you can claim this depreciation at the time of determining gains from your
business. In fact, as per the Income Tax Act, it is mandatory for you to compute
depreciation on your assets as per the rate prescribed for various asset classes. Here
are a few examples of depreciation rates applicable for FY2019-2020: 10 per cent
on fittings and furniture, 60 per cent on computers and software
• Small enterprise is allowed subject to a maximum of Rs. 20 lakh deduction for
depreciation on plant and machinery on the diminishing balance method.
Enjoy the benefits of the input tax credit on the purchase of capital goods
• As per the GST regime, you can enjoy a tax benefit when you purchase capital
goods for your business. These are assets such are at the core of the product or
service that you create. So, whether you use an SME loan to purchase machinery
or vehicles, remember to claim the input tax credit and thereby lower your tax
payments.
• However, keep in mind that while buying an asset, if you claim depreciation on the
GST paid, you can't also claim the input tax credit.

*****

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