Prof.Dr. C.U.

Saraf
7Oct-2014
MIT ED Syllabus
PGDM 2014-15
Session:- 1
Why do Entrepreneurship ?
To generate industrial and agriculture production
To satisfy the ever changing and expanding wants / needs
of customers that is the society
To generate employment
To do effective utilization of the available raw materials,
minerals and natural resources..?
To contribute and economic development of the country
When industrialization takes place, the country develops
via production sector; service sector and communication
sector via development of IT (that has revolutionized the
work style / culture, methods)
ED helps in improving quality of life
ED helps in improving medical facilities, diagonistic
instruments operation facilities- hospitals
ED helps in improving the standards of living
It

gives

opportunity

international

to

business,

visit

foreign

see

and

countries,

learn

do

advanced

manufacturing technologies, visit new factories, market

places, trading centers etc
1

 Visit international trade fares/ exhibitions and participate in

IITFS
Can acquire foreign advance / novel technologies
Can start your own consultancy services ( bankable
proposals , market surveys, drafting of commercial
agreements, settling industrial disputes etc )

Reasons for growth of entrepreneurship

1. Number of service job have become less . Highly paid jobs
are few and difficult to get
2. Small innovative technology based firms are now able to
challenge larger companies
3. De-regularization and privatization ; now companies have
to deal with less number of licenses

and fewer

government controls
4. FDI

policy

of

government

of

India

encourages

entrepreneurship
5. Formation of new business communities ; recent advances
in IT has made inter-firm co-ordination relatively cheaper
compared to intra firm coordination.
6. Thus, business exchanges such as Alibaba.com

help

small firms to be competitive and this has promoted

setting up of new small firms in the new age business
communities i.e. the younger generation of today

7. Increasing demand for variety : demands for a variety of

new products and services is very advantageous for
growth of smaller firms (starting innovating services such
as home delivery of medicines, process food items,
vegetables and fruits, travel tickets reservation and
catering services )
8. Their has been a tremendous growth of service sector- one
can become a service entrepreneur
9. Government incentives and subsidies given by both the
state and central government. These incentives are sectors
specific (tax breaks, preferred sourcing, grants, tax
holidays etc )
10. Increasing flow of information : thru internet- google and
yahoo one can become a business consultant (project
reports, re-sourcing of technologies )
11. Easier access to resources for getting bank loans, debit
and equity finance than ever before
12. Entrepreneurial education provided by state and central
governments

as

also

by

many

universities

and

management institutes (MCED)

13. Return on innovation
14. High regards for self employments
15. Rising dissatisfaction at jobs
16. Companies reemploy ex-entrepreneurs

Session 2/3: Understanding Entrepreneurship

Defination :
- Many acceptable definitions of
vary lot in focus.

Entrepreneurship they

- Word Entrepreneur derived from

entreprende. i.e. to undertake.

the

French

word

- Who organizes, manages and assumes the risk of

business/enterprise, as per BBC Engl.Dic., is a starter of
business sets up a business.
- Takes risks of running an enterprise by paying certain
price for securing and using resources to make a product
and (re)selling the product for an uncertain price (by
Richard cantillion, 1680-1734)
- Austrian economist Joseph Scumpeter (1883-1950) defined
it clearly. Entrepreneur is an innovator playing the role of
a dynamic businessman adding material growth to
economic development.
- Harvard Business Schools Entrepreneur definition is
generally accepted by many authors now, Entrepreneur is
the process of creating of seizing an opportunity and
pursuing it regardless of the resources currently
controlled(Timmons 1994).

Role of an Entrepreneur
Entrepreneurs plays various roles
1. Assumes uncertainly associated risk ( risk bearer)
2. Supplies financial capital (organizes, generates fund for
edp activity).
3. Starts of a new venture
4. Owns an enterprise
5. Allocates resources among alternative uses (resource
allocation)
6. Employs factors of production (generate employment)
7. A decision maker
8. Has leadership qualities (given directions how to do a job)
9. A person who manages (Mgt. of day to day production
activities, public relations, customer and suppliers
relations, manage customers satisfaction ,suppliers
dispatch, banking activities)
10. Is an organizer and coordinator of economic resources
11. Is an innovative person (innovator)
12. Is an contractor (undertakes, contractual responsibility to
complete an assignment / job order)
13. Is an arbitrageur ( who takes advantages of different prices
in other markets)
14. Motivator
15. Creator
16. Visualizer
17. Imitator
5

18. Manufacturer (technology machinery scientific knowledge)

19. Marketer(develop marketing strategic)
20. Sales person
21. Accountant / Businessman
22. Effective user of 3 M s
23. Exporter

Session 2/3
Reasons for Growth of Entrepreneurship

There has been a rapid growth of entrepreneurship the world

over

during

the last 15-20

years.

As

per

the Global

Entrepreneurship Report (2007), the entrepreneurship growth in

the Asian countries and particularly in Thailand and India has
been spectacular. The macro level reasons. (major) for a such
high growth are :
1. Industry Structure
Effective and efficient utilization of scares resources and
Technological

changes

favored

establishment

of

large

centralized industrial units. The fairly recent technological

advance shifted towards bigger role for small industrial
units/firms.

The

growing

competitiveness

gave

entry

opportunities for new entrants. The larger companies promoted

ancillaries and suppliers / vendors to get into entrepreneurship
activity directly.

2. New Technologies
Fundamental changes in Industrial structure, instability in the
markets led to decrease of mass production and towards
flexible specialization. The small technology- based firms are
now able to challenge larger companies who are still dependent
on economic scale (large scale production) empirical analysis
showed that small firms have an advantage over large firms in
highly innovative industries.
3. Deregulation and Privatization
This

policy

brought

phenominal

growth

fuelled

by

entrepreneurs (e.g China, India and many other countries) Now

companies have to deal with less (comparatively) number of
licenses

and fewer govt. controls. Many state owned

enterprises have been privatized. Private sector industries

played a greater role. Particularly in a development of
entrepreneurs.
4. Formation of New Business Communities
Because of development and use of innovative information
technology the cost of business transaction have become
substantially

low.

Coordination

now

has

been

quicker.
8

Business exchanges such as alibaba. com help smaller firms to

be competitive & it promotes led setting up of new firms in
new-age business communities.

5. Increasing Demand for Variety

Of

product and services has been advantageous to smaller

firms being innovative coming up with new product (Prusa &

Schimts 1991) because of changes in consumer tastes and
preferences. People are inclined to specialty products to meet
their specific needs.
6. Service sector

There has been a tremendous growth of service sector in the

last 15-20 years in India and the world. These has promoted
entrepreneurial activity across a number of service sector
industries. Apart from travel tourism ,hotel management, event
management, new industries such as software and business
process out sourcing(Dev.of testing processors, market survey
etc) have emerged in a big way.
9

7. Government Incentives and Subsidies

There are many. Details in Vasant Desais book on ED.
8. Increasing Flow i.e. exchange of information
Internet, search engines (Google, Yahoo)

9. Easier Access to resources

Contact and processing with suppliers of RMs components,
getting Bank loans has become easier.
Purchase of equipment machinery has become more easy.
10. Entrepreneur

Education

MCED

etc.in

India

and

Management Institutes
11. Return on Innovation : Return on IPR is substantial and its
major boost
12. Entrepreneurs get social recognition thereby special statues
(Ambanies, Narayan Murty etc )
13. High regards for self employment
14. Dissatisfaction at the present Service Job

10

23/10/2014
Entrepreneurial Characteristics

General characteristics
1. Commitment and determination : eg. Uncertainly of project
selection. Project selection not done system a tically (
collapsible tubes, toothpaste to prevent cavity formation,
energy milk sugar-free ice-cream etc. Failures )
2. Leadership : be able to give direction / advice to team
members , employers for how to solve the problem or
overcome difficulties.
Eg 1. getting bank loan sanctioned
2. get consumer acceptance
3. successfully negotiate
3. Opportunity obsession : be able to exploit the opportunity :
Feather touch D.T.C.
i) Unable to exploit
ii) Simultaneous operation of tackometers to check R.P.M. of
Two Railway engines
iii) Development of Novel cough syrup using naturally
occurring R.M. eff
11

4. Tolerance of Risk ambiguity & Uncertainly quote competitive

and or even low price to get a purchase order e.g. Magnetic
pickups.
5. Creativity Self reliance and ability to adapt : dependent on self

6.Motivation to excel : Sales people i) awards ii) facilities

iii) promotion iv) Bonus
23/10/2014

Based on individual demographic and cultural background.

1. Being and off spring of self-employed parents
2. Being fired from more than one job
3. Being an immigrant or a child of immigrants
4. Previous employment in firm with more than 100
people
5. Being the eldest child in the family
6. Being a college graduate
7. Confidence within himself
8. General awareness about business related activities
awareness

of

Mkt

size,

location,

Mkt

social

requirements
9. Be mobile, alert
10. Should be resourceful financially, technologically &
commercially.
11. Be aware of technological sources, know-how
12. and should understand what is Technology Transfer
12

13. Be prepared to make business combinations

14. Small scale entrepreneur is an Inventor, Founder,
Technician,

Manager,

Salesman,

Technocrat

and

Accountant and a Clerk of his enterprise

How to solve the Case Study

A methodology could be followed. First thing is to see whether
case study question is compulsory and how many marks are
allotted to it. Usually for a compulsory question the marks are
between say ,18 to 22 .
For compulsory question you should reserve more time
say about 40 to 45 minutes . Distribute remaining time
equally for the remaining questions to be answered.

How to solve a case : A methodology

Read the case. Re-read the case .

Analyses the case. Narrate the case summarizing the
developments and situation in your own words.

Identify the issues involved i.e. identify the problems, and

developments given in the case.

Think deep , use your management knowledge and

industrial experience and identify the reasons that caused
or gave rise to the problems mentioned in the case

Find out possible solution/s to solve the problems with

logical reasoning.
13

Highlight

the best possible solution to overcome the

difficulties or solve the problems .Justify as to why you

think it is the best solution .

Give a meaningful title to the case.

One can also do the SWOT Analysis and then solve the
case. This however depends on the nature of the case.
(solve the given case study)

23/10/2014

Entrepreneurial Skills
1. Creativity and opportunity evaluation
2. Real- time strategy and decision making
3. Comfortable with change and chaos
4. Teamwork
5. Evangelicalism, selling, negotiation through influence and
persuasion
6. Oral and written communication
7. Basic of accounting, business laws rules and regulations,
business plan start up of finance.

14

23/10/2014

Types of Entrepreneurs
Classification based on the Timing of Venture Creation
Early Starters
Experienced
Mature
Based on Socio-cultural Variables
First Generation Entrepreneurs
Entrepreneurs from Business Families
Minority Entrepreneurs
Women Entrepreneurs

Based on Entrepreneurial Activity

Novice
Serial Entrepreneur

Portfolio Entrepreneur

Why Start a Business ?

- Quest

for new venture creation and to sustain it is a

Motivation to start a business / entrepreneurship its a

dream to own a business and run it. But before you start,
explore the reason before you commit your time, money
and resources.
- Common reason to start a business
15

Control
- You do not like to have a boss / work-under anybody
- You want to be your own boss and make ur decisions
exercise ur own free will.
-

The Idea : U want to revolutionize the world

- Money : is the oldest and most common reason (e.g. NCL

e.g. I have M. U do all the things!) to become wealthy,
people get money through business. As per one estmate,
the success rate is ~ 10% and many successful ones have
achieved success in business very late!
Many
hate their present service job and become
businessman, but are not really successful they are neither
here nor there. They simply want to escape from service
job.
- Therefore begin by defining ur primary goal, plan and think
what u want to be /get from business in the long term and
in the short term.
- Also think what you want to achieve personally, financially
and professionally; when you are ready to retire, will be
pass the business on to ur children or shut down or sell it?
It is hard to give equal weightage to the goals of
maximizing income, working part or full time and having no
debt at the time of retirement.
Advantages and Disadvantages of running ur business
- Advantages
U are the boss, All profits are yours, There will be great
variety in roles and tasks, increase self confidence, work can
be very satisfying, success will give you immense
satisfaction
- Disadvantages
U are alone, All decisions are yours, All losses are yours,
work may not be satisfying, you will need to put in long hours
for work; lack of success will affect self- esteem, Exit from the
business is difficult, pressures will affect ur social and family
life.
16

SOURCES OF BUSINESS IDEAS

Business idea can be everywhere around us. One may
evaluate the ideas that struck and choose 2 or 3, do costbenefit analysis do brain storming and select one of them.
Various sources of ideas:
1. Past experience i.e. u are professionally experienced,
developed contacts within and outside picked up skills,
received training in specialized field. analyze the situation,
think if your former employer can be a potential client. ( e.g.
intrapreneur) thus you are at an advantage.
2. Hobbies and Interests : Explore formal hobbies e.g. if u are
interested or playing cricket or badminton, u can start a
sports goods shop, become a trainer organizing training
camps. If you like traveling to see places of tourist interests
you can start tours and travel agency.
3. Strengths and Abilities : List ur strengths and weakness, ask
your real friends / relatives to help analyze. e.g. list ur top ten
accomplishments, list ur skills and personal attributes u have
applied to achieve those- the more commonly occurring are
ur major strengths.
U may find that u are exceptionally v. good at compiling and
analyzing the information and data or v. good at negating.
Based on your educational qualifications u can start a
business selling books, specialized items to educational
institutes, business.
4. Friends and Families : They might have thought of starting a
business share with them take advantage of their experience
& interests to generate ur business idea. Form business focus
group, invite some real expert from the field u want to enter.
5. Distribution Channels : Retails and distributors are closest to
Consumers/customers. They know consumers behavior,
habits likes/dislikes and preferences. They can tell you which
product or products are doing well in the market or even
can have suggestions for completely new product / business
idea.
17

6. Travel ; when u travel to different parts of the country / or

foreign countries, see different ways of doing things or
products or services which may work at home town. See
super markets gazing at amazing new products / you get new
business ideas. You also get novel ways in dealing or
servicing people in long ques/crowds.
7. Books and Magazines : one can pick up a lot from business
publications and periodicals. They write on current trends in
industry, best practices, legal issues, you also see brain
catching advertisements ( e.g. packing material)
8. Current life style : e.g. Double income families may mean
creation of greater demand for home security, crches, ready
to eat products, door delivery etc.
9. Research Organizations : These such as CSIRs Labrotories
and Research Institutes develop technologies that are
licensed for commercial use. Based on ur technological
qualifications or business experience, trading and the
financial & other back-ups you have, you can get they
technology at a comparatively low price and start commercial
production and do business.
10. Start your consultancy firm : e.g. undertake market survey,
project feasibility study, act as a profession advisor to would
be entrepreneurs.

18

21/ 10/2014
A

BUSINESS PLAN
Business plan : talks about entrepreneurial finance. Has to
be drawn up determining sources and uses of funds for the
proposed business / entrepreneurial activity.
Define Purpose e.g. using b.p. to secure bank finance
attract (strategic) partner. Customizing be done.
Do the business research properly -

Mkt res. ;

Competitors; Substitutes; cost -estimates;

Get the plan reviewed by a third party
B.P. should normally include:
1. Company details :
i) Document related to co. formation
ii) Shareholding details
iii) Permits and Registrations
2. Management :
i) Organization chart
ii) Details of key employees
iii) Consultants and advisors
iv) Compensation & other employee agreements
3. Industry and competitors : Mkt statistics, reports on trends,
competitors data and customer surveys

19

B
4. Operations : Product specifications ; contract and purchase
orders for RMs. Competitive advantages ; Details of IPR,
Regulatory approvals; Industry standards as per regulations;
plant

layout

and

Operation

plan

and

Research

and

development plans technology up-gradation , upgrading

product performance;
5. Marketing and Sales : i) Marketing Plan ii) Advance purchase
order (if any) iii) Marketing / Product / Sales promotion materials
6. Financial information : (i) Data on fixed and variable costs to
be incurred (ii) Financial forecasts.
Note :

The above is not an exhaustive list of BP contents.

Additional data may be required depending upon the nature and

type of business and as per the requirement of ur company.
Eg : - Description of the business
- The Management Team
- Industry & the Market
- Marketing Plan
- Risk and Contingencies
Appendices

Graphical

representations

of

schedule,

milestones & dates.

- Location photographs; Factory and plant layout, production
process

(details

summary)

Findings

conducted photograph of product or

of

market

surveys

prototype, mock-ups of

advertisements storyboard.

20

C
- Projected balance sheet, Profit and loss account, projected
cash flows
- Sensitivity analysis of P&L account, breakeven analysis and
and financial ratios.
Prof.Dr. C.U.Saraf
MITSOB : ED
29/10/2014
ED : Business Planning, Marketing Plan
Decide business mission i.e. target major customers and
become their suppliers / vendor of chice e.g.
i) book seller becomes major suppliers of educational books
and journals of say 20 Management Institutes
ii) become mechanical industrial units (say > 10) vendor of
choice for supply of key instruments or components required
by them
iii) become importer of choice of fresh vegetables and fruits to
major buyers in say gulf countries

while doing this do our own SWOT analysis and select the
businesses for which ur business unit has financial, personnel
(both technical & managerial) and technological as also
managerial capacity and capability; and find out the business
opportunities.

21

- Can make a customized product and /or service for this

conduct a thorough Marketing Research and then decide
ur business mission.
- Formulate ur Business goal what u want to be
- Formulate ur Marketing Strategy w.r.t. i) Cost leadership
i.e. achieving lowest production and distribution costs so u
can price lower than competitors ii) quality leadership i.e.
make components and finished products with best
components using best possible production, assembling,
inspection processes .i.e. establish

differentiation iii)

focusing ur business with one or more narrow market

segments.
- If desired, make strategic alliances

Formulate ur marketing programs and implementation

w.r.t.
i) participating trade show national and international trade
exhibitions, sales contests, hiring competitive sales persons
ii) nurturing stake holders customers, employees, suppliers,
distributers so as to earn sufficient and increasing profits. For
this establish customer relationship, employee relationship
employer them. Create high-level customer as well as employee
satisfaction.
iii) sales target, market share

- Take regular feedback and control

w. r. t. planned

business activities, marketing strategies and customers

22

satisfaction; and then take corrective action/s relating to

ever changing marketing environment. Ensure that you
mould modify your business plan and policies, marketing
strategies that suit and are fit with business environment.
Sample Typical Marketing Plan Contents
- Executive Summary
- Situation Analysiss w.r.t. type of customers, competitors,
company

i.e.

capital

investment,

installed

capacity,

production capacity, capacity utilization

- Context

estimated

present

and

future

demand

considering demographic analysis and buying power of

customers.
- Market Opportunity and related issues

considering the

total estimated consumption per month for total number of

customers and working out possible production capacity
depending on availability of raw materials & persons.
- Business Objectives i.e. total sales per month, quarterly,
six monthly to be achieved and the at the end of 1st.2nd &
3rd year.
- Marketing strategy formulation of mktg strategy to achieve
objectives.
- Take re3view and control w.r.t. Revenue and unit sales,
Expenses, customer feedback, check competitive major
activities and
- Also make contingency plan relating to pressures on
prices due to competition and strong buyer power because
its impact will be on profitability & BEP
23

26 / 10 / 2014
Classification based on socio cultural variables
1. First Generation Entrepreneurs : are the entrepreneurs whose
parents / families have not been in business and were in
salaried service. So change of economic policy of India (
1993-94 onwards ) lot of business opportunities were and are
generated so de-regularization, privatization e.g. Dhirubai
Amabani, Narayan Murthy .
2. Entrepreneurs from business families : Traditionally there are
some socio- ethnic groups in the society who have dominated
the business in India. Prominently, the Marwadi, Gujarthi,
parsee,sindhi and chetiyar communities. The Tatas, Birla
Wadias, Murugappas, Singhanias are all such communities.
Business is in their blood.
3. Minority Entrepreneurs : are small ethic groups that have
traditionally not ventured

into business. But it became a

must for them to venture and create enterprises. e.g.

Dominant parsees started of as ship- loads of refugees on
costal Gujrat . Also distinctly low-levels of entrepreneurial
activity are seen among trials of central India the hill people
of North-East and some socio economically backward classes
also do entrepreneurial activities.
4. Women Entrepreneurs
24

5. Notice Entrepreneurs : Vishwambar Saran started his first edi

venture very late after during 35 yrs service in Tata steel
started his visa steel has a turnover of Rs 400 crore now
6. Serial Entrepreneurs is the one devoted to one venture at a
time but ultimately starts many. Mr. Rakesh Mathur IIT
Mumbai started webrow which enables easy offline surfing on
the net. this is his lasted venture in a series of successful
ventures with great names such as Aramadia, Purple Yogi
and Jungunlee. He sales off his ventures before moving to the
next one. His most high profile sale is Jungunglee which is
sold to Amazon.

BUSINESS IDEA EVALUTAON

Business ideas can come from ourselves, past experience, our
hobbies and interest, our strengths and abilities, friends and
relatives, distribution channels, travel, books and magazines,
life style and research organization- the R&D Institutes. ( e.g.
Tapstry, sports shop, logistics, courier services, tours and
travels, life-style crches, ready to eat products, door delivery
services and a visit or visits to R&D gives us a business idea.
Also from distributors you can find out a product that is in real
demand.

25

Having got the business ideas you must do business idea

evaluation. In this the following questions may be useful.
Q1. Which is the product or service?
- Focus on the need of the customer. Develop a product that
will satisfy need of the customer.
- Market needs must be carefully assessed for this consult
industry or business experts or even potential customers (
short length magnetic pick ups, spice oleo resins,
reinforced plastic materials, PPS etc.
- Assess if the market segment is willing to by your product /
service at the price are you have offered.
- For this do market segmentation in terms of demographic,
geographic, psychographic and consider their life style.
- At times you may have to modify current behavior of your
customer and or modify your offers to satisfy the customer
needs ( e.g. door delivery, selling in installments, offer
tours/ hotel accommodation at substantially discounted
rates especially during

off season e.g. Mahableshwar

tours in a rainy season with attractive tour events prizes

etc.
Q 2. what is the Business Model ?
BM describes various aspects of business. It may include a
detailed product description and an overview of how it is
going to be produced and delivered to the target customers.
Also check if the intended business will develop superior
organizational processes, capabilities or resources compared
to its competitors (e.g. better DTCs, pesticidal formulations
26

life saving drugs, anti diabetic, higher fuel efficiency

automobile etc ) .Also work out profitability estimates.
Q.3 How big is your Market ?
i.e How many total customers are there?
The answer will give you the size of the Market. Then find out
How many will buy from you ? What is there buying power
etc. This gives you your share in the market (e.g. foot-ware
boots in South- Africa). Also a certain How many such
customers can de convince to buy your product .
3 How much investment is needed ?
The above judgment would give you an idea as to How much
investment

is

needed

for

the

business

taking

into

consideration. The annual turnover, fixed and working capital

needed, and all other expenses to

start and run the

business. Based on the above estimates you can decide

whether you have enough funds, or you are bringing partners
who are willing to invest in the proposed business, or
whether you should take bank loan / or from financial
institutes.

But

insure

that

you

are

comfortable

with

investment requirements and the manner in which you have

decided to generate the funds and make repayment of the
loan.

Q.4 How can you protect your business from existing

competitors and likely entrants ?

27

To answer this question, ascertain if you have strength which

give you the survival advantage. Your strength is your
products cost and production, advanced manufacturing
technology, superior product quality, dedicated marketing
staff-

sales

people,

dedicated

channel

members,

and

proprietary assets such as process patents, copy rights and

trade / core technology secrets. That is you have business
strengths which can not be easily duplicated or emitted by
competitors.
Second important factor is you must know the people in the
industry / business firms their igo, there likes and
sicknesses. Develop contacts with the key persons in the
industrial units and maintain those contacts with them. Also
develop contacts with suppliers, vendors , competitors and of
course with the government departments- both the central
and state and

the agency authority. Remember that the

number and quality of such contacts up and down the value

chain is an important determinant of business success.

Q,5 What are you going to get out of the business ?

The answer to this question will tell you that the proposed
business should be big enough to make it worth for you and
that you are proud of running that business. It should give
you satisfactory returns on your investment. There should be
reliability of the profit that you get. Remember the payback
period is the time it takes to get back the amount you have
28

invested. Usually any business that gives you back your

money within 3 yrs or so is considered Okey . it is also
reported that the business which pays you back with in a year
is superb! (on this statement I have some reservation ) on the
whole the business should be such that it survives in the
dynamic market environment conditions. That the business
gives optimum profit, it grows, it achieves sustained growth,
later expands horizontally or vertically is the real business
I think.

28 / 10/2014
SWOT ANALYSIS

29

- Tool to assess the overall strategic position of a start up of a

firm to undertake a business activity .
- Strengths and weaknesses are internal in a business / firm
- Opportunities and treats are external factors for example, one
can state the following factors as SWOT.

Strengths
- Technological superiority
- Low fixed costs
- Creativity
- Competitive capabilities R&D platform ; update knowledge of
market
- Leadership
- Proprietary know how
- Location nearer to the market.
Weaknesses
- Absence of talent or skills i.e. weak human capital
- Lack of cash / funds
- Poor distribution network
- Non-availability / non-adaptation advanced technology
- New (unproven) product / services
- Weak brands
- Location away from market or at remote place
Opportunities
- New market requirements / changing customer tastes
- Changing technology
30

- Downsizing of competitors
- Foreign markets
- New and efficient distribution network (Internet)
- New tax structures
- Effective utilization of technological advance
- Buoyant economic conditions

Threats
- New competitors
- Depressed economic condition
- Changes in govt. economic industrial policy
- Additional (new) taxes ; lower tariffs
- Closing of markets
- Unfavorable public opinion
- Use of new technology by the competitors
- New government rules and regulations
- Change in customer needs

31

28 / 10/2014
DOING BUSINESS IN INDIA
- Entrepreneur should be ready to deal with uncertainly with
greater degree than in advanced countries. Business
expansion in foreign countries is comparatively easy than
in India. Further more, de regularization, privatization,
rationalization of taxes and tariffs are underway in the
country. There is a crippling inadequacy of current
infrastructure in India.
Major Issues :
- Bureaucracy : There are large number of procedures to be
followed and clearness to be obtained consume a lot of
time and money before one can start and operate a
business. Therefore they result in time and cost overruns
and there is inordinate delay in project startup. Secondly,
lack of resources is again the major problem faced by the
entrepreneurs and new ventures find it very difficult and
taking to divert time and attention to time taking procedural
work and get the job done. Save time and botheration.
- Corruption : It is a bitter truth that corruption is rampant in
many government departments and in private sector also.
We should make a collective effort to curb this social evi.
Its a challenge to the entrepreneurs and business people.
Its reported that people pay money to get something extra
over and above what is done to them as per rules. Some
follow ridiculous practices i.e. by paying money to ensure
that the competitors funds are not released from the bank.
There are many ways by which corruption is done.
Situation, it seems, is now changing and the corruption ,it
is hoped, will come down. The factors / reasons for the
likely change are :
1. There is a greater transparency in procedures. A
number of depts. have initiated e- governance
initiatives that decrease public interface with officials

32

by enabling registration, filling, payments &

registering complaints through internet.
2. The right to information (RTI) Act has significantly
given access of government records to interested
and affected public.
3. The media also has played active role by conducting
sting operations to expose corruption at many levels
- Labour : Low Productivity. Therefore in early ears several
MNS preferred to set up manufacturing plants in Thailand,
Mexico and China rather than in India. In spit of huge
population foreign countries cloud not set up manually
operated manufacturing facilities in India. The workers
different unions also contribute towards low productivity.
Moreover there are long breaks in work hours which result
due to bandhs, regional unrest
and breakdown of
supporting infrastructure. Also welfare measures restrict
long hours of work.
But comparatively, the Indian hour is cheap because of
low-wage structure. The manufacturing sector has taken
off in different industrial sectors and service sector has
shown a spectacular and sustained growth during the past
15 years. However there is shortage of skilled manpower.
There are not enough training institutes to train
employable youths on skills that are in demand in the job
market. The lack of elementary skills in many call centers
and BPO employees has been well documented by
NASSCOM and other industry surveys.
Also, stringent laws governing lay-offs make it very
difficult to fire workers in case of non- performance, or
during times of financial distress, industry recession.
- Regional sentiments : Many businesses have failed
because those business firms did not take into account
sentiments of the local population. Many successful
businesses, mainly internationals change the menu
( eliminated beef or pork items ) to secondly the local
sentiments.
Secondly the local community desires employment in the
factory ensure that the disposals do not pollute the ground
water. Also do not forget to spread the word about the
33

advantage of having the business in the vicinity of the

region, and that it would help to raise the standards of
living of local population, growth in employment possibility
of generating business for service providers e.g.
transporters, welding shops, setting up of small ancillary
units and that it will bring improvement in local
infrastructure such as roads electricity and in long term
also the possibility of setting up educational institutes,
hospitals etc.
- Grey Market: This refers to the unauthorized flow of goods
of e.g. smuggled goods (cell phones, other electronic
items, jewelry and alcohol) because the prices of domestic
products are very high due to high local taxes. For
example, In India the prices of cell phones used to be very
high but rampant smuggling promoted a change in the
taxes and prices, greatly reducing the differential between
India and Singapore or Dubai.
It is also true that in many parts of the country people
make living by selling pirated products, pirated copies of
software, movies, and video games to customers who are
fully aware that they are buying a pirated copy for a
fraction of the cost of legally procured copy. To overcome
this the manufacturers drastically reduces the prices,
warranties are not extended to the products that are not
purchased thru regular channels. In short, a new enterprise
of high quality goods has to think about an appropriate
strategy to effectively tackle the problems posed by the
gray market. Also remember that there are many shady
enterprises manufacturing fake labels, packages having
names similar to successful products e.g. washing powder,
Surf.
- Social capital : people like to do business with people they
know. They may be either in industry or government
departments. Entrepreneurs should see that this
relationship does not preced over the business ethics of
fared business rules, that it does not lead to cronyism and
nepotism and ask for special favors.
Also there are many examples of businesses being setup
by NRI in India e.g. Hindugas Ashok layland, investments
made by L M Mittal in a Jharkhand and Orisa. They are also
34

the sources of the overseas link for many aspiring Indian

entrepreneurs and businessman.

1.
2.
3.
4.
5.
6.
7.

TYPES OF ORGANISATIONS:
Sole proprietorship
Partnership firm
Company
Limited liability partnership
Small companies
Medium scale & large companies
Franchises

13 / 11/2014

Case study : Systematic analysis of the case and

logical
reasoning will have more weightage.
U.S, Pharmaceuticals, Inc. (A)

U.S, Pharmaceuticals (USP)is a U.S. firm with about 30 percent

of its sales outside the United States. USP concentrates on the
ethical drug business but has diversified into animal health
products, cosmetics and some patent medicines. These other
lines account for about one-fourth of USPs $800 million sales.
USPs international business is conducted in some 70 countries,
mostly through distributors in those markets. In six countries,
however,
it
has
manufacturing
or
compounding
operations.(compounding refers to the local mixing, assembling,
and packaging of critical ingredients shipped from the united
states.)
USPs
only
Latin
American
manufacturing/
compounding operations are in Latinia, a country with a
35

population of about 30 milion. Some products are shipped from

Latinia to other Latin American ,markets.
USPs latinian plant is operated by the pharmaceutical division.
It is engaged in the production and especially the compounding
of USPs ethical drug line. It does no work for other USP
divisions(cosmetics, proprietary medicines and animal health).
All the other divisions, which also sell in Latinia, exports their
finished products from plants in the united States. The Latinian
plants employs 330 people, of whom only two are North
Americans - the genral manager, Tom Hawley, and the director
of quality control, Frixos Massialas.
USPs cosmetics and toiletries business accounts for $150
million in sales and is handled by a separate division Cosmetics and Toiletries. The division sells in only 38 of USPs
70 foreign markets. One of the divisions better foreign markets
is Latinia, where it has sales of over $8 million and an
acceptable market position. Cosmetics and Toiletries has a
marketing subsidiary in Latinia to handle its business there. Jim
Richardson, an American, heads the subsidiary. The rest of staff
are Latinias.
Jim Richardson was very disturbed by the latest news received
from the Latinian Ministry of International Trade. Traffic were
being increased on many nonessential products because of
the balance of - payments pressures the country had been
undergoing for the past year and a half. For USPs Cosmetics
and Toiletries, specifically, this meant a rise in the tariffs it pays
from 20% to 50% ad valorem. The 20% duty had posed no
particular problem for Cosmetics and Toiletries because of the
prestige of the imported product and the consumer franchise it
had established, Richardson explained. He believed, however,
that the 50% duty was probably an insurmountable barrier.
Cosmetics and Toiletries competition in Latinia was about
evenly divided between local firms and other international
companies from Europe and North America. Jim believed that
local firms, which had about 40% of market, stood to benefit
greatly from the tariff increase unless the international firms
could find a satisfactory response. When Jim received the news
36

of the traffic increase, which was to be imposed the first of

October one week away he called a meeting to consider what
Cosmetics and Toiletries could do. Deborah Neale, manager,
Cosmetics Marketing, and Emilio Illness, manager, Toiletries
Marketing, met with Jim to discuss the situation.
Several different courses of action were proposed at the hastily
called meeting. Deborah suggested, we could continue
importing, pay the high duty, and change the positioning
strategy to appeal to high-price, quality market. Another idea
was to import the primary ingredients and assemble
(compound)and package them in Latinia.(Duties on the imported
ingredients ranged between 10% and 35% ad valorem) Emilio
suggested asking Cosmetics and Toiletries in the United States
for a lower price on the products shipped to Latinia so that the
duty would have a lesser impact on the final price in the local
market. Jim mentioned the alternative that none of them wanted
to think about. If we cant compete at those high prices, we may
have to give up the market.
Questions
1. Evaluate the alternatives
meeting.

that were brought up at the

2. Are there any other possible courses of action?

3. Propose and defend a course of action.
4. How would your response differ if, instead of a traffic
increase, Latinia had imposed a quota cutting the imports
of these products by 75% ?

37

Prof. (Dr.) C.U. Saraf

MITSOB: PGDM
ED 09/11/2014
LEGAL COMPLIANCES
Entrepreneur has to comply with several laws
Following are the must comply with
Income Tax: The entrepreneur must file return of Income on or
before 31st August. Following the end of the financial year
(subject to revision)
1. No separate Income Tax compliances are required if the
proprietor is already a tax payer. His proprietary income
must be added to his/her other income on which income
tax must be paid in installments according to the
provisions made in the Income Tax Laws its rules and
regulations. If the proprietor is not already a tax payer or
does not have a Permanent Account Number (PAN), he
must make application for PAN.
2. A partnership firm and a company must prepare annual
accounts, determine income, pay income tax thereon, and
file returns of Income Tax every year. In case of
partnership, Income Tax must be paid during the year on
estimated income in installments as per the provisions
made in the Income Tax Laws. A company must pay
advance income tax on estimated income in installments,
as per Income Tax Law provisions.
3. A partnership or a company must also deduct income tax
at source on certain payments made by it and pay it to the
Government. For this, the partnership firm or the company
must apply for a Tax Deduction Account Number (TAN)
Sales Tax:
The entrepreneur must obtain a Sales Tax Registration Number
from the concerned authorities. If the sales and/or purchases are
38

both within and outside the state, both the Central Sales Tax
Registration Number and the Local Sales Tax Registration
Number must be obtained. If the sales are within the state, CST
Registration Number need not be obtained. Some Municipal
Bodies impose Octroi or entry tax on entry of goods.
Sales Tax has to be paid either monthly, quarterly, half yearly
or annually depending on the turnover. Also a Sales Tax
Return has to be filed. The details of Sales Tax are given in
the respective Sales Tax Laws of each State. In most States,
Value Added Tax (VAT) has replaced Local Sales Tax. VAT
seems to be an improvement over the earlier State Sales Tax
regimes. There are five slabs of VAT
- Zero percent for essential commodities
- 1% on bullion and precious stones
- 4% on industrial inputs and capital goods and items of mass
consumption
- 12.5% on all other items
- Petroleum products, tobacco, liquor, etc. attract higher VAT
rates, which vary from State to State.
But VAT is the standardization of rates and procedures across
the country [For more details on VAT, refer to the books
recommended on the subject].
Profession Tax:
Entrepreneur has to pay Profession Tax at the rates
prescribed in the Laws of each State. These are generally
one-time payments. Entrepreneur must obtain Profession Tax
Registration Number. Also the entrepreneur has to deduct on
monthly basis a fixed amount of Profession Tax from the
salaries paid to the employees and pay it to the Government
on behalf of the employees. For this, a separate Registration
Number i.e. Entrepreneurs Registration Number must be
obtained. Profession Tax is to be deducted only if the salary
of the employee exceeds at a certain amount. It varies. For
example, in Maharashtra, Profession Tax is payable only if the
salary of employee exceeds Rs.20,000/- (?) per month.
39

 Central Excise:
Central Excise is paid on manufactured goods; Excise is not
paid on services. The Central Excise is payable on the
following characteristics / criteria
1. The goods must be manufactured
2. The goods must be movable
3. The goods must be marketable
4. The goods must be notified in the Central Excise Tariff Act
In India, Central Excise is implemented as per the Central Excise
Act and several other rules and notifications pertaining to it.
Excise Registration Number must be obtained if the business is
manufacturing of goods that come under Central Excise. The
following steps are beneficial while paying the Central Excise
(1) Give bills directly to the buyer; (2) Advice all distributors and
dealers of your products to be registered; (3) Avail of SSI
concession if your unit is eligible; (4) Know your product
properly so that Excise Tax is appropriately levied i.e. say in
lower slab; (5) Avail of concession under CENVAT (In India,
CENVAT is used to minimize the effect of cascading taxes.
Accordingly, the manufacturing firm can reduce Excise payable
by an amount equal to the Excise paid on the inputs used in the
manufacturing of the end product).
Company Law:
These provisions are applicable only to companies. In this
several records and registers have to be maintained by a
company. A company must file copies of its Annual Reports
each year with the Registrar of Companies. The Annual
Report shall consist of Profit & Loss Accounts, Balance
Sheet, Auditors Report and Directors Report. Also, an
annual return has to be drawn up showing changes in
shareholding patterns and changes in the Directors. The
Annual General Meeting of all members must be held each
40

year. Board of Directors meetings must be held in each

quarter of the year.
Import Export:
R5
Import-Export Code Number (IE code) must be obtained from
the Directorate General of Foreign Trade (DGTD) under the
Ministry of Commerce & Industry. IE code is necessary for
receiving and making payments for goods or services in
foreign exchange and to get incentives. The exporting firm
must register with appropriate Exporters Body i.e. for export
of sea-food, the registration must be obtained from Marine
Products Exports Development Authority (MPEDA). There are
different export bodies for different export items. A software
firm must be registered with Regional Branch of the Software
Technology Parks of India (STPI) to avail exemptions in the
Income Tax. Also the exporter must adhere to the guidelines
laid down by the Foreign Exchange Act (FEMA).
Labour Laws:
These Laws have been enacted to safeguard the welfare and
interests of employees. The following gives an overview of
some important aspects of Labour Laws
- Provident Funds Act applies to all business establishments
employing more than 20 people. It provides for compulsory
savings for the employees. It is the responsibility of the
employer to deduct the Provident Fund amount from the
employees salaries and deposit it regularly along with the
employers matching contribution.
- Employees State Insurance (ESI): The ESI provides for certain
benefits to employees in case of sickness, injury and
maternity. ESI is applicable to all industries employing more
than 20 persons and manufacturing without the aid of power
and employing more than 10 people and manufacturing with
the aid of power. In this case also, the employer collects the
41

amount from the employees salaries and deposits it along

with the entrepreneurs contribution.
The other important Acts are - Gratuity
- Payment of Wages Act
- Minimum Wages Act
- Contract Labour Act
- Factories Act
- Equal Remuneration Act
Pollution Control( Managing Sustainability):
There are several laws for protection of the environment. In
this context, the responsibilities of entrepreneurs are:
- Adhere to the various rules and regulations laid down by the
Pollution Control Act and not to create pollution during
production and disposal of effluents
- Not deviating from standards of pollution laid down
- Provide safeguards in handling hazardous / poisonous
materials
- Furnishing information on accidents immediately to the
concerned authorities
Large industries should obtain consent of the Pollution Control
Boards (PCBs) to set up the operations. SSI units need consent
for only 17 critically polluting sectors. In other cases, the SSI
unit has to only obtain consent from the concerned authorities.
Also under most circumstances, No Objection Certificate from
PCB authorities regarding air, water and soil pollution. Site
Clearance Certificate will also be needed. There are zones
marked where certain polluting industries will not be allowed to
be set up. Similarly, there are severe strictures against release
of effluents, dusts, vapours into air, water and in soil or into
atmosphere. We have discussed in the class examples of
effluents / pollution problems caused by of , J, H or B acid.
Which are the intermediates required in production of certain
dyes.

42

 Service Tax: Introduced in 1994 by the then Finance Minister,

Dr. Manmohan Singh. The reason being the service sector in
India grew faster, the share of service sector in GDP rose to
60% in 1994 from 30% in 1950. Sales Tax and Excise Duty are
levied on manufactured goods, therefore, in the interest of
parity, the service tax is justified.
Initially, there were only three services under service tax
Insurance, Telephony and Stock Exchanges. Currently, over
two lakh assesses in more than 60 different services pay >
Rs.10,000 Crores as Services Tax annually.
For entrepreneurs, at the commencement of the business, the
entrepreneur has to apply for registration under the Service
Tax Rules for payment of Service Tax. ST is levied at the rate
of 12% of the value of the services billed. ST is to be paid
quarterly on the 25th day of the month following the quarter.
For corporate bodies, the Sales Tax is to be paid monthly.
Returns have to be filed on a half-yearly basis. Electronic
filing of returns is also available for many categories of
services.
In addition to the above laws, there are a number of other laws
which the entrepreneur has to follow. In a year, there are a
number of submissions and inspections to be made such as
check on working conditions, stock, business records, checkup of weighing machines, testing labs, ventilations, first aid,
etc., and including Factory Inspectors surprise visits on all
and any of these.
The textbook has given (1) clearances required for setting up
of an industrial unit and (2) a list of laws important for an
entrepreneur on pages 116, 117 and 118. The students may
study the information provided and also update the data
given therein.

43

Prof. (Dr.) C.U. Saraf

MITSOB: PGDM
BM (a)
11/11/2014
Business Models
Introduction:
A Business Model describes the rationale of how an
organization creates, delivers and captures value. Whereas a
Business Plan is how the entrepreneur will execute the business
model. If the BM works as planned, the business is likely to do
well. The term Business Model is likely primarily used to
explain (1) strategic issues such as profitability, value chains
and competitive advantages and (2) Innovation. (3) Its also used
to address E-business or use of new technology in the business.
Components of a Business Model:
According to Johnson (2010), BM consists of for interlocking
elements
Customer
Value
Proposition

Key

Key

Profit

Resources

Processes

Formula

These elements create and deliver value.

- Customer Value Proposition (CVP)
The company (entrepreneur) has to provide / create a compelling
reason to buy its products or services. For this, the company
44

has to (find out) identify an important, unsatisfied customer

problem or job and propose the product / service which will
satisfy the customer need at an acceptable price (e.g. hotel
accommodation to business people, feather touch DTCs)
Thus, we can say, before developing CVP, the entrepreneur
must have real and practical understanding of what the job is to
be done or what is customers present and future requirements
relating to the performance of the job and service that will give
him 100% satisfaction i.e. the entrepreneur must explore why a
customer buys an offering (e.g. spice oleo resin, neem-based
pesticidal formulations, cough syrup obtained from naturally
occurring raw materials or a particular solar water heater
system, a specific water purifier, etc.)
The overall value of CVP depends on the following parameters
(a) How important the job or the problem is to the customer
(b)How satisfied are the customers with current solution
(c) What is the relative advantage of the new offering to the
previous offering (e.g. A polyethylene packaging bag to
house several testing equipment units and components).
- Profit Formula: PF defines how the business itself will make
money by providing value (additional) to the customer. The
PF has several aspects.
- Revenue model: How much money can be made: price x
quantity. Quantity can be in terms of market share, ancillary
sales, purchase frequency, etc. Various combinations can opt
for various combinations of amount of sales and realization of
sales. In this, the following points emerge
(1) At my price, how many customers will I have?
(2) How many units per customer per transaction will I sell?
(3) How many transactions per customer can be expected?
Answers and analysis of the above will help me to work out
my right price and expected turnover and profit.
45

- Cost structure: Here the entrepreneur will have to determine

the right mix of fixed costs and variable costs to ascertain the
overall viability of the proposed venture. He can consider
various options and choose the optimum mix of the fixed and
variable costs.
- Target unit margin: This refers to how much each transaction
should yield so as to cover overheads and achieve desired
profits at the target volume of sales. The target unit margin is
obtained from the revenue model and the cost structure.
- Perfect Velocity: It defines how quickly resources need to be
used to support target volume. For example, monthly sales of
a retail outlet may need to be about a quarter of its average
inventory, in order to meet its annual sales targets.
KEY RESOURCES: are the combination of people, raw
materials, technology and infrastructure required to deliver
the value to the customer. There can be several resources
that may include
- People
- Channels of distribution
- Technology
- Partnership,
Alliances,
- Raw materials
Franchise
- Equipment / machinery
- Funds
(type
of
&
their
- Intermediate products /
allocation)
items
- Licences and permits
- Information [Commercial] - No
Objection
Certificates/Clearances
- IPRs
KEY PROCESSES: The key processes ensure that the
profitable delivery of the CVP is reproducible and scaled up
for commercial practice. The key processes can be of the
following types

46

1. Processes such as designs, manufacturing (technology)

sourcing, quality control, hiring training people, etc.
2. Business rules and success metrics These connect
coordinate the elements of business model and keep the
operation systems in balance. These could be supplier
terms, e.g E.Cumins credit Quarterly terms, lead time,
margin requirements for investment, etc.
3. Behavioural norms: These refer to the socially determined
approach to business which is determined by the beliefs
and values of the entrepreneur and the industry. These can
include, required return on investment, approach to
customers i.e. business ethics, entrepreneurial culture.
BUSINESS MODEL CANVAS: Prepared by Osterwalder (2010)
has more components than the BM components proposed by
Johnson. The main differences are mentioned below
Difference between components of BM, as given by Osterwalder
(2010) & Johnson
(1) The importance of strategic partnerships was emphasized by
putting it as a separate component in BM Canvas. The
partnerships can include relationships with suppliers,
strategic collaborators and also Government Departments
and complementers.
(2) Instead of just talking about customers, Osterwalder split it
up into the following:
(a) Customer segments the specific set of customers who
find the CVP most appealing
(b)Customer relationship would have to grow, however, for
different types of businesses it may not be the same e.g. a
Grocer entrepreneur would want the same customer to
make purchases regularly but a TV seller or a two-wheeler /
four-wheeler seller would not want to see the customer

47

frequently. But both types of entrepreneurs want to satisfy

the customers.
(c) Channels: This refers to the channels used in
communicating with the customers and channels used in
reaching the product to the customers. The communication
channel should be flexible and allow two way
communication between the customer and the company.
Similarly the channels for distribution should be
appropriate channels for distribution should be appropriate
and designed to get customer feedback to know their
needs and bring out improvement in the services provided.
(3) Cost and Revenues: are shown as separate components in
canvas. In that its shown that costs come from processes,
resources, and partnerships, whereas revenues come from
channels, customers and customer relationships.

11\11\2014
INNOVATION, CREATIVITY AND ENTREPRENEURSHIP
By definition innovation is the introduction of a new
combination of factors of production which may occur in any of
the following forms.
a) Introduction of new product in the market
b) Instituting a new production technology which is not yet
tested or proven commercially
c) The opening of a new market for a specific product or
service
d) The discovery of a new source of supply of raw material
e) By designing a new form of organization of any industry.
We may further add doing something new or different is
necessary condition to be called a person as an entrepreneur.
That the entrepreneurs are constantly on the look out to do
something different and unique to meet the changing
requirements of the customers to satisfy them and do a
48

business. Such entrepreneurs posses the ability to foresee the

possibility of making commercial use of the inventions /
innovative ideas for their enterprises and also for the benefit of
the society. For example, to satisfy the changing preference of
customers, fruit juice is sold in small cartons (mango fruity)
instead of bottles so that customers can easily carry it and
dispose of the container after its use. Lipton Company offers its
tea in small packs knows as PUDIYAS to meet the requirement
of rural customers. Changing demands or preferences of the
customers is a continuous thing therefore entrepreneurs should
always think about innovative ideas to meet the customers
requirements.

Innovation: Some other commercial applications

Entrepreneur can be an innovator or creator. A product / service
developed by an entrepreneur may be a novel or new which was
not known earlier to the society. Its an innovation. Similarly a
product may be known, but if the entrepreneur has found or
developed its new application then again its an innovation.
There are many examples of innovation or Novel products.
Some are mentioned below.
1. Development of a controlled release drug or pesticide
formulation is an innovation though now it has
become a commonly known variety of drugs or
pesticide formulation (examples such as Omez,
Deriphylline tab, anti- diabetics CR tabs are well
known)
2. Reinforced plastic materials or polymeric compounds
developed have hundreds of application in industry
e.g. automobile components both for two, three and
four wheelers. They have tremendous tensile strength
3. A four step process when is modified or in which the
number of processing steps is reduced to two then
its an innovation or technology up gradation (e.g.
ethanol to ethylbenzene ) or take the examples of DipDip Tea, Sugar free ice-cream, Sugar free meethai
made by using natura, Solar water heater systems,
49

motors that runs consuming alcohol and or air as

fuel, even the four-stork engines, various electronic
panels ATM cards , online banking, Rail reservations
etc. which have now become very common are all
new or innovative but there are some limitations.
11/11/2014
ENTREPRENEURIAL PROCESS
Is the process through which a new venture/new business
activity is carried out by an entrepreneur. It involves more than
just problem solving in typical management position. An
entrepreneur must find out, evaluate and commercially utilize
the business opportunity by overcoming the difficulty / forces
that resist the creation of something new. The entrepreneurial
process, one can say has four distinct phases:
1. Identification and evaluation of an opportunity (e.g.
producing preparation and marketing of energy milk
powder for children, young ones middle aged and old
people)
2. Development of business plan
3. Determination of the required resources and
4. Management of enterprise. Although these phases
appear to proceed progressively, no one phase is dealt
with in isolation or is totally completed before work on
the other phase occurs. The activities in the phases may
start simultaneously. The components of the 4 phases
may be:
1. Identify and evaluate the opportunity
Opportunity assessment
Real and perceived value of opportunity
Risk and returns of opportunity
Opportunity Vs. personal skills and goals
Competitive environment

50

2. Develop Business Plan Major sections

Description of the business
Description of industry
Technology availability / development plan
Marketing plan
Financial plan
Production plan/ schedule
Organization plan
Operational plan
Executive summary
Appendices / Exhibits
3. Resources Required
Determine resources needed
Determine existing resources
Identify resources gaps and
Find out available suppliers
Develop axes to needed resources (These would by
financial, technical, managerial w.r.t. 3 Ms)
4. Manage the enterprise
Develop management style
Understand key variables of success
Identify problems and decide their priority
Implement control systems
Formulate growth strategy.
11/11/14
Dr. C.U. Saraf
MITSOB : PGDM
Corporate Entrepreneurship
What is a corporation?:
The Corporation are clearly not the same as individual people
business firm/s. The Corporation is by far the dominant form of
business entity in the modern global economy.
Not all
businesses such as sole traders are corporations, and many
corporations such as charities and universities are not for profit
51

businesses and therefore, our discussion is primarily

concentrating on corporate form of Entrepreneurship, who do
business for profits.
Key Features of a Corporation :
A corporation is essentially defined in terms of legal status
and the ownership of assets. Legally, corporations are
typically regarded as independent form those who work in
them, manage them, invest in them to receive products or
services from them. or receive products or services from
them. Corporations are regarded as having perpetual
succession - i.e. they survive the death of any individual
investors, employees. They need to have a succession
plan. The corporation itself usually owns the assets - the
factories, offices, computers, machines, equipments and
all other such assets operated are owed by the
Corporation, and not by the shareholders.
Similarly,
employees, customers, suppliers, etc., deal with and agree
contracts with the corporation, and not with shareholders.
Thus - Corporations are typically regarded as " artificial persons
in the eyes of the law.
- The are notionally " owned " by shareholders, but they
exist independently of them.
- Managers and Directors have a "fiduciary" responsibility
to protect the investment of shareholders.
- Corporation have social responsibility, and are morally
responsible for its (business) actions.
- Principal Shareholder/s seek profits, rising share prices of
the Corporation and Agent Manager/s seek remuneration,
power, esteem etc, from the Corporation.
- Corporation is an artificial person being created by the
law that has an existence separate and apart from its
owners i.e. it's an artificial persons created by law, with
distinctive name, a
common
seal
and
perpetual
succession of members.
52

- A v is an artificial person being invisible, intangible and

existing only in contemplation of law.
- It's and association of many persons, who contribute
money or money's worth to a common stock and employ it
for a common purpose.
Corporate's Entrepreneurship Activity and Responsibility
It is expected that the corporate undertake business
activities that will effectively and efficiently utilize the
available raw materials, men and money to produce
finished products and services to satisfy the needs of
customers/ consumers that is the society. It is also
expected and has now become essential for the corporate
bodies to see and ensure that while practicing their
business activities, that is using the natural resources,
doing production / manufacturing activities, treating the
waste materials, etc., they - the corporate do not pollute the
environment.
The present environmental pollution
problems are serious and they are mainly caused due to
non-eco-friendly industrial production and waste disposal
practices. In recent years, say during last 15 years or so,
the environmental degradation due to different types of
pollution occurring in air, water, soil and the biosphere
have expanded and increased to an alarming level. In this
context, much of the blame has been given to industries of
all sectors.
The big companies have been targeted as the main culprits
and enemies of the environment. The problems such as
global warming, depletion of ozone layer, increased
instances of health problems, etc., have arisen due to rapid
- non scientific industrialization without any consideration
for environmental protection which is so vital for all of us
and our future generations to survive.

53

Industry - corporate companies can no longer survive, with

the "environment damaging image". Now the companies
have to re-examine and refurbish their industrial activities
right from the nature of products they produce,
manufacturing, technology they employ, raw materials they
process or consume to make the finished products and the
way they market their products.
The environment protection and pollution prevention have
been recognized as the essentials for good corporate
entrepreneurship and governance practices. In fact, many
international committees on corporate governance have
required insisted that the companies to publish a detailed
report on the measures taken by them in preventing
pollution and environment protection in their annual
reports. And therefore, many well governed companies the
world over including India have developed their
"environmental policy" and disclosed the same in their
annual reports. This is a very good thing that has
happened.
In future, companies that refuse to :go green " will certainly
perish die their own death in an environmentally conscious
society of 21st century.
Therefore, the corporate leaders should essentially learn to
promote resource preservation by reducing waste and
maximizing renewable resources while improving
profitability. The corporate bodies - entrepreneurs should
make honest and real attempts to improve environmental
performance and take it as new business opportunity to
innovate newer and better, environmentally friendly
products and services. Also, environmental audits can
provide an in depth review of the company processes and
progress in realizing long term strategic goals to be
achieved towards developing and making green products
54

generating green jobs for betterment and giving more

comfort and friendly environment to their employees and
customers and consumers.
Corporate entrepreneurs should also endeavour to create
wealth from rural areas making all-round sustainable
developments exemplified below :
a) Generate energy from agriculture residues. As per
one estimate India produces 600-800 million
tons/yearly of agriculture residue, which can
theoretically produce (via lignocelluloses conversion)
about 150 billion liters per day of ethanol which can
take care of about 50% of India's total oil demand. If
we use pyrolysis oil route then it can provide around
80% of India's diesel demand. This of course is a
technological challenge to scientists as remarked by
the experts in the field.
b) The agriculture residue can also be used to produce
organic fertilizers in rural areas.
c) Hundreds and hundreds acres of lands can be
cultivated by select plant spices developed using
Plant Tissue Culture Techniques. Woods obtained
from them can be used to produce paper. This would
save destruction of forests.
d) Some of our designs and technologies for example,
computer chips, cell phones, power plants are
becoming very small in size, efficient, complex and
economically visible. Our technology developers
should follow this strategy in developing rural
technologies and contribute towards sustainable
development. As 21st century scientists, engineers
can do it by providing right-sized technologies at the
right-price for the economic and sustainable
development of the poor in our country.
Xxxxxxxxxxxxxxxx
55

CORPORATE ENTREPRENEURSHIP
The corporate entrepreneurship will thrive to achieve business
goals as per the vision statement/s formulated by the
corporation
i.e.
the
shareholders
stockholders.
The
corporations business policy will be always guided by the
milestones or business goals to be achieved as defined in the
vision of the company the corporation. Obviously, the
stockholders are very much concerned with the business policy
and the business strategy formulated by the members of the
managing council / committee from time to time run the
business organization that is the corporation.
11/13Nov2014

PROJECT MANAGEMENT
Activities differ from project to project and nature of the product
and or the business
- PM used to accomplish diverse goals
- Consists of several models and charts,
- Broad Perspectives of PM are :

1. Attributes that characterize projects

- Purpose : The project goal is made up of several sub goals
Needs planning to coordinate costs, timing and precedence
of subtasks
- Lifecycle: starts from small beginnings, build up in size and
terminated
- Uniqueness: each project is different though there may be
many common elements (e.g. identification, production and
marketing activities are common elements in mechanical and
chemical projects, but they are different)
2. Project selection: is evaluation of several projects and
selection of one project is done for commercialization based on
56

certain criteria.(e.g. technological, financial and commercial

viability, profitability and competitiveness)
3. Project Planning: consists of imagining and planning various
activities to establish the project implementation by the
concerned project teams. Making a written project plan its
evaluation and taking timely corrective actions certainly helps
commencement and completion of the project on time.
Otherwise it results in time and cost overruns. The P.P. may
consists of Overview, Background, Objectives, Approach,
Schedule of activities, Resources (3Ms) and their allocation,
staffing, Monitoring and Risks involved.
4. Project Manager : in charge of the project his job description
and job specifications should be appropriately done and
selection be done on the above basis. The factors to be
considered are qualities, responsibilities( acquiring resources,
staffing a project, dealing with obstacles, communication,
negotiations, scheduling, program evaluation and review
techniques and familiar with IT knowledge)
5. Problems : could be human and mechanical serious issues
will cause project delays & cost overruns.
- Some usual problems are:
- Insufficient physical resources (e.g. raw materials, utilities,
etc)
- Project may need redefining because of change in orgl.
Objectives (e.g. domestic Vs. international)to market the
product / services
- Reworking of time estimates earlier being optimistic
- Client may change specifications of finished product (this will
affect input cost of production, profitability and output)
- Shortage of labour, skilled/ specialized labour
- Labour unrest due to work overload, delayed payment etc.
- Bad working conditions
- Low or No appreciation of the workers and staff.
57

6. Project Control: Project may deviate from actual objectives.

(e.g. entry into foreign market not achieved and domestic market
get saturated). Thus project control mechanism has to be there.
Project control usually focuses on project performance its cost
and time. Therefore strategic evaluation to find out problems be
necessary and change or modification in the earlier strategies
may be necessary to rectify the situation. (e.g. Rectify and
ensure that inauguration of the product showroom is done in
real time.)
- Post Performance Control : is applied to make sure that both
good and bad practices are recorded, studied as guideline for
future prospects of projects. This control includes a set of
recommendations to improve future projects performance.
7. Best Practices : There are some twenty practices listed in the
book on Entrepreneurship on pages 394 & 395. Students have to
study these for further benefits. We can later discuss these in
the class.

13/14 Nov 2014

BUSINESS INCUBATION
Business incubators nurture entrepreneurial companies by
providing them guidance and support during their start-up
period, when they are most vulnerable.
Incubation Benefits
Incubators are found all over the world and their approach to
venture development can be summarized along the following
dimensions:
Offering space on flexible terms
Providing shared office services
Presenting a business consulting network
Providing opportunities to develop business relations
58

 Facilitating access to capital

Offering Space on Flexible Terms

In business incubators, entrepreneurs are provided small
spaces on flexible terms.
Providing Shared Office Services
Incubators make available shared services and facilities such as
printer, fax, photocopier, secretarial services, phone connection
through a PBX, and conference room. Incubators focused on
manufacturing provide additional facilities such as shared
storage, loading docks, and tool rooms. start- ups have a need
for these services, but pooling the services allows the incubator
to spread the cost among the number of start-ups.
Presenting a Business Consulting Network
An entrepreneur is not expected to have all the skills and
expertise needed to start and run the business efficiently, but it
is important that the entrepreneur have access to consultants
and other experts who have the skills and knowledge. They may
need assistance from a legal consultant to set up the firm and to
sign contracts with suppliers, customers, and employees.
Technology related consulting can be provided by researchers
as well as industry experts.
Providing Opportunities to Develop Business Relations
The incubator can have a database of suppliers and service
providers, which will be of generic interest to a number of
sectors, for example printers, website designers, and
transporters. If the incubator is focused on a certain industry,
they will have an opportunity to develop a similar list of interest
to a specific sector.
59

Facilitating Access to Capital

One of the most important activities of an incubator is to get an
entrepreneur in touch with the financiers. This process starts
when the consulting network of the incubator helps the
entrepreneur to refine the business idea and make a business
plan.
Managing Incubators
1. The role of the incubator manager should include
management facilities at the incubator and developing
and nurturing a network for the entrepreneurs.
2. The incubator should set clear guidelines for eligibility.
A policy document should clearly outline how the
business idea is going to be evaluated and what is the
profile of the entrepreneur the incubator is primarily
interested in.
3. An incubator should have clear-cut guidelines for the
admission process. The entrepreneurs can submit their
business plans and CVs, to be short- listed, and a
rigorous process of selection should include an
interview by a panel of experts.
4. The contract should be signed by the incubator and the
entrepreneur laying down all the terms and conditions.
5. The long- term financial viability of the incubator will
depend on its business model. The revenue streams of
the incubator would primarily be what it charges its
incubates. This can be broken up into the following
three parts:
A fixed rental to cover the cost of basic
infrastructure
A usage- based charge for services such as
conference room, copier, etc
A success fee, which can be in the form of an equity
stake in the new venture
6. Just like guideline for admission, there should also be
clear guidelines for exit. The ventures tenure in the
incubator can come to an end under the following
circumstances:
60

After a fixed period

When the start-up receives substantial funding
When it achieves a certain level of profitability
In case of irresolvable disputes

Note : Under CSIR R&D and business incubation centre is

actively engaged in helping the R&D oriented small and medium
business units as incubation centers e.g. NCL campus.
BUSINESS CLUSTERS
Doeringer and Terkla (1985) defined a business cluster as a
geographical concentration of industries that gain performance
advantages through co-location.
A cluster is a made of a core group of highly specialized firms
from the same industry. There will also be many supporting
firms that supply goods and services to the core industries in
the cluster. Now, many governments are looking at developing
clusters as a means of promoting small business. Other
characteristics of business clusters includes the following:
Well developed and intense links with suppliers
Formal and informal business networks
Shared supporting infrastructure such as buildings road
connections
A certain level of cooperation in spite of a high degree of
rivalry and competition.
Michael Porter claims that clusters have the potential to
influence businesses in the following three ways:
1. Productivity of the companies in the cluster increases.
2. There is increased scope for innovation in the sector.
3. New businesses are encouraged to come up.
There are basically two types of business clusters:

61

 Vertically- integrated cluster made up of businesses linked

through intense buyer-seller relationships.
Horizontally-integrated cluster made up of businesses that
share a common market for their end products, use a
common technological base (or common skilled
workforce), or require similar raw materials.

Most of the clusters-development activities can be grouped

as follows:
Supplier-buyer relationships can be forged by collecting and
distributing information about potential industry linkages. Also,
there could be formal interactions in fairs and exhibitions.
Common infrastructure can be supported by external
agencies. For example, roads could be built or a container
terminal could be set up, depending on the needs of the cluster.
Providing skills training and education is a good means of
supporting a cluster, especially in the case of industries heavily
dependant on specialized skills.
Industries in a cluster can be aided by providing marketing
channels. Efforts can be directed at enabling easy access to
public procurement or at facilitating links with buyers in the
private sector.
One of the most famous clusters the world over is that of
software and high technology firms in Silicon Valley.
Some of the well-known clusters in India are given here:
IT firms in Bangalore
Diamond polishing in Surat
Textiles in Tirupur
Seafood processing in Kochi
Call centers in Gurgoan / NCR
Jute mills in Kolkata

62

25/11/2014
1. SMALL BUSINESS START-UP
One of the most effective route to success for entrepreneurship
small scale business is depicted below
1.
2.
3.
4.

Start the business in a business incubator

Take part in a mentoring program
Have a detailed start-up budget
Produce a part product or service for which there is a
proven demand
5. Secure outside investment
6. Start with more than One founder
7. Have experience managing small firms
8. Have industry experience
9. Have previous experience in creating a start-up business
10. Choose a business that produces high margins
11. Start the business with established customers
12. Build trust in your story.
All the above points are important. However the points Viz.
1,6,10,and 11 need some discusion.
Pt. 1. Start the business in a business incubator. Experience
shows that starting a business with the help of a business
incubator is Warranted, if the product, service or business is
really novel and there is no market network. People who are
experienced as per the points 7,8,9 and the product has proven
demand (pt.4) and has established
Customers (pt.11) then the entrepreneur can start his/her own
business. Business incubator usually encourage a research
oriented, exciting, new, novel and innovative business proposal.
63

Pt.6. Starting a business with more than one founder is

dependent on the individuals educational qualification,
experience, family background his financial and technological
capacity and capability. Never the less he can take assistance in
different capacity from friends, relatives.
Pt.10. choice of business having high margins may not be
always feasible. This will depend upon the nature, demand,
specialty use of the product, and let us not forget the tough
competition.
Pt. 11. By establishing contacts with key persons in a company
the entrepreneur can secure a purchase order.
Spin-off business activity :
It is a business that is created by separating part of an operating
business into a separate entity. This of an either off-shoot of or
from an established running business. The management way
decide to separate the part of the production activity separately
which is recognized as a separate legal entity. We can take the
example of an INTRAPRENEUR that has been already discussed
in the class earlier.

Build trust in your story :

Building trust is essential to the success of all start-ups for
example, suppliers, vendors, are usually reluctant to trust newly
started business. By making payments to your vendors,
suppliers and employees regularly
and on time and also
making timely deliveries to the customers a new business man
can start building up the trust in the minds of above people. This
pays large and sustainable dividends in future. And while
making the Business plan, Business model see to it that they are
complete in all respects, the data provided is factual, and
acceptable to the Bankers. This in turn will surely help increase
trust in your fresh entrepreneur activity.

64

Starting a new Business: some IMP. considerations

One should take into account the following managerial factors
carefully in the process of starting a new business in the
present context of time
1.
Selection of the product/project, manufacturing process,
complexity of the technology involved.
2.
Identification of the user of the product and consumer
acceptance
3.
Size of the market, import, competition in the business
knowledge about the leading players in the market
4.
Social and political atmosphere in the country
5.
Knowledge about the statutory requirements, Government
Rules and Regulations to be followed
6.
Availability of land, finance and infrastructural facilities
(eg. Transport, supply of power, water and labour)
7.
Selection of project site for setting up the factory and/or
business activity
8.
Persons / Organizations background, educational
qualifications, family background, his/her experience in
manufacturing and marketing activity, trading business
9.
Availability of a commercially viable process knowhow/manufacturing technology, specifications/quality of
the finished product
10. Availability and prices of the raw materials and finished
product, its imports/exports data
11. Understanding the levels of transfer of technology from
supplier/s to user (transition of the technical knowhow
from laboratory / workshop / supplier to industry, scale and
level of transfer of technology and guarantees of
performance
12. Knowledge about Intellectual Property Rights (IPR) terms
and conditions agreed for commercial utilization of the IPR
13. Creation of marketing and other infrastructural facilities
e.g. marketing outlets
14. Application of management tools / techniques
65

15. Use of Information Technology

The success of the project by the entrepreneur depends upon
their ability to identify these factors / anticipate possible
problems that are likely to come up and plan the project
activities for its implementation accordingly. Take periodic
reviews of the project implementation, if necessary, modify the
plan, activities at the right time, search appropriate solutions
and implement them to overcome the difficulties keeping in
mind the time, cost and business opportunity.

2. Buying an Existing Business

In this there are Advantages and Disadvantages. Some majors
are given below
Advantages :
- You get established customers for immediate sales and cash
flows. If eliminates hiring fresh employees, you need
comparatively less cash outlay.
Disadvantages :
- Finding a successful business for sale that is appropriate for
your experience, skill is v. difficult and time consuming.
- The reputation of the business may be hindrance to future
success. So check Mkt. standing and creditability before
buying.
- Also avoid outdated technology. (How ever one can upgrade
the technology if technological talent is available)
Note: Refer to the skill model 6.2 for finding a business for
sale.
Buyer Beware before you buy:
When you have found a business you would like to buy, then
you must do exhaustive investigations to determine its future
value and prospects. This is called Due diligence process of
66

determining the full and complete practical implications of

buying a business. Who buying a business have technocommercial experts with you to
- Conduct extensive interviews with the sellers of the business
- Study the financial reports and other business related
reports.
- Make a personal examination of the site
- Meet and interview customers and suppliers of that business
- Develop a detailed business plan for the acquision
- Negotiate an appropriate price of the business- based on
plan projections.
- Generate sufficient capital to purchase & operate the
business.
Prepare discounted cash flows viz; the cash flows that have
been reduced in value because they are to be received in future.
Also workout the book value, net realizable value of a firm to
annual earnings.
Structuring the Deal:
Understand the methods for purchasing an existing business.
1. Purchase at the lowest price possible
2. You may buy in, by acquiring some, but not all the ownership
3. You may buy only the key assets such as the inventory, or
equipment of the business and not the business itself and
4. You may takeover a public business by buying a controlling
interest of its stock.
( For obvious reasons the details of 1 2 3 4 have not been
discussed here )
Key Resource Acquisions
Called as bulk asset purchases, i.e. sole proprietorship may be
purchased. This includes: assigning value to the intangible
assets i.e. things of value of business name ( value of ongoing
business, value of established relationship. etc ) the Intangible
assets i.e. Things of value that have no physical existence for
example, patents and Trade secrets. In this one can check life of
patent/s and estimate future turnover for say 5 to 7 years and
also depending upon the type of patent viz. national,
67

international and whether it is a process or product patent and

check the benchmark of the manufacturing process.
Takeovers : are possible only of business that have stock
which is freely transferable by the owner. In takeover, the buyer
(called raider) seizes control of the business. Takeovers are
hostile events. In the takeover the current management maybe
replaced. In takeover small business are vulnerable to hostile
takeovers. Small businesses takeovers may result in the loss of
the key employees and resentment & resistance of employees
who remain. In view of this, takeovers are usually done on
medium or large businesses.

3. STRATING AN ENTREPRENEURSHIP
For starting an Entrepreneurship business, you may also
consider examples of how changes in the environmental Trends
offers B. opportunity.
Economic Trends :
- Teenagers with more cash and disposal income :
resulted in New businesses, products and
opportunities such as-

This has
services

- Designer of cloths, compact discs, DVD players, electronic

games and hand held computers by the companies (e.g. GAP,
Banana Republic MTV, sega, palm, etc).

- Increased interest in Stock Market gave business to online

brokerage services, stock research services, creations of
magazines for investors.
Social Trends
- Predominance of dual income families has left v-little or no
time to cook at home ! Therefore food delivery services,
Restaurants, ready to eat hotels have come up in large numbers
68

(e.g. McDonalds, Fried chicken shops frozen dinners, Dominos

pizza are seen every where )
- Increased interest in fitness, hazards of being over weight : a;;
these have given birth to fitness centers, in-house exercise
equipments weight-loss-centers, health food stores.
- Increased mobility of the ever rising population because of
better and quick means of transportation and increased disposal
income have resulted in business such as Cell phones, Laptops,
Phone cards, etc and also Tours and travels the world over.
- Technological Trends
- Development of Internet and Other Its have created Ecommers, improved supply
chain management, fast and
accurate communication.
Advances
in
computerized/
electronically
controlled
technologies have resulted into fast, accurate production of
complicated medical equipment & machinery.
- Advances in biotechnology helps producing biotech related
pharmaceutical products, food products, veterinary products
and information services.
Political and Regulatory Trends :
Opportunities are opening up Consulting Companies (what to
produce, marketing techniques, training, how to start a business
i.e. procedural formalities)

69

Prof.Dr.C.U.Saraf
MITSOB PGDM
ED 30-11-14
BUSINESS CONTINUITY PLAN
Definition of a Business Continuity Plan
BCP is a logical plan stating measures to be taken by an
enterprise to recover and restore its operations at the time of a
disaster
Its a route map to effectively deal with internal and external
threats to the business.
It ensures the continuity of the business in anticipated,
unanticipated,
difficult
and
complicated
business
circumstances.
BP : Business plan has plans and guidelines to be followed
while establishing a new enterprise and plans for regular
functioning of the business
BCP : BCP aims at taking preventive measures before and at the
time of a disaster. It suggests alternative steps, solutions to
overcome various obstacles, contingency situations in the
functioning of the business.
BCP involves delegating responsibilities of employees and
managers, it records sequence of key business activities to be
carried out in the most difficult conditions

Need for BCP (Objectives of BCP)

Its a proactive plan for protection and growth of an enterprise.
Objectives :
Maintaining the reputation of an enterprise
Recovering the critical processes and move towards
achieving the objectives and goals of the enterprise
Minimizing the impact of risk on employees & customers

70

Protecting the interests of stake holders, e.g. share

holders, customers, suppliers and employees.

The form of disaster may vary from a Terrorist attacks to any

other problem such as a power failure short supply of raw
materials, non availability of labour. Large companies are
normally well equipped to handle disaster efficiently. Small
enterprises are usually not geared up to deal with any such
disaster.
In the absence of BCP , an enterprise can be affected as
follows:
Loss of business reputation, loss of business clients,
failures in supply chain management, Liabilities may
increase, damage to the assets, finished goods, raw
materials, physical injuries / death to the owners and
employees, make them disabled.
Process of Developing a Business Continuity Plan
BCP helps to nullify the disaster effect of crises on time
and that it help to maintain requisite resources and
information to deal with any emergency.

BCP Development Process Consists of Five Steps

1 .Analysing the Business : identifying strengths and
weaknesses, analyze business components e.g. key people,
premises, major equipment, status of technology
2. Assessing Risks : identifying technological and operations
in environmental threats, risky operations in production
process, (estimate probability and intensity and magnitude of
disaster)
Also ask questions such as disaster event/s may result in
loss of customers, or shutting down the business.
(Imagin think deep and enlist possible disaster events and
degree of loss thereby ) These may range from reaction of
suppliers due to negative publicity, computer IT Network
communication systems failure, loss of entire or imp.
documents, non payments by customers, no supplies by
vendors, technology piracy, leak of secret info. etc. an
71

enterprise can manage and come out the above difficulties if

BCP is foolproof and management is alert.
3. Developing Strategies (formulating recovery strategies):
To effectively handle Avoidable risks, unavoidable risks
(natural calamity) i.e. take insurance to get coverage for
damage.
This includes development of plans for
1. Construction of temporary building to carry out
business operations in case of disaster. But this is a
comparatively slow action plan.
2. Plans for fully equipped functional room to carry out
essential and critical business operations at the time of
technology failure with the help of specialist enterprise
or a consultant technical and managerial.

Developing the BCP Plan : It consists of visualizing the

plan in minute details, covering all possible risks, and
including the contents right from worst major disaster to
the a small disaster and remedies how to get back in
business, giving clear and easy to understand instruction
to be followed by the right personnel (Manager to the
worker) concerned so that they can be quickly
implemented to overcome the crises.
Also the
plan should be designed that will match the
available resources both human and material so that
strategic decisions are taken by Top Management people
(CEO). And
that coordination of implementation of the
strategic appropriately is done by the Middle level people
project Managers and departmental heads and strategic
actions are taken by the lower level people supervisors,
workers and by doing up word communication system.
While developing the BCP it is very important to generate /
collect risk recovery information and data from outside the
business resources
such as next door business,
emergency services, utility organizations, and to
communication to suppliers and customers as early as
possible and of course to the insurance company.
72

The BCP thus made may be rehearsed in the organization with

the help of
1. Paper based exercises
2. Telephone cascading & by
3. Do full rehearsal.
This will depend upon size, nature of the business.

Maintaining the plan : This includes reviewing the BCP

plan periodically, documenting the changes and timely
communicating the changes to all concerned people.
Role of Technology in BCP
Using computer software helps in reducing human errors in
managing risks and uncertainties. May enterprises have
developed different risk- managing software for developing and
implementing BCPs. For example, Sanovi Technologies (India)
Pvt. Ltd., provides disaster management solutions to enterprise.
Sonavi DRM software helps in communicating and transferring
information from primary infrastructure( the original site ) to
secondary infrastructure (disaster recovery site) and gives end
users a faithful view of disaster recovery readiness. Similarly,
Hewlett Pacard
(HP) has introduce business continuity
software in the field of information Technology. This software
provides data protection, disaster tolerance, high availability,
business continuity and IT management and security services.
HPs XP 24000 Disk Array software helps in providing an
effective and innovative technology platform, and storage
solutions. In addition to above, there are several key benefits of
this software details of which are given on in the reference book.

For effective BCP, an exhaustive check list information

about all resources that may be required at the time of disaster,
should be prepared which becomes very helpful to start
immediate action at the time of disaster. Details are given on
pages 260,261 of the Ref. book material already supplied to the
students

73


1.
2.
3.
4.
5.
6.
7.

Advantages of BCP
Fast recovery of disaster
Maintaining relationship with customers
Mitigating negative publicity
Safeguarding MKt share
Protecting profit & avoiding financial losses
Preventing damage to firms reputation
Protecting key business activities (production, marketing,
employee loyalty, R & D activities)

Important Points
1. Keep regular modification of BCP to suit dynamic mkt
conditions
2. If not implemented timely and effectively BCP may turn
out to be a time cost overruns.

74

02-12-2014

75

76

77

78

79

Prof. (Dr.) C.U.Saraf

MITSOB; PGDM
2.12.2014
Creativity (A)
CREATIVITY
Creativity:
Meaning: It is the process of generating a novel and useful idea.
Also, opportunity recognition can be a part of creative processits a creative thinking in the formation of new products,
services and businesses.
Creative Process: consists of five steps
Preparation, Incubation, Insight, Evaluation, Elaboration
1. Preparation: it is the persons background, experience and
knowledge help entrepreneur to recognize opportunity 50
to 90% of business startup ideas emerge from persons
work experience and knowledge.
2. Incubation: It is a stage when a person considers an idea
and further thinks about the related problem to convert the
idea into reality.
3. Insight: It is a search, and seeing a solution to the problem
i.e. idea is born- eureka experience-the entrepreneur
recognizes a business opportunity. But it may push
forward or bring back to preparation stage. The
entrepreneur recognizes the potential of the idea but
realizes it needs more knowledge and thought to convert it
into reality.
4. Evaluation: In this stage the creative idea is scrutinized,
analyzed for its viability both technical and commercial,
wherein several techno commercial aspects are evaluated.
5. Elaboration: Here the creative idea is put into final formexperimental details are worked out and the idea is
transformed into something of a value such as new
products, services and into commercial business plan.

80

Opportunity Recognition Process:

Market Environment Factors such as Economic, Social factors,
technological advances political and regulatory changes.
All these affect the personal characteristics prior experience,
cognitive factors, social networks, creativity.
This helps to identify the Business Product service and
opportunity gap.
Gives rise to generation of new business, Product and service
ideas.
Techniques for Generating Ideas:
Brainstorming
Focus groups
Surveys
Advisory Boards
Anthropological research such as day-in-the-life research
Note: In many firms, idea generation is a haphazard process. But
there are some who take concrete steps to encourage and
protect new ideas.
Example: Production process based on A, B & C starting raw
materials in which B is imported, and the second process that
identifies an indigenous substitute to raw material B which
actually enhances the organizations creativity. The example also
talks about barriers to creativity when the director suppresses
the novel idea.
The above example has been discussed in detail in our class.
We can also consider establishing an Idea Bank.
The Creative Process: it consists of SEVEN steps:
1. Preparation.
2. Investigation.
3. Transformation.
4. Incubation.
5. Illumination.
6. Verification.
7. Implementation

81

Examples:
1. Plant tissue culture - Sugarcane
Teak
2.
3.
4.
5.

Reinforced Plastic materials-Diesel Engine Protection Unit.

Controlled release Drugs Formulations
WAP
Remote Controls

ENTERPRENEURIAL LEADERSHIP
E-leadership
Example: G.D.Birla-Amazingly successful businessman,
founding manufacturing units from textile and cement to
metals and contributed a lot for education institutes in
India.
Dimensions of Entrepreneurial leadership:
Vision-Innovation-Initiative-Responsibility-Winning
Customer Care and Concern

Team-

E-leadership requires founding team to identify staffing

needs, professionally recruit people to fulfill those needs
and lead the team to success. E-leadership revolves
around taking initiative, responsibility, calculated risk, and
creating befitting environment of entrepreneurial creativity.
It basically is an attitude focusing on inculcating courage
and confidence in team members to translate
entrepreneurship idea for achievement of organizational
goals.
For this, the E-leader should be capable of developing and
growing a business, vision and business insight, speed
and ingenuity to appropriately respond to emerging
business challenges (w.r.t global standards, fast changing
82

economic, technical, legal, social and business

environments-both domestic and foreign
MNCs have failed because they could not prepare to face
business competition and pressures as entrepreneurial
leadership was lacking. In 21st century you cannot do
business with yesterdays tool and techniques (e.g. Bill
gates and Steve Jobs have been legendary leaders in the
corporate world who have nurtured two giants
organizations-Microsoft and Apple)
One most important aspect of E-leadership is power to
influence employees to achieve the objectives of the
organization. E-leaders must win the trust and confidence
of their team and must be powerful communicators. They
should be good managers, good leaders (exemplary). They
should emphasis rationality and control, problem solvers,
tough minded, hard working, intelligent and analytical. One
of the best ways to earn the trust & confidence is to
empower the employees. (e. g. Pvt. Airline services,
marketing people-warrantee & guarantee
Some Characteristics of successful Entrepreneurial LeadershipHas Clear Vision, Sets Mission, finds and motivate people,
has followers, he empowers, is guide, is great
communicator and inspire others he being a role model.
Corporate leaders have to respond to Business
Environment challenges. Because they have to
survive, grow and further develop. They must have
vision speed and integrity. They must have Indian
Ethos- the characteristic and the spirit ant they must
be able to successfully face global business
challenges, adopt and adapt to global business
standards.
In todays fast changing economic, technological, legal
social and business environments E-leaders have to
continuously strive and work for their effectiveness.
83

The response has to be quick, with logical and

systematic planning coupled with knowledge
management.
Characteristics of Principle-centered leaders:
1. See life as an adventure.
2. Radiate positive energy.
3. Are service oriented
4. Are continuously learning
5. Have trust before allocation of resources
6. Exercise for self renewal
7. Are synergistic
(Examples: Kiran Muzumdar Shaw(Biocon ltd.) Shiv
Nadar(Hindustan Computers)).

7/9/ Dec 2014

SMALL SCALE ENTERPRISES
Definition : Definition of SSI varies. There are ~ 50 definitions in
75 countries. They are based on capital investment or
employment.
- As per the Abid Hussain Committees report in 1997, if the
investment (fixed capital) is up to Rs. 3 crores it is a small
scale industrial unit. Subsequently in 2000 it was reduced
to Rs. 1 crore.
- Small scale industry includes the terminologies
1. Modern Small scale industry
2. Cottage industry
3. Village industry
4. Ancillary industry
Characteristics of Small Scale Industry
- Generally a one man show

84

- Owner is a manager, technician, marketer, salesman, an

accountant and the founder.
- Has lesser gestation period to start ROI
- Operation of SSI is generally localized caters to local and
adjacent regional demand
- Use indigenous resources, barring an exception or two
- Are fairly labor intensive
- To start with it may require smaller capital
- Small Scale Units are decentralized, and dispersed in rural
areas, helps to promote more balanced regional
development, and prevents migration of people from rural
to urban areas.
- Are more flexible to adopt changes like introduction of new
products, new methods of production, new markets.

SSIs relationship with Medium and Large Industrial Units

SSIs are often ancillary to large industry. They are
competitive, supplementary, and complimentary in the
following way.

For selected products, SSI can not compete with

large
industrial units in certain circumstances e.g. where in large
scale operations, and production in bulk quantity are done.

As against this, production of item like bricks, tiles.

Perishable edibles, preserved fruits, goods requiring small
engineering skills, items demanding craftsmanship,
making formulations, fine chemicals are best suited for
SSI.
- SSI plays a supplementary role to large industrial units
e.g. production of tricycles alongside a large bicycle
factory, production of cardboard boxes, packaging
materials alongside pharma industry.
- SSIs produce various components, instruments,
prototype units, small parts, speciality items, gadgets, and
85

regularly supply those to large scale mechanical, electrical,

chemical,
automobile,
specialized
sophisticated
instruments and , dehydration machinery manufacturing
industrial houses (Examples are : electronic small
instruments DTC, tachometers, engine protection units,
gauges, measuring instruments, fine chemicals, specialty
chemicals, plastic reinforced materials, preservatives, etc,
etc )
- SSIs install servicing and repairing workshops for the
products of large industries (e.g. repairs of refrigerators,
radios, televisions, cycles. Two wheelers, four wheelers,
transport buses and so on).
Economic Development and SSI
-

Small scale industries play a major role in bringing out

economic development of rural and backward areas of our
country by using manpower, material and agriculture
produce of that region.
- They provide immediate large scale employment. They
ensure more equitable distribution of the national income
and facilitate mobilization of resources of capital and skill
which might otherwise remain unutilized
- Establishment of well spread small scale industries will
help faster development of basic infrastructural facilities
road, water and electricity and communication in rural and
backward areas of India.
Rationale
1. Employment generation
Small scale industry units have potential to create large
scale employment opportunities. This will reduce
unemployment problems. As per one estimate employment
generation by SSIs in India is about eight times that of the
large Industrial sector.

2. Equality
86

SSIs ensure more equitable distribution of national income

and wealth. This is because SSIs are more widespread and
they are more labour intensive, they are and can be
dispersed to rural and backward areas. That the relation
between the workers and employers is more homogenous
in SSIs than in large industrial houses. Wages in SSIs are
on lower scale than urban industries (i.e. they are not
organized, there are no workers unions)
3. Decentralization
Decentralization caused by SSIs helps tap local resources
such as raw materials, agriculture, forest produce, idle
savings, local talents, and it ultimately improves the
standards of living in backward areas, improving quality of
life in under developed areas.(for example Punjab has
more small scale units than even the industrially
developed state of Maharashtra)
4. Utilization of Latent Resources
The impressive growth in number of small enterprises in
the post independence period highlights the fact that
providing the necessary conditions such as power,
transport, water and most importantly the credit facilities,
the talent resources of entrepreneurship can be tapped by
growth of small enterprises.
Objectives of developing small scale industries
Most of these are discussed in rationale and preceding
topics. They are listed below.
1. To generate immediate large scale employment
opportunities with comparatively low investment.
2. To eradicate (reduce) unemployment.
3. To encourage dispersal of industries all over country
covering small towns and villages and backward areas.
4. To bring backward areas into the main stream of national
development.
5. To ensure more equitable distribution of national income.
87

6. To encourage effective mobilization of countrys untapped

resources.
7. To improve the standard of living of people.

The scope for small scale industries :

The scope of SSIs is very vast covering wide range of industrial

and business activities requiring less sophisticated technology.
The important activities are listed below. (This list is not
exhaustive)
- Manufacturing activities
- Servicing/ repairing
- Retailing
- Financial
- Whole-sale business
- Construction activities
- Infrastructural facilities creational activities
- Services industries
- Consultancy activities to start manufacturing activity
- Plastics and polymers
- Pesticides and pesticide formulations
- Providing analytical & testing services
- Small instruments manufacturing
- Electronic and electrical units manufacturing
- Food processing units
- Readymade garments / textile products
- Event managing activity
- Advertising and media management
- Providing legal services to industry
- Chemicals and chemical products
- Agro based products
- Stationary items for schools and colleges.
- Providing management, technical, engineering advisory
consultancy
Incentives and Subsidies to SSIs
The government of India has announced several incentives and
subsidies to promote and encourage small industries. Incentives
are given in the form of
1. Concessions
88

2. Subsidies and
3. Bounties
For details see Vasant Desais book on dynamics of
entrepreneurial development
In addition, certain items are especially reserved for small scale
industries development.
Incentive/ subsidies are provided for purchase of land for
SSI, for purchase (license) of technical know how , training,
machinery, seed capital, tax exemption, No stamp duty,
Interest free loan, Incentives to NRIs, special incentives to
women entrepreneurs; exemption from Income tax for
limited period; purchase of industry land & bldg. at
concessional rates, price preference to SSI units.
Provision for seed capital, loan for technical improvement,
renovation of machinery and equipment, allotment of
constructed indl. Sheds; Allotment of controlled
/
subsidized raw materials; concession utilities; special
facilities for import of raw materials; excise concession,
special facilities for export of finished products, services,
venture capital facility.
Note: The facilities, incentives, subsidies listed above are
subject to revision from time to time and govt. to govt.

16/12/2014
RURAL ENTREPRENEUR
Introduction:
-

Rural entrepreneurship is utilization of the natural

resources such as Local talent, Agriculture, forest
produce, minerals available in rural and backward area of
India for bringing out the economic development of the
people living in that region.
- India is developing country. The rural and remote areas in
many states of our country are still backward. In rural
areas there are not as yet basic infrastructural facilities
such as transportation, approach roads, water and
electricity and power supply.
- Also, there is a difference in the life style, the standards of
living and cultural habits of the rural and urban customers.
89

The consumer behavior of rural customers, there buying

habits, entertainments and sports likes and preferences
are certainly different than that of the urban customers.
The rural customers spending, money saving investment
thinking/ practices differ from the urban people. They are
not as yet that much civilized or fashion oriented such as
the urban living people.
Most importantly the rural areas in India are not thickly
developed marketing infrastructure, banking, high-tech
educational, entertainment and medical facilities.
The rural entrepreneur originated from his or under
developed area may or may not be aware of the facilities,
incentives, subsidies and or bounties and concessions
offered by the central and state or local bodies for
development of entrepreneurship in the rural area.
Thus, on this background the rural entrepreneur has to
would himself / herself. The above discussed factors have
and will influence the entrepreneurial activity in rural areas.
The rural entrepreneur must understand the characteristics
of the rural customer and rural people of India.
Secondly the rural entrepreneur will have to produce
consumer and industrial products utilizing the mineral, and
other raw materials, agriculture and forest produce and the
skills available in that areas. Such finished goods or
processed food material can be transported and sold in
suitable urban markets at competive price.
Thirdly, an urban entrepreneur producing goods, products
and services can be sold in rural areas, villages, and for
this the urban marketer will have to develop a suitable and
result oriented marketing strategy for introduction / launch,
popularizing the products/ goods in identified rural areas
i.e. towns or in cluster central villages. For this the urban
company may have to use a real novel & catchy marketing
method such as organizing a Navtanki (Tamasha) show
during which free samples of consumer non-durable
products can be distributed to the spectators and handbills
advertising the product in local language.

90

Establishing industrial units in rural areas refers to rural

entrepreneurship rural industrialization
Rural industries are generally associated with agriculture.
Village or Rural Industry means any industry located in rural
area where population does not exceed 10,000. The major
categories of village industries are:
Mineral, forest, Agro based industry.
Also polymer and chemical based, Engineering and Textile
including Khadi and service industry are rural industries.
Need for Rural Entrepreneurs

1. Being labour intensive RE has high potential in

Employment
generation.
They
help
reducing
unemployment problem.
2. Because of RE there is a high potential of income
generation in rural areas. It help in reducing disparity in R
& U areas.
3. RE encourages dispersal of economic activities in the
rural areas and promote balanced regional development.
4. RE helps to promote the Rural art of activity-i.e. the age
old rich heritage of the country (e.g. handcraft, boutiques,
metal earthen pots, lamps, leather decorative, textiles etc)
5. Helps reducing growth of slums, social tensions, and
atmospheric pollution.
6. RE being labour intensive, most of them are environment
friendly they cause minimum environment pollution.

1.

Problems of Rural Entrepreneurship

Financial constraints, lack of technical know-how, lack of
training and extension services, management problems,
lack of quality control, high cost of production, lack of
communication and market information, poor quality of
raw materials, lack of storage and warehousing facilities,
use a absolute technology, lack of promotional strategy.
Now of course the government both central and state and
NGOs and local bodies have taken initiatives and
implemented some schemes and as a result some
promotional facilities, banking, commercial information
91

centers have been created. This has helped to solve some

of the above problems of rural industries. Also
entrepreneurial develop programs (EDPs)conducted by
state govt. in collaboration with urban industries has now
helped in increasing awareness & importance of
establishing rural entrepreneurship in rural areas of
several states in the country.
For faster development of Rural Entrepreneurship the following
measures are important
1.

2.
3.

4.

Strengthening of collection and availability of various

types of raw materials in bulk quintiles and its assured
supply for continuous production is urgently required.
Sufficient funds (fixed and working capital) as also credit
facility should be provided to rural entrepreneurs.
Common production cum marketing facilities should be
credited including that for export markets. For this
necessary guidance be provided through production and
marketing experts.
People from rural areas must be encouraged to join
entrepreneurial development programs especially made
for rural entrepreneurship.

5.

Such entrepreneurial development educational facilities

should be made available in schools and colleges in near
about towns and rural areas including ED training
programs similar to EDPs.
6.
Information
about
various
promotional
schemes
implemented by govt. (central & state) for development of
rural entrepreneurship must be properly disseminated in
rural areas and preferably in the respective local
languages.
7.
NGOs can help and promote developing rural
entrepreneurship in the country. In fact various NGOs are
involved in promoting rural entrepreneurship in three
ways.
a)
Primary level NGOs mobilize their own resources,
operate at international level and execute R.E programs.
Examples are ACTIONAID, OXFAM, Christian children Fund, etc
92

b)
Intermediate NGOs procure funds from various agencies
and impart training, also conduct workshops for target
entrepreneurial work force. SEWA and AWAKE are the
intermediate NGOs examples
c)
Grass Root Level NGOs conduct field activities, establish
direct contact with the (grass root level) needy who would be
rural entrepreneurs. Examples are : NGOs RUDESTIs, ANARDE
Foundation (Gujarat) and Indian Institute of Youth Welfare ()

Prof(Dr).C.U.Saraf
30/12/2014
Entrepreneurial Competencies
- Competencies
of
an
Entrepreneur
are
special
characteristics which lead the entrepreneur to do superior
performance on the job.
- Entrepreneur competency (trait) is a cumulative impact of
the knowledge, skill and motive which are possessed by
the entrepreneur that make him / her a successful
entrepreneur. Competencies that lead to superior
performance of the entrepreneurs are :
1. Initiative: means individual does things on his own. The
entrepreneur initiates a business activity. At time he tells
other what they have to do to make a business success. That
is assertiveness.
2. Looking for Opportunities: He looks for a business
opportunity, takes immediate and appropriate action. The
entrepreneur does not lose the opportunity, rather he/she
93

grab the opportunity whenever it arises and makes business

out of it. Seizes unusual opportunities to start new business.
3. Persistence: He makes repeated efforts to overcome the
difficulties / failures and finally succeeds achieves the goal.
4. Information seeker: Takes individual research, discusses,
consults experts to get commercial, technical, financial
information knowledge to start a business and achieve
success.
5. Quality Conscious: Successful entrepreneur always has a
strong urge to excel the existing standards. He believes, there
is always something better than the best that is available. He
knows that performance of a product/service is directly
proportional to quality.
6. Commitment to work: Such entrepreneurs make every
scarifies to complete the task.
7. Efficiency Seeker: Makes tenacious efforts to get the job
(task) done within minimum possible cost and time. Does the
job neatly in or before the stipulated time and cost and at the
same time does not compromise with the quality of work.
8. Proper Planning: He/ She formulates realistic plans and then
executes rigorously to accomplish the tasks. While
implementing the plan such an entrepreneurs monitors the plan
related actions, changes/ modifies them if so necessary to
accomplish the task. He appropriately responses to changed
marketing conditions that are always dynamic.
9. Problem Solver: Always makes an effort, finds out ways and
means to overcome the difficulties, he/she does not give it up or
leaves the things half way down.
10. Self Confidence: He /She is always a strong believe of their
strengths abilities, knowledge and skills. They believe that yes
they can always do it - come what may.
11. Persuasive: Such entrepreneurs are able to successfully
persuade others to get the work done the way he wants it to be
done.
12. Efficient Monitor: Personally supervises or develop a
monitoring system to ensure that the job is being done as per
the standards laid down.
13. Employees well-wisher: Such as entrepreneur shows great
concern about the well being of his/her employees. He/she also
94

takes necessary measures to improve the welfare of the

employees working in their enterprise. Treats employees as an
important factor in production and that they have emotions and
feelings. Like themselves. They are human being first and then
the employees.
14. Effective Strategist:
a) Such entrepreneurs formulate introduce effective business
/ marketing strategies to achieve sustainable growth in the
business.
b) They introduce strategies to effect employees to achieve the
enterprise goals and objectives.
c) They also believe in empowering the employees to achieve
success in the business.

Prof (Dr.) C. U. Saraf

MITSOB i P G D M
E D Social
Entrepreneur
30-12-14 (A)
SOCIAL ENTERPRENEUR

The entrepreneur who values to bring out a transformational

change that will benefit the society is a social entrepreneur.
Examples start up of a campaign for vaccination to control or
irradiate swine flu, or if an entrepreneur starts advertising,
opens up a campaign against cigarette smoking (which is a
silent killer), he is a social entrepreneur- because he/she has
recognized a social problem, and has used entrepreneur

95

principles to organize, create and manage a venture to make

social change. In this type of entrepreneurial activity some
organizations/individual entrepreneurs use profits from the
social enterprise or other organizations to do this good work.
Social entrepreneur tries to solve social problems social issues
in a businesslike manner.
These entrepreneurs, with social mission face challenges
which are quite different than business challenges (for example
the social entrepreneurs / organizations may not get workers to
do the job, they do not get funds easily to do this work for the
good of the people)
Motivations of Social entrepreneur
The most important 4 motives are
1. The possibility of exploiting change as a new opportunity
2. Ethical motives and moral responsibility
3. Personal fulfillment
4. Selfishness
(1)

Exploiting Changes as a new (activity) opportunity is itself a

motivator for entrepreneurs. This change presents a possibility to
create new value in social area activity that has not been
exploited. For example, Nicholas Apostil a CEO of a social
Organization recognized and adopted a new way of disposing of
rubber. Instead of burning which is wasteful and hazardous to
environment, he developed and implemented a rubber recycling
process which was much less hazardous and it offered new uses
that created social value while being profitable. The recycling
produced asphalt, rubber, tires and athletic surfaces. So is the
96

case of recycling of used plastic materials to regenerate and make

new

ones.

While

being

profitable,

this

certainly

reduces

environmental pollution to some other examples in this are

production of ethyl benzene in two steps from ethanol.
(2) Ethical motives and moral responsibility are major reasons for
motivating social entrepreneurs. Example: Founder of Grammeen
Bank Muhammad Yunus, in 1974 donated 27 to 42 dollars to
different families to create small items for without the burden of
bank loan. This sign of social affection began his idea of issuing
micro credit loans

to the poor of Bangladesh to help pull its

population out of poverty (Earlier to this successful attempt of

Grammeen Bank, all other lenders refused to lend micro loans
especially to the poor due to high cost and with a fear that no one
would pay back the loan)
(3) Personal Fulfillment: Although it can be perceived as a selfish
reasoning, it is the other way round. For example when one sees a
commercial gain in donating to a children fund, one may not feel
morally ethically motivated to donate. Donating to this cause may
fulfill some one personally, it may just make them feel good. This
sense of accomplishment may not have the same underlying
interests as moral or ethics, yet despite a possibility being
considered selfish one, may be able to create social value through
personal fulfillment.
(4) Selfishness: is the 4th motivator to social entrepreneur. Though
this is applicable to social entrepreneurs, it is easier to relate this
motivator to current enterprises trying to make efforts to create
social value for example, Wal-Mart is a company with a highly
97

unfavorable public perception. Though the company has a lot of

grip over, it has added more social value than most people may
care

to

believe

it.

Wal-Mart

imposed

sanctions

over

its

manufactures and suppliers in South America from using any

resources obtained from Amazon. According to Green to gold
author Andrew Winston, this sanction may have single handedly
saved the Amazon. In addition to Wal-Mart, U P S imposed a new
rule for drivers, no left turns in cities. What exactly did this
accomplish? U P S has saved 3 million gallons of gas annually, 30
million miles of delivery routes and 32,000 metric ton of CO2. Both
these companies are not perceived as social enterprises and their
changes may have been brought about selfishly (profitability
public perception, etc). But the changes inarguably created social
value.
CHARACTERISTICS OF SOCIAL ENTERPRISE
There are three
1) First is Enterprise Orientation: They are directly involved
producing goods / services to market them, and they seek to be
viable trading organizations with an operating surplus.
2) Second is their social aim. They have explicit social aims such
as job creation, provide training, and make provision of local
services. They have ethical values including a commitment to
local capacity building and they are accountable to their
members and to the wider community for their social,
environmental and economic impact.
3) Third: They are autonomous organizations with governance and
ownership structures based on participation by stake holders
98

groups or trustees. Profits are distributed as profit sharing to

stakeholders or used for benefit of the community. For example
- UK has developed a New Legal Form called community
Interest Company (CIC). These are limited company designed
for those wishing to operate for the benefit of the community
rather than for the benefit of the personal gains of an
individual or group of people.
- Second example is the Social firm which is business set up
specially to create employment for people otherwise they
severely disadvantaged in the labour market.

There can be many similarities between social entrepreneurs

and business entrepreneurs. Social entrepreneurs also have to
market their enterprise, often to get developmental projects or
to get funds. They too have to convince their consumers to
switch to the alternatives being offered to them.
Dees

(2001)

has

given

detailed

definition

of

social

entrepreneurs
The social entrepreneur plays the role of a change agent in
society by:
1) Adopting a mission to create and sustain social value.
2) Searching for and pursuing new opportunities to serve that
mission.
3) Continuous innovating, adapting, and learning, in pursuit of
the mission.
4) Acting boldly without consideration of resources currently in
hand.
99

5) Being accountable for outcomes of activities.

Responsible
- Many Social Entrepreneurs will exhibit these characteristics in
different ways and in different degrees and very few will
exactly fit this mould of an ideal social entrepreneur.
- Social Entrepreneurs get or raise funding through Debt (e.g.
educational institutes in India) 2) Equity: Several enterprises
have Robust business models to open up accessing retailing
and institutional equity finance ( sks) Microfinance (3) Public
Donations obtained by connecting individuals to social
cause. (4) Government grants is the biggest funder for social
enterprises and (5) Foundations and Funds such as
International Aid Agencies like Ford Foundations.
EXIT STRATEGIES
Introduction:
The main goal of starting a business is to make commerce. Satisfy the
needs of the society and make personal gains as also do something good
for the society.

The goal could be short-term and long-term profit

maximization. In this context it is also logical to plan for one's exit from the
firm. It is called the planning behind terminating one's ownership of a
company. But very few entrepreneurs think about an exit strategy. Most
think to nurture their firm, stay with it till the end of their life, and then pass
it on to their children. However, in between many things can happen to
upset their plans. They suddenly find that it is not in their best interest to
continue with the business they started.

100

Some business people can successfully sale their business, whereas

there are many who could not sale inspite of their intention to sell because
they had not taken appropriate steps.

Why Exit?
Reasons for Exiting
1) No future prospects: Lack of profit:

The business ceases to be

profitable, entrepreneur has no interest in continuing the business,

Entrepreneur is not sure of long term sustainability.
2) Dissolved partnership: This happens when one of the partners opts out
of partnership and the remaining do not feel that they alone can
continue to run the business.
3) Entrepreneur: disinclined to take further business risks. If there are
significant growth possibilities then it becomes an attractive deal to
buyers.

101

4) Other business Opportunities: a business started was a viable

business opportunity at that time. Later other opportunities may come
up that may seem even more exciting. Under these circumstances,
the entrepreneur will want to exit the current venture and try a new
business (e.g. give up producing the whole equipment set up) i.e.
Become OEM.

5) Personal Reasons: This may be due to unexpected illness, death in

the family, divorce, etc. i.e. the reasons that become more important
than profit maximization.

Long term preparations:

If one wants to sell the business, it should be planned. In this context
some of the factors to be considered are:

(1)

Focus: A company with strong focus is more valuable to the buyer. The
managerial team of the company and all assets should be aligned to serve
to its core business activity. All business activities i.e. right from purchase
of raw materials , there inventory, stores processing of raw materials,
assembling, testing of the finished products, their dispatch, revenuesreceipts, working conditions in the factory, cleanliness, moral of workers,
the overall atmosphere at work place should be healthy and likeable to the
buyer. So also the sales and advertising and marketing departments the
marketing people should be well informed and aware of what is happening
in and around in that industrial sector. All this is necessary to attract the
buyer.

(2)

Large customer base/Diversified customer base :

Your company may have big business (repeat business) from few but
good customers who are processing your products to make their finished
products. This is certainly a paying preposition as long as those few
customers continue buying your products but suppose they stop
102

purchasing because of their changed production or purchasing program

then your company's business turnover goes down.

In such case the

chances of selling your company's business become unattractive. In this

context therefore a large and diversified customer base becomes an
attractive preposition to the buyer (e.g. production of phenyl acetic acid
and dependency on only one buyer!)

(3)

Regulatory Compliances:
A business firm needs various permits, licenses, and regulatory
compliances to run the business. Many of these clearances are difficult to
get and there are long delays.

A company with incomplete regulatory paper work poses a number of

uncertainties in the minds of the buyers.

A buyer does not want the

additional hassles relating to a regulatory mess left behind by the previous

owner.
(4)

Land Documents:
One of the biggest assets being transferred during the sale of a business
is its land and building property. All documents relating to purchase or
long lease should be complete in all respects. The land should be in
physical possession of the seller.

A business such as retail and other services are heavily dependant on

their location. In such type of businesses, a long lease is preferable, and
a short period lease will not be attractive to the buyer.

Contracts:
In a country like India, where the validity and enforceability of a contract is
suspected, entrepreneurs resort to entering into verbal contracts and
informal arrangements.

This may be convenient for the day to day

103

operations but are detrimental (not sufficient) to the valuation of the

company in the eyes of the buyer. The formal written and crystal clear
agreement will assure the buyer of the existence of relationships with
customers and suppliers.

Also while entering into contracts, the entrepreneur must ensure that the
contracts are transferable, so that this does not become an issue while
selling the business.
Management:
Entrepreneurs are closely associated involved in every aspects of the
business operations of their companies.

As an important step of

preparation for business sale, entrepreneur must plan to delegate

responsibilities of conducting the business to some key members of
his/her management. Everyone should be valuable to the company, but
no one should be indispensable, not even the entrepreneur him/herself.
The buyer will be interested in a company that can operate smoothly even
in the absence of the owner.

Short Term Preparations:

Valuation:

Realistic valuation be done from a reliable outside

expert. A professional valuation is preferable to judge
how much sale value the entrepreneur can expect.
This helps to gauge offers. A competent experienced
Chartered Accountant having some credibility in the
market is preferable.

Update books:

Buyers will certainly want to look at past-years

financial performance of the company keep audited
balance sheets and profit and loss accounts of the

104

previous years ready for scrutiny by prospective

buyers so also keep audited tax returns ready.

- Supporting Documents:
It is reported that small businesses in India are notorious for being able to
construct books of accounts that are convenient for their purposes.
Remember that you (as the seller of your business) need to have the
supporting documents that convince buyers about the actual state of
things.
Also, if there are a number of personal expenses that you would have
passed off as legitimate business expenses for tax purposes, explain them
to the buyer.

For example, a family holiday to Goa may have been

entered as a business trip.

-

Tax Advice:
Consult your chartered accountant/tax advisors to understand the tax
implications of the sale. Understanding the personal and company tax
implications will help you in structuring the sale deed deal.

Get the Team in Place:

This will include your own employees who might be looking forward to
become employees of the buyer. It is also important to involve impartial
outsiders (?) to help with valuations and negotiations (in this, your
company's CA would be very helpful).

Continue Business as Usual:

Do not cease your normal business operations/activities just because you
are planning to sell your business. A running business is going to be more
valuable to the buyer than a business a business he/she has to start. Also
keep the business activities going when a likely buyer's team visits your
business premises for inspection.
105

First Impressions:
The first impression counts a lot. So keep your business ready to impress
the buyer at the first instance itself. The buyer should see a neat, orderly
place of business and well-maintained books ad smooth processes.
These are good business practices in general and they help to create and
maintain good impression on the buyer.

Benefits to Seller:
1. Buyer may be prepared for higher price if it is offered on such terms.
2. Assures buyer that sell is convinced of the long term viability of the
business.
3. Seller gets further profits by way of interests on the investment.
4. Seller does not plan to use proceeds of the sale immediately. So it's a
good way to profitably park funds in banks.

Risks to Sellers:
1. Business may fail before buyer makes full payment.
2. Buyer may not make any further payment, may lead to long-term
litigation.
3. The seller continues to have an investment though it is sold to a third
party.

Benefits to Buyer:
1. It becomes an easy and readymade source of debt for the buyer to
finance his purchase of business.
2. It might be easier to deal with the ex-owner of the business than to
deal with a commercial money lender.
106

3. The seller may be persuaded to offer guidance in times of

need/difficulties particularly in procuring P.Os.

Risk to Buyer:
1.

There may be lot of interference from the seller. Seller always feels
how to do this business better.

2.

The buyer may end up paying much more than the fair value of the
business.

The Actual Sale:

-

Get equity partners' authorization for the sale. Mention this in MOU.

Hire team of outside experts to do valuation of the business, provide legal

inputs.

Records and books of accounts should be reviewed and problem areas

identified. Inconsistencies, unexplained entries be reconciled.

A list of assets and liabilities be drawn up as the basis for valuation of

business.

Valuation be carried out by an expert to ensure that the price is right.

The agreement is drawn up, address all concerns of both parties and all
possible eventualities should be considered while drafting the agreements
and all elements be put in black and white.

Finalization of the deal has to be communicated to all employees equity

holders, vendors, imp/big customers and all stake holders.

Transfer of assets, closing of bank accounts, transfer technologies and all

other such formalities have to be completed as per the time table laid
down in the agreement/s.

107

GROWTH

Phase 1: Coming into existence:

-

Product identified

Produced on small scale/prototype unit made.

Tested at lab for performance / properties / specifications.

Got consumer acceptance, consumer feedback.

If required modify the features to suit consumers' expectations.

Do thorough market survey and do marketing of the product.

(if it's a chemical /pharma product get it analyzed to ascertain percentage
purity, got approval from Govt. testing labs/R & D centres, get consumer
acceptance produce it on lab scale, then pilot and then on commercial
scale)

Marketing, launch, advertise through 2 or 3 media, keep competitive

pricing, offer discounts, prizes and most importantly warranty and/or
guarantee of performance sell it through dedicated and competitive staff.

Phase 2: Survival:
-

Convert into a workable viable business

Expand and design organizational structure

Introduce systematic accounting and feedback systems.

This is

necessary for survival.

-

Generate enough returns to ensure the unit achieves BEP and it survives.

Generate more turnover and earn economic return on assets.

Phase 3: Success:
-

Company/Entrepreneurship is reasonably stable.

Grow further
-

Owner entrepreneur has to decide

Maintain status
quo?
Preferable take decision to grow, take fresh loan to finance expansion
program.
108

Thus the organization is likely to decentralize so that responsibilities are

appropriately shared by and between Top level Middle Level
management and operational lower level.

In this stage the concept of profit centre is introduced.

Phase 4: Take-off:
-

At this stage, the organization is decentralized several departments.

Head Office has overall control and critical functions are centralized.

Management / Accounting systems are expanded / refined to involve

strategic plans.

Key managers handle the operations of dynamic circumstances.

Company still is dominated by the Entrepreneur (by controlling equity) see

that decision making is effectively delegated.
There should be enough cash to meet liquidity demands.

Phase 5: Take-off:
-

At this stage the organization has the Financial and Managerial resources
to be a formidable force in the industry.

Organization has the capability to do detailed strategic and tactical

planning, do problem solving through teams and experimentation also is
encouraged.

The entrepreneur provides broad direction cues.

Day to day management operations are carried out by the Management

teams.

The challenges in this stage are

(a) Get rid of inefficiencies which might have crept in during growth (eg.
expansion No. of vendors more than adequate).
(b) Be professional without sacrificing entrepreneurial qualities.
NOTE:

The above is one pattern of growth stages through which an

entrepreneurship/company growth goes through. But the stages and the

109

pattern of growth is bound to vary from company to company product to

product and nature of business.

Dr. C.U. Saraf

MITSOB : P.G.D.M.
ED : Net Working
Dt. 27.01.2015
NET WORKING:
It's a business supportive system for sharing infor & servicess
amongst business individuals having common interest e.g.
manufacturers,

marketers

of

pharmaceuticals,

electronic

gadgets, mechanical devices, or common service providers. It

is a kind of business relationship or business alliances. It's
very useful and important to overcome the restrictions of time
and resources available.
*

Entrepreneurial

Networks

Some

dimensions

of

professional networks are mentioned below.

- Anchorage : refers to the focal point of network. Every Orgn.
or person is the focal point of his/her professional network.
- Density is a measure of the extent to which an ent is
connected to the network (NW). This indiciates the speed at
which the business or market information moves from one
place to another, and this is directly proporational to the
number and type, or the heterogenity of the people available in
the NW.
Reachability is a measure of how far and how easily and Ent.
is able to contact the other concerned people and organization
110

for acquiring the business info and the data. Stronger the
relationships better is the reachability (e.g. relationship
between the manufacturer and the supplier or the user.)
- Intensity refers to the strength of the bonds between the
networked individuals and also refers to the degree to which
individuals are prepared to share the business related info and
the data.
- Frequency refers to the amount time network individuals
dedicate to the NW relationship in the form of phone calls, Emails, and fact-to-face meetings.
- Direction indicates the amount of power and freedom of
power relationship that exist between the boss and the
empowered

employee

to

share

and

disseminate

the

information & data to the NW individuals or organizations.

* Starting the Network:
Start your network with the select business people you know
having

Competency,

Dependability

and

Helpfulness

characteristics. You can activate a contact by putting in some

good for getting some information. In this proactive networking
will be initiated by you, and the reactive networking in the
networking generated by others.
The typical members of you business network could be:
-

Current suppliers, customers, and channel members

and their working people.

Your contact people in the industrial sector including

your competitors.
111

Bankers, financers, and others from services sectors

that are closely related to your line of work.

Govt. officials, Policy makers, administrators whose

work is related to your business line.

Collegues from your past work

places.

This

will

include peers, subordinates and bosses.

-

Customers, and also.

The people whom you know from meetings of alumini

associations, social and or business clubs.

Other knowledgeable, competent professionals, and.

Your friends that have contacts in business circles,

politicians and social leaders.

* Keep the size of your NW reasonable more number of people

in NW results in bigger range but it can result in lesser
usefulness. Bigger NW are difficult to control which may be
harmful in the long run.
* Typical Effectiveness of Network: In a professional NW,
the common bond is work related which can take various
forms. For example, with some people, the bond is that you
have manufacturing units in the same industrial estate and
you will need each other's help during prolonged power shut
down, or strikes or natural calamities. With someone else, the
bond could be that the two of you work in the same industry
i.e.

one

of

you

working

for

large

manufacturer

of

downstream products and you have your own firm, which

could potentially be a supplier to the larger firm.
112

* Infrastructure for Networking : These include your real

time availability to share the business related in formation,
your promptness in reacting to the queries, and other
infrastructural facilities such as phone (landline), E-mail,
mobile phone and accurate and update details of your
contacts which also must include address books, contact lists,
significant

calendar

dates:

birthdates,

anniversaries,

appointments and meetings schedules remainders, fax and email and voice mail communications and instant message
archives and personal notices and journals.
Network: Some Best Practices:
1.

Establish relationship with select people much before

you need them.

2.

Understand what you can do for others; that will

ensure what you can expect others to do for you.

3.

Attend conferences, syposia, seminars, workshops,

trade meets, social events. This helps you to establish
business net work with those whom you have come in
contact in such events.

4.

Find common points of interests. There can be related

to business or can be related to your other interests.

5.

Do not talk too much when you meet people. Ask good
questions and let them talk. This will leave good
impression. Find out more about other persons.

6.

Do not contradict others unless you can make

convincing case of it.
113

7.

It is good to come across a well read person with a

broad range of interests. For this, you have to read a
lot fiction, non-fiction, news papers, business
magnizines,

industries

review

articles,

scientific

literature, etc.
8.

Remember to carry a lot of business cards with you all

the time; and also remember to collect business cards
use them appropriately to build up your network.

9.

Keep using the network, stay in touch with others in

your network. Find a way/s to help them. It is good to
do favors so that you are in a good position to ask for
favors later.

10.

Occasionally ask for favors because people like to be of

helps it promotes a healthy exchange of give and take.

114

Prof.(Dr.) C.U. Saraf

Ex-Scientist, NCL,Pune
ED:PGDM
22 Jan 2015
FIVE MAJOR PATHS TO PART TIME E-SHIP
Part-time entrepreneurs sell product and service in five major categories.
1. Stand Retails Ancient forms : Roadside, farmer's market, fix market etc.
Today they have been semi-permanent.
Advantages of stand business: need little investment, it can be a box or a ground
cloth, not much inventory needed and location are many.
Disadvantages of stand business variable income, problems of meeting legal
requirements.
Then these are mall carts on the wheel, kiosk. The cost a little more than stand
retail.
Advantages : your product can been seen by many say thousand people in a
week. Also carts can be rented.
Key Success factors : Available foot or vehicle traffic help to system your
business.
Important : make sure to keep all documentations viz, vendor's permit licenses,
tax number, yearly with you handy for verification by police, inspectors or
officials
Note : Always start with that you know - If some one is selling ask if you can be
an agent or reseller. Go online to search for products or services you resell at the
industrial Resource Network Do online search for the manufacturers of
particulars products for this you must first establish personal contact.
2. Home Retail : This is the party or door to door model. e.g. A retailer arranges an
acquaintance get-together at some one's home, to acquaint with retailer and the
products - a franchise model
This type pioneered by cosmetic firms , also it's a widely used technique with a
number franchise sales operation which sales representative with exchange offer
of home hold, electrical appliances. The retailer goes home to tome, demonstrate.
115

If the retailer, sales man is visiting community, housing societies then he must
think of their lifestyle, income and the kind or types of products or services they
are likely to purchase.
Net working marketing effect : In this the salesman recruits customers to become
distributors of the products or service to other. It's chain selling system. But be
sure of illegalalities of deceptive people in this
3. Consignment Stores and Auctions (Consignment Shops)
These are selling through consignment shops or auctions. In this wide variety of
sellers keep their products for sale customer can come and buy the products of
their choice. The owner of the shop handles the sale and gets some commission
ranging from 10-15 to even 50% for big and small items.
Auctions : are the places, where customers are told where and when they can bid.
these auctions are at specific physical locations. One can verify / check out the
merchandize before the bidding starts. Online auctions show in pictures and
description of the merchandize.
Now- a days you can post it yourself on e-Bay or use an online e-Bay
consignment shop. Using a consignment shop involves dropping of your item.
The consignment shop photographs the item, prepares a description and posts it
on e-Bay. When the item is sold, they ship it to the buyer and send you your share
of the sales price. In foreign counties there are several national franchise chains
offering drop off consignment services like "Auction it today" (e.g. Quicker in
India) The listing of e-bay, Drop Off stores can be found on www.
auctionbuyers.com under consignments services" The consignment stores
generally charge lower percentage than do traditional consignment shop.
The method of selling through consignment shops many consignment shops have
minimum selling price for items. So make sure your item qualifies. There has to
be a written contract outing what the consignment operator will do to sell your
product, what the costs and the fees are, and how they get paid. It is very
important to have clear (3600) direction of (your) product and all parts, pieces and
manuals included. The description should mention the condition of the items and

116

any blemish photos help. Auctions are often time limit and therefore the contract
should also have time limit
The advantage of consignment approach is that they permit full time sale with
only a part time involvement from you, low set up cost, a low risk level and
flexibility that comes from a variety of consignment stores and actions available
to you.
The disadvantage of consignment (auction shops) are little effort being put to sell
your product, risk of high potential for competing offering, long amount of time
before payouts and low profitability, because of seller fees. Also remember that
consignment shop are popular for used products such as antiques, collectibles and
clothing. In person auctions are more common for large ticket items such as cars,
and antiques, while on line auctions such as e-bay.com offer almost everything.
The success factors to look for in consignment shop or auction is location that get
good numbers of and the kind of customers that you think would be interested in
your products. Around to in and outside city locations for such shops and the
quality and condition of the other merchandize.

Also see if the firm has

computerised inventory checking. It helps customers to find goods/ products of

their choice and helps you to keep better track of fast and slow sellers. Also do
some comparison shopping to ascertain which consignment shop or auction shop
is the best for your goods.
IV Mail order and catalogue sale
Imagine you have goods or services to sell but have little time to spend on selling.
Your products/services are such that people would recognize and will understand
how to use. You also imagine that customers are scattered across the country and
world. Then that is the situation for which mail order of catalogue sale is made
The advantages of mail order and catalogue sale
1. Ability to sell on your schedule, low cost for getting started especially if you
place your goods in other's catalogue or online, the ability to get by without major
inventory investment and the potential for selling to large markets.

117

Other challenges are: preparation before selling, the skill for writing and the
photographs of your products, the need to find out right markets and way to get
customers attention for your product.
Mail order sales are typically made from ads placed in news papers or magazines.
Orders can be taken online or by phone as also by mail. Marketing is the key to
successful mail order sales. Here one part is preparing an ad that does a good job
of answering the customers' questions, removing their doubts and attracts them to
buy the product.
The other key element is placing an ad in the (right) news papers or magazines in
which your target market is likely to see it. For this its important to know how to:
Write an Ad copy: Here Headline or slogan of the Ad copy is important. It must
attract the attention of target customers. The headline/ slogan/theme & contents
should focus on customer's needs, benefits and problems. Keep it short and
catchy. You can scan ads in news papers or magazines that attract you for the
product or services that you need or want and then accordingly design or layout
your product's ad that you want to give. (Unless your company's name is famous,
it must not go in the headline).
- Also put the payoff up front.
- Offer incentives e.g. Save 20%, or coupon to spur customer's attention, put a
prize or something to differentiate your product offer from other similar item.
-Put Visuals: attractive and distinctive, sometime line drawing make a difference.

Placing ads: Choose right media (Print, audio and visual / audio visual) depending
upon your target audience, customers. Also select right timing.
Get Media Kit monitor your ad: Put a code and ask customers to write that code
no. in their order. This will help determine Ad effectiveness.
The Catalogue offer customers a description and often a picture of the product
and tells customer how to order it by mail, phone or online. Usually catalogues
are targeted at particular type of customers and focus on particular types of
products. Print of catalogue should be sufficient in number as per the list of

118

regular customers including probable. For this you will have to do marketing,
generate you list of customers based on the data/lists obtained.
You can create and disseminate a catalogue online- This saves your cost of
printing and mailing. Generally- web- hosting services offer shopping baskets
which infact online catalogue- making programmes.
Most part time entrepreneurs include their products into existing catalogues. They
identify catalogue. In this the buyers buy based on preproduction models and
prototypes. Here a Micro inventory is a set of goods or services that consists of
only or few items like Just- in - time inventory as practiced in big businesses. That
is the product or service is prepared only after getting an order. For this a stable,
consistent and secured source of inventory supply is required.

V. ONLINE SALES: Internet is an attractive setting for entrepreneurs looking for

part time business. The advantages of online store are the stores availability 24*7
and possibility of attracting customers the world over. Two major approaches to
Online selling: 1) using e-bay or another online site to showcase your products
and handle the selling and payment process.2) The other is to do this through a
Website of your own. Both are complementary. You can use e-Bay to introduce
your product to a large audience to find initial selling price, and to learn more
customers and competitors. Later you can set up your own Website as your
primary point of sale, and use e-Bay to market new customers. For details, see
skill module 5-2

PATHS TO PART-TIME E-SHIP

Situations : When to consider part time business:
1) Lack of Experience : not involved in pricing, buying and selling and learning how
to do such things makes lots of sense before launching your business .
2) When you lack resources to pursue a full scale business or lack to create before
people pursue their own business part time, gain experience, develop and
maintain contacts and savings they position themselves for going out in to full
business on their own.
119

3) Third type of situation is : there a narrow window opportunity part-time business

can be quickly created by preparing logo clothing, logos, banners and similar
such items also during festival times(Diwali), Ganpati Utsav, Chrismas and ID
Festival. One can undertake part time preparation activities and become part
time entrepreneurs.
You want to gain
basic experience

You
lack
resources for a
full scale business

There is narrow
window opening

I) Stand Retail II) Home Retail (III) consignment stores and Auctions IV) Mail order and
catalog sales V) On line
I. Consignment Shops : Variety of sellers keep their products for sale in consignment
shop. Owner of the shop handles sales get come commission from 10 to 50%.
Many consignment shops have limit of minimum selling price/item. So fit your
product and sign a contract detailing consignment operator's job, costs to be
paid, provide 3600 description of your product advantages and limitations of your
product, keep your product photo. In this, the advantage is the consignment
approach permits full time sales with only your part time involvement, there is a
low set up cost, low risk level.
Auctions at places and online :
Auctions are the places where customers are told where and when they can bid.
Customers can check and see items before they bid. The on-line auctions shows
picture and description of the merchandise.
Now you can picture post your product on e-Bay or use an online e-Bay
consignment shop. The e-Bay consignment shops post photo and description of
items and when the item is sold - they ship it to the buyers and send you your
share of sales price In foreign countries ther are several national franchise chains
120

offering "drop-off" consignment - services like "Auction if today" ( similar to

what we have Quicker in India). The disadvantage of consignment (auction shops
) are long amount of time wait before payouts, low profitability because of seller's
fees.
Consignment shops are popular for used items such as antiques, collectible and
clothing.
Auctions are more common for large ticket items such as cars or very rare
antiques.
On line auctions such as e-Bay can offer almost every thing.
The Success factors for consignment shops or auctions are : There is the location
advantage to attract good number and kind of customers interested in your
products. In and outside city locations for such items can also be considered. Alco
check if the firm has computerized inventory - it helps customers to find goods of
their choice.

Also do come comparison shopping and then choose the

consignment shops or auction shop that would be best for your goods.

IV) Mail order or catalog Sales

This requires preparation before selling, the skill for writing an (advance) copy,
describing its salient features. A photograph/s and work to finding out right
customers/markets and way to attract the attention of customers for your product.
Mail Order sales are made from advertisements in News papers/Magazines :
orders can be taken on line by Phone or by Mail. Your advertisement should
satisfy customer's need and queries. Also placing advertisement in right news
paper, magazine to fetch your customer is very important. For this how to write an
advertisement copy and it contents (headline, slogan, contents, focused on
customer's needs, benefits are important thing so the advertisement should also
highlight "Pay off up fronts" offering incentives,, coupons, visuals, offer prize
contents etc.

121

Also choose right media (print, audio and visual) and right time give a code
number to your each type of advertisement to enable you to monitor
advertisement effectiveness.
THE CATALOG: This gives pictures of your product and tells customers How
to order by mail, phone, or on line. Catalogs are targeted at particular type of
customers and focus on particular type of product (Mechanical, automobile,
cosmetics, instruments, ornaments). No. of catalogue prints should be sufficient to
cover target customers. For this one has to prepare a list of customers based on
market survey and business and social contacts.
Also you can create and disseminate a catalog on line. This saves cost of printing,
and mailing. Generally, Web-hosting services offer shopping baskets which
impact online catalog-making programs.
Most part-time entrepreneurs include their products/services into existing online
catalogs by identifying target catalogs. The advantage is they maintain "Micro
inventory" similar to "Just-in -Time" of big business houses. That is, the product
or service is prepared only after the order is receive.
V) ONLINE SALES:
Internet is an attractive setting for entrepreneurs looking for part-time business.
The advantages of on-line store is store's24hours X7 days availability and
possibility of attracting customers from the world. There are two major
approaches to online selling.

1) Using e-Bay or another online site to showcase your product and

2) Do this selling through a Website of your own.
Both approaches are complementary.
You can use e-Bay to introduce your product to a large audience to find our initial
selling price and also learn more about your customers and competitors. Later,
you can set up you own website as your primary point of sale, and use e-Bay to
market new customers. ( The skill model given in the reference book gives more
details.)

122

Prof.(Dr.) C.U. Saraf

Ex-Scientist, NCL,Pune
ED: 22 Jan.2015
Sub : Contribution of Entrepreneurship Development in Economic Development
and Society in India.
Definition of Economic Development : "An increase in real per capita income of a
person resulting in improvement in the level of living standards."
Invention and Entrepreneurship are the heart of national economy.
Entrepreneur Manifests new ideas and initiatives to form new markets, new industrial.
It creates competitive, viable industrial/business firms therefore, Entrepreneurial activity
promotes economic activity leading to economic development.
Entrepreneurship Development given rise to various business establishments with at least
20% growth rate every year which substantial.
Entrepreneurship Development gives self employment which obviously generates
further manpower employment.
It use locally available skills, capital i.e. raw material, minerals, forest products,
agriculture produce etc.
Entrepreneurship Development helps to raise standards of living of the society, quality of
life is
improved by introduction of new products and services.
For example, new facilities, transportation, development of tours and travel services,
hotel accommodation, restaurants, development of household and industrial electronic
goods, generation of various retail shops, national and international malls, etc.
Because of Entrepreneurial development, online reservation of travel and tours has been
computerized. There are now online banking services, establishment of ATM and credit
and debit card facility, therefore, payment of bills and taxes, charges, income tax has now
been possible through electronic services., E-filing etc.
There is a tremendous improvement in medical, hospital, medical emergency services,
diagnostic centers, security services and fast communication services such as cell phones,

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video conferencing, telephones, electronic advertising, business transactions, completion

of producers, formalities etc. Are now done rapidly.
Infrastructural Development
Because of Entrepreneurial development now there several business incubators, business
clusters, industries sector wise clusters, incubation centers, several analytical and testing
laboratories/(R&D Units have come up. They have helped and are helping rapid
industrialization in very many regions including under developed areas of India. As a
result, we now see large growth of mechanical, electrical, electronic, pharmaceutical,
food processing, agricultural, automobile industries, IT, and of course the establishment
basic and bulk industrial growth in India.
Exports
Economic Development has significantly contributed in expanding India's export
business. It has at the same time contributed a lot in reducing imports to a large extent.
As a result, we see a healthy balance Trade picture compared to what it was some 20
years back.
Job creations/ Business Expansion.
It is estimated that Economic Development - Small scale industrial sector has and is
contributing more than 70% GDP. In fact, it is said that economic development is equal
to development of small scale industries in India.
The small scale industries generate very large number of and different kinds of jobs at
both skilled, non-skilled and managerial levels in industries. Newer better business plans
CPBs are prepared for better continuity and further progress of business.
They make effective and efficient use of men, material and money for economic
development of the society.
New Technology :
Entrepreneurial firms are usually faster to generate markets with (radical ) new
technologies, novel products and new services. Examples are " Automation,
computerized production techniques, e.g. automated feeding and stopping supply of raw
materials, components in industrial production, use of IT.
Institutional support to small Entrepreneurs :

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1. National Small Industries Corporation (NSIC) is an enterprise under the Union

Ministry of Industries set up in 1995.
Purpose : To promote and foster the growth of small scale industries in India. It
provides a wide range of services, particularly to small scale industries.
Functions :
1. To provide machinery on hire-purchase scheme to small scale industrial units.
2. To provide equipment leasing facility.
3. To help in export marketing of the products of small scale industries.
4. To participate in bulk purchase programs of the Govt.
5. To develop proto type of machines and equipments to pass on to small scale
industries for commercial production.
6. To distribute basic raw materials among small scale industries through raw material
depots.
7. To help in development and up gradation of technology and implementation of
modernization of small scale industries.
8. To provide training in various industrial trades.
9. To set up small scale industries in other developing countries on turn key basis.
10. To undertake the construction of Industrial estates.
2) Small Industries Service Institutes (SISIs)
These are set up to provide consultancy and training to small Entrepreneurs both
prospective and existing units.
The activities of SISIs are coordinated by the Industrial Management Training Division
of the DSSSIs office.
There are more than 28 SISIs and over 30 branches all over the countries. There
functions are :
1. To serve as interface between Central and State Govt. in connection with
establishing small industries in the Country.
2. To render technical support to small Entrepreneurs.
3. To conduct Entrepreneurship Development Programs in all states in India.
4. To initiate promotional programs.
5. The SISIs also render assistance in the following areas
i. Economic Consultancy/Information/EDP Consultancy
ii. Trade and Market information.
iii. Project profiles
iv. State Industrial potential survey.
v. District Industrial Potential survey
vi. Modernization and in-plant studies.
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vii. Workshop facilities.

viii. Training in various trades.
3) District Industries Centers (DICs)
Started in 1978 to provide integrated administrative frame work at the district
level for promotion of small scale industries in rural areas of the country.
It is looked upon as a single window interacting agency with Entrepreneurs at the
district level.
DICs provide services and give administrative support to small Entrepreneurs
under single roof also called as services provided under single window scheme to
small Entrepreneurs.
The Functions of DICs : are mainly promotional and development as
outlined below:
1. To conduct industrial potential surveys keeping in view the availability of
resources - material, human skills, infrastructure, market/social demand
for the product and services
To prepare techno-economic surveys, identify product lines and
accordingly provide investment advice to Entrepreneurs.
2. To prepare an action plan to effectively implement the industrial schemes /
projects that have been identified.
3. To guide Entrepreneurs for selecting the most appropriate machinery and
equipment, sources of supplies of the right machinery (imported) assessing
requirement of raw materials.
4. To evaluate proposal received from Entrepreneurs and appraise their
worthyness.
5. To assist Entrepreneurs in marketing the products and also provide
assistance to export them in foreign countries.
6. To undertake product development work suitable for small scale industries.
7. To conduct artisan training programs.
8. To function as the technical arm of DRDA in administering IRD and
Trysem programs.
INDUSTRIAL FINANCE TO ENTREPRENEURS
1. Industrial Credit and Investment Corporation of India (ICICI)

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Set up in 1955 under the Indian Companies Act, with the primary objective of
developing Small, medium scale industries in private sector.
The Functions of ICICI are :
i. To provide assistance by way of rupee and foreign currency loan,
underwriting and direct subscriptions to shares/debentures and guarantees.
ii. To offer variety of financial services such as deferred credit, leasing credit,
installment scale, asset credit and venture capital.
iii. It guarantees loans from other private investment sources.
ICICI has set up a Merchant Banking Division to provide financial assistance
to Entrepreneurs. It has also set up ICICI Asset Management company Ltd to
operate the schemes of the ICICI Mutual Fund. It also has opened another
subsidiary called ICICI Investors Service Ltd and ICICI Banking Corporation
Ltd. All these are functioning very well.
The ICICI assist all sectors, viz, the private sector, the joint sector, the public
sector and the co-operative sector. It is to be noted that the major beneficiary
of the ICICI's assistance are the Entrepreneurs from private sector mainly the
Small Scale Industrial Units.
2) Small Industries Development Bank of India (SIDBI)
SIDBI has been set to ensure larger flow of financial and non-finance assistance
to the small scale sector by the Government of India, under a special Act of the
parliament in 1989, as a wholly owned subsidiary of the IDBI.
SIDBI has taken over the outstanding portfolio of IDBI relating to small scale
sector worth Rupees over 4,000 crores at that time. The authorised capital of
SIDBI that time was Rs. 250 Crores.
The Important functions of SIDBI are :
1) To initiate steps for technological support / up gradation and modernization of
existing industrial units.
2) To expand the channels for marketing the products of small scale industries in
both domestic and international markets.
3) To promote employment oriented industries especially in semi-urban areas to
create more employment opportunities and thereby checking migration of (rural )
people to urban areas.
The SIDBI's financial assistance to small scale industries is channelised through
the existing credit delivery system comprising State Financial Corporations, State
Industrial Development Corporations, Commercial Banks and Regional Rural
Banks.
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SIDBI subsequently opened two new schemes viz., Equipment Finance Scheme
for providing direct finance to existing well run small scale units taking up
technology up gradation / modernization of plant/equipment and refinance for
settlement of voluntary retired workers of NCT.
The other new scheme launched was to provide venture capital fun exclusively for
small scale units, with an initial corpus of Rs. 10 Crore. The SIDBI enrolled itself
as an Institutional Member of the OTC exchange of India (OCTEI)
SIDBI also provides Financial support to National Small Industries Corporation
for providing leasing, hire purchase and marketing support to the industrial units
in the small scale sector.
Prof.(Dr.) C.U. Saraf
Ex-Scientist,NCL,Pune
MITSOB:PGDM
9. STARTING AN ENTPRENEURSHIP
For starting an Entrepreneurship business, you may also consider examples of how
Changes in the Environmental Trends offers, Business opportunity.
Economic Trends:
Entrepreneurship Teenagers with more cash and disposal income : This has resulted
in new businesses, products and service opportunities such as Designer of Clothes,
compact discs, DVD players, Electronic games and hand held computers by the
Companies ( e.g.GAP, Banana Republic, MTV, Sega, Palm etc.)
Increased interest in Stock Market : gave business to ouline brokerage services, stock
research services, creations of magazines for investors.
Social Trends
Predominance of duel income families has left Very little or No time to cook at home
: Therefore, food delivery services, Restaurants, ready to eat hotels have come up in large
numbers ( e.g. Mc Doland's Fried Chicken shop, Frozen dinners, Domino;s Pizza are seen
every where)
Increased interest in fitness, hazards of being over weight : All these have given birth
to fitness centers, in house exercise equipments, weight-loss-centers, health food stores.
Increased mobility of the ever rising population because of ": Better and quick means
of transportation and increased disposable income have resulted in businesses such as
Cell phones, Laptops, phone cards etc. and also Tours and travels the world over.
Technological Trends
Development of internet and other ITs: have created E-commeres, improved supply
chain management, fast and accurate communication.

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Advances in computerized/electronically controlled technologies have resulted into fast,

accurate production and automation, production of complicated medical equipment and
machineries.
Advances in biotechnology : helps producing biotech-related pharmaceutical products,
food products, veterinary products and information services.
Political and Regulatory Trends :
Opportunities are opening up, consulting companies ( what to produce, marketing
techniques, training, business how to start i.e. procedural formalities.
10) SMALL BUSINESS START - UP
One of the most effective route to success for entrepreneurship small scale
business is depicted below :
1. Start the business in a business incubator
2. Take part in a mentoring program
3. Have a detailed strat-up budget
4. Produce product or service for which there is a proven demand.
5. Secure outside investment.
6. Start with more than one founder.
7. Have experience managing small firms.
8. Have industry experience
9. Have previous experience in creating a start-up business
10. Choose a business that produces high margins.
11. Start the business with established customers.
12. Build trust in your story.
All the above points are important. However the points vizs, 1,6,10 and 11 need
some discussion
Point No. 1 : Start the business in a business incubator : Experience shows that
starting a business with the help of a business incubator is warranted. If the
product, service of business is really and there is no marketing network, People
who are experienced as per the points 7,8,9 and the product has proven demand
(Point No.4) and has established customers (Point No.11) then the Entrepreneur
can start his/her own business. Business incubators usually encourage a research
oriented, exciting, new have and innovative business proposal.
Point No. 6 : Starting a business with more than one founder is dependent on the
individual's educational qualification, experience family background, his financial
and technological capacity and capability. Never the less he can take assistance in
different capacity from friends, relatives.
Point No. 10 : Choice of business having high margins may not be always
feasible. This will depend upon the nature, demand, specialty, use of the product
and let us not forget the tough competition.
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Point No.11 : By establishing a contact with key persons ( Purchase officer,

Director, Vice President ) a fresh Entrepreneur can secure a purchase order

Spin - off business activity:

It is a business that is created by separating a part of an operating business in to a
separate entity. This can be considered as an either off-shoot of an established
running business. The management may decided to separate a part of the production
activity separately, which is recognized as a separate legal entity. We can take the
example of an INTRAPRENEUR that has been already discussed in the class earlier.
Build trust in your story :
Building trust is essential to the success of all start-ups. For example, suppliers,
vendors, are usually reluctant to trust newly started business. By making payments to
your vendors, suppliers and employees regularly and on time and also making timely
deliveries to the customers a new business man can start building up the trust in the
minds of above people. This pays large and sustainable dividends in future. Also
while making the business plan, business model see to it that they are complete in all
respects, the data provided is factual, and acceptable to the Bankers. This in turn will
surely help increase trust in your fresh entrepreneurship activity
Buying an existing business
In this there are advantages and disadvantages. Some majors are given below
Advantages : You get established customers for immediate sales and cash flows. It
eliminates hiring fresh employees, you need comparatively less cash outlay.
Disadvantages : Finding a successful business for sale that is appropriate for yur
experience, skill is very difficult and time consuming.
The reputation of the business may be hindrance to future success. So check
marketing standing and credibility before buying.
Also avoid outdated technology ( However one can upgrade the technology if
technological talent is available)
Note : Refer to the skill model 6.2 for finding business for sale.
Buyers Beware before you buy :
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When you have found a business you would like to buy, then you must do exhaustive
investigations to determine its future value and prospects. This is called " Due
dilligence process of determining the full and complete practical implications of
buying a business. have techno-commercial experts with you to
o Conduct extensive interviews with the sellers of the business
o Study the financial reports and other business related report
o make a personal examination of the site
o Meet and interview customers and suppliers of that business
o Develop a detailed business plan for the acquision.
o Negotiate an appropriate price of the business - based on plan, projections
o Generate sufficient capital to purchase and operate the business.
Prepare discounted cash flows viz; the cash flows that have been reduced in value
because they are to be received in future. Also work out the book value, net realizable
value, replacement value and earning multiple i.e. the ratio of the value of a firm to
annual earning.
Structuring the Deal
Understand the methods for purchasing an existing business 10 Purchase at the lowest
price possible 2) you may buy in, by acquiring some, but not all the ownership 3) you
may buy only the key assets such as the inventory, or equipment of the business and
not the business itself and 4) you may takeover a public business by buying a
controlling interest of tis stock ( For obvious reasons the details of 1,2,3,4 have not
been discussed here)
Key Resource Acquisions :
Called as bulk assets purchases, i.e. sole proprietorship may be purchased. This
includes : assigning the value to the intangible assets such as the value of business
name ( value of oon going business, value of established relationship etc) the
intangible assets i.e. Things of value that have no physical existence, for example
patents and trade secrets. In this one can check life of patent/s and estimate future
turnover for say 5 to 7 years and also depending upon the type of patent viz, national,
international and whether it is a process or product patent and check the bench mark
of the manufacturing process.
Takeovers: are possible only of businesses that have stock which is freely
transferable by the owner. In takeover, the buyer ( called raider) seizes control of the
business. Takeovers are hostile events. In the takeover the current management may
be replaced In takeovers because of the requirement that stock be freely transferable,
only a few small businesses are vulnerable to hostile takeovers. Small businesses
takeovers may result in the loss of key employees and resentments and resistance of

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employees who remain. In view of this, takeovers are usually done on medium or
large businesses.
FRANCHISING A BUSINESS

What is Franchising : Franchising is a legal agreement that allows one

business to be operating using the name and business procedures of
Another. e.g. are many Mc Donalds. We must understand the
advantages and disadvantages of having a franchise. The Agreement
must have the following 4 elements.
1. The agreement provides the franchises with a legal right to engage
in the business of offering, selling, or distributing goods or
services.
2. The agreement provides that the franchisee may engage in business
using a marketing plan or system provided by the franchiser.
3. The agreement grants the franchisee the right to use Brand name,
Trademark, Service Mark, Logo, or other commercial symbols.
This designates the franchises as an affiliate of the franchisor
4. The agreement requires the franchises to pay a fee for the right to
enter into the business.
There are four basis forms of franchising.
1.Trade name franchising. An agreement that provides to the
franchisee only the rights to use the franchisor's trade name and
or trademarks.
2.Product distribution franchisee provides specific brand name
products which are resold by the franchisee in the specified
territory.
3.Conversion franchisee : An agreement that provides and
organization through which independent businesses may
combine resources.
4.Business format franchising franchising : An agreement that
provides a complete business format, including trade name,
operational procedures, marketing and products or services to
sell. This exemplified by the Mc.Donal's corporation. It
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includes many trade names, specifications of the products to be

sold, operating methods, marketing plan and national
advertising. Franchisee pays to the franchisors both an up front
fee to obtain the franchisee rights and the percentage of gross
sales.
Some franchisors sell their master franchisee that require opening
multiple stores within a specified period, which they do by selling subfranchisees within the development area ( e.g. subway Sandwich shops)
Advantages of the franchising.
The advantages of franchising that the franchisee receives the benefit of a
proven successful business model (Mc.Donald's specifies every aspect of
the business, from the temperature to which burgers are to be cooked, to
the time that they may be kept before being sold. )
The franchisees receives training and management support ( e.g. training
such as in Hamburger university before being allowed to begin business.)
They send an experienced manager to assist the franchisee during the start
up phase.
Regular training is provided concerning operations, techniques, products
and new product promotions. The send proprietary computerised
program for sale register and accounting.
Also marketing, product placement, advertising and promotions are all
controlled and directed from the franchisor's headquarters.

Disadvantages of franchising
franchisee have to give up control of marketing and operations. He has
no freedom to use his own marketing techniques.
franchisor sets policies e.g. at that time, the franchisee should open and
close the day to day business.
That supplies and inventories must be bought from specific, designated
vendors by the franchisor.
Local purchase (If allowed) are tightly controlled by written policies
and contract provisions.
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 You will be regularly inspected to ensure that you are meeting all
contractual standards. If you consistently fail to meet standards, the
franchisor has the right to take your business from you.

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