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Role of Support Institutions to Promote Small Entrepreneurs

OBJECTIVES After reading this chapter you will learn: 1. Information about the infrastructure of the support institutions 2. The role, functions and major schemes of the support institutions The entrepreneurship development movement, is primarily based on the belief that people can accept entrepreneurship as a career. In order to accelerate the speed of self-employment and entrepreneurship development, various institutions and organisations were established by the government, particularly during the Third Five-Year Plan. These institutions and organisations cater to the business needs and requirements of the entrepreneurs. Particularly, the 'first generation entrepreneurs' is the focal point. This chapter familiarises the entrepreneurs with the various support institutions at the Central as well as at the State level. 5.1 DIRECTORATE OF INDUSTRIES The Directorate of Industries is established at a state level under the Ministry of Industry, Power and Labour. The Development Commissioner is the head of the Directorate. He is assisted by the Additional Commissioner, Additional Director and Joint Directors. For the administrative purpose, the state is divided into Divisions/Zones. 8.1.1 Functions of the Directorate 1. Implementation of the industrial policy of the government. 1 2. Promotion of the industrial development in the state and accelerate the speed of implementation of various industrial projects. 3. Establishment of cooperative industrial estates.

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Role of Support Institutions to Promote Small Entrepreneurs

OBJECTIVES
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reading this chapter you will learn: 1. Information about the infrastructure of the support institutions 2. The role, functions and major schemes of the support institutions

The entrepreneurship development movement, is primarily based on the belief that people can accept entrepreneurship as a career. In order to accelerate the speed of self-employment and entrepreneurship development, various institutions and organisations were established by the government, particularly during the Third Five-Year Plan. These institutions and organisations fcater to the business needs and requirements of the entrepreneurs. Particularly, the 'first generation entrepreneurs' is the focal point. This chapter familiarises the entrepreneurs with the various support institutions at the Central as well as at the State level. 5.1 DIRECTORATE OF INDUSTRIES The Directorate of Industries is established at a state level under the Ministry of Industry, Power |and Labour. The Development Commissioner is the head of the Directorate. He is assisted by the Additional Commissioner, Additional Director and Joint Directors. For the administrative purpose, |the state is divided into Divisions/Zones. 5.1.1 Functions of the Directorate

speed of implementation of various industrial projects. 3. Establishment of cooperative industrial estates. 4. Registration for the small-scale units. Procurement of land, water, electricity for the small-scale sector. . Provision of financial assistance to industries. Helping the small-scale units in procuring plant and machinery, scarce raw material and machinery. VL Training to new entrepreneurs. ^. Coordination between various government departments and committees established!^

1. Implementation of the industrial policy of the government. 2. Promotion of the industrial development in the state and accelerate the

the promotion and development of small-scale industries. lO. Implementation of the various financial schemes, subsidies and grants for small scale industries. n Helping and rehabilitating the sick industries. Development of rural industries. 1 Exportpromotion. 4 Promotion and development of agro-industries. 1 Compilation of statistics related to industry, trade and commerce. Marketing assistance. Initially, all the functions related to promotion and development of new industries and small entrepreneurs were assigned to the Directorate of Industries. But, to accelerate the speed of ^Plementation of the scheme and enhance efficiency, the government has established separate corporations like SSIDC, IDC, SFC, etc. These corporations function under the directives of the Directorate of Industries. 5.2 DISTRICT INDUSTRIES CENTRE (DIC) To initiate the process of industrial development in each district, the Central government estab' District Industries Centres (DIC) in each district of the country. DIC functions under the Directora of Industries. Each DIC is headed by a General Manager who is assisted by managers to look the following activities, 1. Economic investigation 2. Plant and machinery 3. Research, education and training 4. Raw materials 5. Credit faddities 6. Marketing assistance 7. Cottage industries off DIC I| Accelerate the overall efforts for industrialisation of the district, k Rural industrialisation and development of rural industries and handicrafts. ^ Attainment of economic equality in various regions of the district. 4 Providing the benefit of the government schemes to the new entrepreneurs. Centralisation of procedures required to start a new industrial unit and minimisation of the efforts and time required to obtain various permissions, licenses, registrations, subsidies, etc. Functions off DIG I Acts as the focal p oint of the industrialisation of the district. 2. Prepares the industrial profile of the district with respect to: a. Statistics and information about existing industrial units in the district in the large, medium, small as well as co-operative sectors b. Opportunity guidance

c. Compilation of information about local sources of raw materials and their availability & Manpower assessment with respect to skilled, semi-skilled workers e. Assessment of availability of infrastructure facilities like quality testing, research and ; development, transport, prototype development, warehouse, etc. f^^/Organises entrepreneurship o^elormient^aining ? i. Provides information about various government schemes, subsidies, grants, and assistance available from the other corporations set up for promotion of industries ~K SVUives SSI registration I 6. Brepares techno-economic feasibility report \y. Advises the entrepreneurs on mvestments.^ r^/Acts as a link between the entrepreneurs and the lead bank of the district . 9. Implements government schemes for educated unemployed people, PMRY scheme, Jawahar Rojgar Yojana, etc. ^ff. Helps entrepreneurs in obtaininghcenses from the Electricity Board, Water Supply Board, No objection certificate, etc. Helps the entrepreneur to procure imported machinery and raw materials 12. Organises marketing outlets in liaison with other government agencies.

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y> obtain a plot of land in IDC an entrepreneur has to fulfil the following requirements:

1. Purchase the required (white) form from the nearest DIC or the office of
the IDC 2. Fill up the form and answer the queries mentioned in the form 3. Attach copy of the project profile along with the form p Attach Demand Draft for the required amount with the form. The DD is to be addressed to the Chief Executive Officer, IDC 5. Obtain a receipt of submission of the form from the concerned IDC office for further correspondence

6. If the entrepreneur has completed all these formalities and if the plot of
land is available in IDC, he will get the offer letter from the IDC within 15 days from the submission of the form 7. The entrepreneur has to pay the advance amount (50% of the cost of the plot) by DD in the IDC office 8. After receipt of the advance, within two weeks IDC gives the allotment letter to the entrepreneur

9. Within 30 days, entrepreneur has to pay the remaining amount of money 10. After full payment is received by IDC, an agreement is signed and the
possession is given to the entrepreneur. industrial estate Industrial estate is a group of industrial galas or units constructed with a minimum cost at a place where infrastructure facilities like bank, post, transport, roads, power, water, etc. are available. There are five categories of industrial estates: a. government industrial estates b. municipal industrial estates c. functional industrial estate d. cooperative industrial estates e. private industrial estates 5.4 STATE FINANCIAL CORPORATION (SFC) Finance is another important factor of production. The easy availability of financial resources is an impetus for the speedy development of industries. Particularly, new entrepreneurs have a severe problem of dearth of capital. To

overcome this hurdle in the industrialisation of the country/the government ha established State Financial Corporations (SFC) in each state according to the Financial Corporations Act, 1951."

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/SFC is one of the pioneering corporations established to fulfill the financial needs of the small and medium scale industries Jrhe prime objective of SFC is to caterto the long-run financial requirements of the entrepreneurs Jit gives long-term loans for the purchase of fixedTassetslike land, building, machinery, and equipment) Loans are given for the new industrial urutsas well as for the modernisation of the existing units. .Loans are not given for the repayment of the working capital .^Recently, SFC gives financial assistance for the repayment of working capital worth RB.10 lakhs^For this purpose the total project cost limit is Rs.20 lakhs Industrial units entitled for the loans from the SFC are a. Proprietary concern b. Partnership concern c. Hindu undivided family d. Private limited company e. Public limited company f. Registered cooperative society

According to the SFC Act, loans are given to the industrial units engaged in manufacturing, preservation of perishable products, mining, hotel industry, testing, repairing and assembly of any type of machinery and vehicles for the passengers and goods transport by road or by sea. In the service industry sector, units engaged in activities like analytical and testing laboratories, repairing of television, repairing and maintenance of airconditioners, computer services (excluding computer training classes), tourism related entertainment and cultural centres, hotels, tourisni services, video recording studio, weighbridges, salt manufacturing, chicken meat production, stone crushing and coal manufacturing for domestic use. SFC has identified a certain group of beneficiaries for financial assistance. Important beneficiaries are listed below: 1. General loan scheme for the technically and feasibly viable projects Purchase of machinery J^- Modernisation 4. Quality standardisation and testing facility 5. Medical professionals 6. Hospitalsand nursing homes J, Small nursing homes and diagnostic centres 8.. Exservicemen _ '-:9.i> Women entrepreneurs

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Rote of Support Institutions to Promote Small Entrepreneurs 123 jlX Hotel and restaurants ;'j3.v Tbunsm \% Joint loans 13. Single window 14 To avoid the sickness of the unit 15* Nation equity fund 16. Mobile vans

17. 18. 19.

Marketing avenues for village and cottage industry products Service industry as enlisted by SFC

Qualified professionals ; V^"_____,____------20. Purchase of computers 21.---Ve hicles \^ . Important aspects and conditions considered by SFC while scrutinising the loan proposals are: 1. Promoter's contribution 2. Debt-Equity ratio

3. Margin 4. Security and collateral security


5.5 SMALL-SCALE INDUSTRIES DEVELOPMENT CORPORATION (SSIDC) ^Small-Scale Industries Development Corporation is a state level corporation. It caters to the [marketing requirements of the small-scale entrepreneurs. 5.5.1 Functions of SSIDC

1. Assists entrepreneurs in identifying products and preparing project


reports 2. Organises entrepreneurship training programmes 3.Supplies scarce raw materials at reasonable rates by procuring these materials in a bulk quantity from their main suppliers 4. Arranges imported raw materials I .5, Provides credit facilities for raw material supplies, 6, Arranges for marketing assistance to products manufactured by small entrepreneurs

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7, Participates in the exhibitions to promote the products of the small


entrepreneurs 8, Amung68 exhibitions of handicrafts to promote village and cottage industry O, Provide* permanent display, exhibition and sale facilities for small entrepreneurs

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- KHADI AND VILLAGE INDUSTRIES COMMISSION (KVIC)

^s per the provisions of a Special Parhamentary Act 1956, the Government has established Kha^ and Village Industries Commission.
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*6-l Objectives of KVIC vJ^-Te preserve the traditional arts and crafts in India

2. To equip the artisans and craftsmen to take up the challenges of the


modern market 3. To promote the handicrafts, khadi, village and cottage industry by facilitating them with the necessary inputs like raw materials, equipments, capital, etc. ^ * Jo develop a market for these products To introduce the productsqyen in the international market To achieve these objectives, the following schemes are provided by KVIC a. Financial assistance for purchase of land, building, workshop, shed, machinery and equipment at 4% rate of interest b. Working capital provision c - Equity capital d. Loan provision for purchase of raw materials e. Marketing avenues and selling centres for the products of artisans and craftsmen f- Subsidies for the registered societies of artisans and craftsmen belonging to scheduled castes, scheduled tribes, ex-service men, women, etc. In addition to these schemes, KVIC provides various facilities for cottage industry like integrated village development programme, special beneficiary schemes, silk industry development scheme interest subsidy scheme, artisans employment guarantees etc.\The government has defined"Gramodyog" (village industry) asy

1. population of the village should not be more than 10 thousand people 2. investment in the place of products, machines and equipment should not
exceed Bs.ti thousand

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3. manufacturing can be done either with power or without power. It has approved nearly 96 industries under the preview of the KVIC. These industries are grouped under the following categories: 1 Material based industries

^ Agro-based industries |; Polymer and other chemical based industries K Khadi and textile industry 6; Service industry In order to popularise the schemes of the KVIC and to promote the products of the khadi and lage industry, KVIC organises exhibitions of these products. It arranges special shows on TV radio. It also publishes a magazine called "Gramodyog". It organises conferences and get-jether of artisans and craftsmen. Thus, KVIC plays a significant role in the promotion and levelopment of the khadi and village industry. 5.7 TECHNICAL CONSULTANCY ORGANISATION (TCO) Technical Consultancy Organisation plays a crucial role in the industrialisation process of the [state. The TCOs are organisations established by the state governments. The primary objective of the TCO is to furnish industrial and technical consultancy to the entrepreneurs. The TCO is sponsored by national and state level financial institutions and banks like ICICI, IDBIJFCI, CICOM, SFC, SIDC, SSIDC, commercial banks, etc. 5.7.1 Functions off TCO I Prompt advice to the small-scale entrepreneurs about the technical aspects and quality enhancement of their units Encouragement, assistance and technical consultancy for promoting new entrepreneurs Advice and consultancy about industrial management Avail the technical know-how and expertise at reasonable rates 5. Preparation of project reports and project profiles ' 6. Survey work in the field of power needs, modernisation of the plant, sick industries and conducting survey on behalf of central and state governments fc|/^Opportunitv guidance and product selection ^OiClarke^siirvey \J> ^Project launching, installation, supervision IP& Expansion of the unit Training to new entrepreneurs Nj^ Technical collaboration and transfer of new technology 13. Nursing of the new units and sick units HprWuctivity stwdi^ for improvement in quality* delivery, schedule and reduction of ^ manufacturing expenses l%Jlb create a data base for industries S.8 SMALL INDUSTRIES SERVICE INSTITUTE (SISI) Small Industries Service Institute is a national level organisation established by the central government. At the state level SISI functions under the Director assisted by Deputy Director. 5.8.1 Fractions of SISI
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1. s$hbmcl infcrmatinn SISI provides information about the supply and the avaikbihtyitf raw materials. It gives technical information about the machines and equipment. Technical; know-how about the process of production, quality testing

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and standardisation of products, modernisation and preparing product design are other services provided by SISL &y Workshop SISI has a well-equipped workshop which provides services to entreprt at reasonable rates. Jobs related with machine shops, heat treatment, hardness t are carried out in these workshops. The main motive of the workshop facility is toim the^quality of the products. 3./technical training SISI provides technical training to the workers employed in the vi .. industrial units as well as the entrepreneurs in order to improve standards of quaKty labour. In the extension centres of SISI, training is provided for machine shop pra< muling, heat treatment, blueprint reading, etc. 4. Economic investigation division SISI collects and compiles statistical inform^ regarding various aspects concerned with the establishment and development of small industries. Important aspects are demand and supply scenarios for different product* investment, raw material, etc This division prepares review reports on the items reserved for the small-scale industry. The study of sick industries is also undertaken by this division, In such studies, SISI tries to identify the causes of the sickness of the smooth working of these units. xport promotion SISI plays a significant role in the efforts regarding export promotion 7 A special arrangement is made to provide information about exporting the products. On behalf of the small entrepreneurs, SISI participates in international exhibitions and promote the products in the foreign markets. Modernisation SISI guides the entrepreneurs in the quality upgradation, modemisa and improvement of productivity. ^

development of the market SISI acts as a link between the tiny and the small industries and the medium and the large-scale industries. It provides information about the products and the services of the small entrepreneurs to the requirements of the large industries. Thus, it bridges the small industries with the large industries and tries to develop the market. Many of the products manufactured by the small industries are purchased by the large industries. I 8. Library SISI has a huge collection of books, journals, magazines, newspaper clippings ^^etc. It provides-valuable services to small entrepreneurs through its well-equipped library. It has a collection of hundreds of project reports. Entrepreneurs can use these readymade project reports at reasonable rates. 9. Exhibition A permanent exhibition is arranged by SISI in its office premises. SISI exhibits \^products manufactured by small entrepreneurs. The exhibition is free of cost. Thus, SISI provides multifarious services to the small entrepreneurs. 9 NATIONAL SMALL INDUSTRIES CORPORATION (NSIC) National Small Industries Development Corporation is a national level institution. It was set up 1955 as a Central Government undertaking. The main aim of NSIC is to fulfil the requirement machinery and equipment for the development of small entrepreneurs. It is observed that the lain constraint faced by the entrepreneurs is the dearth of investible funds to purchase machinery id equipment. Dearth of finance deprives many new entrepreneurs from entrepreneurial opportunities. NSIC is established to cater to this need of the entrepreneur. NSIC provides plant, machinery and equipment on a hire-purchase basis. Under its special scheme, entrepreneurs can procure indigenous as well as imported machinery. But the scheme does not include second hand machinery and machinery costing less than Rs.1000. NSIC also assists the entrepreneurs in procuring government orders for various items of stores. The prescribed application forms are available in all offices of NSIC, SISI and DICs. Depending upon the cost of the machinery, an entrepreneur has to pay an application fee of Rs.50 to Rs. 1000. The processing fee is 2% to 5% of the cost of the machinery. [Service fee depends upon the location of the unit. Discrimination is made between the units located in industrially developed regions and the units of scheduled castes, scheduled tribes, persons with Usabilities, ex-servicemen and women. The cost of the machinery is to be repaid in 13 equal Instalments. In some cases, the cost is to be repaid in 9 instalments. New entrepreneurs are given tl incentives. They can pay the first instalment after 18 months from the date of contract NSIC. The rate of interest charged by NSIC is usually 16 to 21 percent. For imported jhiriery. an entrepreneur has to abide by the provisions of the import policy of the government. Entrepreneurs have to secure a license for such imports. In special cases, entrepreneurs Have^ prepare prototypes of the machines.

5.10 SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA (SIDBI) Small Industries Development Bank of India was established in 1990 as a development bank exclusively for the small-scale industries. It is a Central government undertaking. The prime aim of SIDBI is to promote and develop small industries by providing them the valuable factor of production, finance. Many institutions and commercial banks supply finance, both long-term and short-term, to small entrepreneurs. SIDBI coordinates the work of all of them. Financial assistance scheme of SIDBI The main obstacles and problems in the growth of industrial units are the paucity of primary infrastructure, unavailability of suitable market for selling the products, working capital requirement and difficulties arising out of the delays in receiving the bills. Considering these problems, the following provisions are included in the various schemes of SIDBI.

1. Loan assistance to the institutions providing market or marketing avenues


to the small entrepreneurs.

2. Loan assistance to ancillary units and also for modernisation and


upgrading technology. 3. Loan assistance to institutions providing primary services and infrastructure and developing the growth centres.

4. Loan assistance to NSIC.


5. Loan assistance to private companies which function on rental basis or contract basis. Nature of the loan assistance scheme is: Refinance to SSIDCs which supply raw material to small units and 1. provide them market avenues.

2. Bill discounting facility. 3. Refinance for loan given by state level institutions and banks under the

single window system for fixed capital and working capital. Refinance of loan given to certified professionals and self-employed people for businesses like small clinics and hospitals, nursing homes, development of tourism, etc. Refinance for loan given by banks and concerned institutions for new projects, expansion and modernisation of existing units, quality improvement and rehabilitation of the unite

imilarly, SIDBI provides assistance to women entrepreneurs and ex-servicemen tinder $ . Finance Management

>ading this chapter you will learn: Need, scope and significance of financial management for a small entrepreneur 2. How to raise monetary resources and resource mobilisation 3. Effective ways of working capital management 4. Techniques for effective investment decisions 5. Methods of record keeping and accounting a. financial accounting b. cost accounting c. management accounting 6. Advisory function of a financial manager 7. Cashflow analysis 11.1 SCOPE OF FINANCIAL MANAGEMENT finance or financial management is a crucial area in entrepreneurship management. Entrepreneurship is defined as profit-oriented activity. Money is a medium of exchange and a substitute for the real resources. Financial management is basically concerned with getting the best out of all the factors of production. All these factorsmen, material, machines and method are commended by a single factor namely money. All the functional areas like production, personnel, marketing, industrial relations have financial implications. It is seen that financial management involves the significant skills and abilities of an entrepreneur and can be viewed from the point of the duties and responsibilities implied in its scope. IIP To analyse and identify the financial needs of the enterprise i To identify sources of finance To raise money and mobilise resources To control the flow of resourcespresent and future 4. To safeguard money which is already invested in the business 5. To meet all types of monetary obligations to all concerned 6. people and parties

7. To protect the business against any financial setbacks 8. To achieve financial targets 9. To maximise returns on investment 10. To manage the working capital effectively 11. To identify and eliminate unnecessary and unproductive
expenditure 12. To advise on financial implications of any decision or plans 13. To represent financial interests of the business. Financial management is classified under the following four broad areas: 1. Money management

2. Record keeping and reporting 3. Control function 4. Advisory function


11.2 MONEY MANAGEMENT An important function of an entrepreneur is the efficient and effective management of monetary resources. It consists of three tasks Resource mobilisation Working capital management Investment decision 11.2.1 Resource Mobilisation An entrepreneur has to raise monetary resources to meet capital requirement. Effective, efficient and timely mobilisation of adequate financial resources is a key factor to the success of an enterprise The amount of money deployed and the sources from where it is mobilised has a serious impact on the operational efficiency of the enterprise. The sources of funds or the means of capital are mainly long-term and short-term loans from the commercial banks, cooperative banks, state financial institutions, private moneylenders, government subsidy, loans from friends and relatives and one's own investmentAlt is a primary function of an entrepreneur to mobilise adequate finance from most appropriate sources because he has to pay a given rate of interest on the money borrowed from financial institutions, banks, co-operative credit societies, private moneylenders and even on the borrowings from friends and relatives. It is the cost of the capital. atn entrepreneur has to bear in mind the cost of borrowings and returns on his investment. It beneficial for him to keep the cost of borrowings at as low a level as possible) So, an entrepreneur to identify the sources which will facilitate him the money at the lowest rate of interest.Un technical terms, it is the lowest cost of capitaDpms, the exercise starts with the identification of fa alternative source from where money can be mobilised, the cost of capital of each source and the desirable mix of these sources. For example, entrepreneurs A,B and C need Rs. 1,00,000 each to start their business. Entrepreneur A has a bank balance of Rs. 1,00,000. The bank deposit is yielding 10% of interest per annum. Suppose, if he decides to break that deposit and use the entire amount of Rs. 1,00,000 r investing in the business, it is essential and obligatory for him to get 10% minimum returns investment per annum. Entrepreneur B borrows Rs. 1,00,000/- from the bank with 17% rate of terest per annum. Then, it is essential and obligatory for entrepreneur B to get at least 17% minimum returns on investment per annum to cover the cost of borrowings only. If entrepreneur C manages to mobilise interest free borrowings from friends and relatives, he develops an edge over the competitors. Thus, the source from where money is mobilised has a bearing on the business. 11.2.2 Working Capital Management

An entrepreneur invests the monetary resources in two wayslong-term investment and short-term investment. Usually, a major portion of the investment consists of long-term investments mainly in land and building, machinery, equipments, furniture and fixtures. Money deployed for a short-term is for working capital or operational purposes. It is also described as capital for day-to-day operations of the business. Working capital is required for raw material procurement, wages and salaries, electricity and other utility services as well as to provide credit to buyers of goods. The operational efficiency of the business depends upon how efficiently, effectively and timely the money is available to an entrepreneur. If not managed properly, working capital can cause serious trouble in business. If more money than what is required is deployed in working capital, the funds remain idle and unutilised. The idle funds do not give returns. This leads an entrepreneur to a problematic situation. Similarly, if adequate provision is not made for working capital, the dayto-day operations of the firm becomes difficult and ultimately it results in the closure of the operations. As the entrepreneur needs working capital to provide credit to the buyers of goods, it is compensated through the credit he obtains from his suppliers. Working capital has mainly two components 'Current Assets' and 'Current Liabilities'. Items tike C&fth and bank balances, inventories, sundry debtors and investment in marketable securities nfpiilie current assets of the business. Current liabilities include sundry creditors, advances customers and other short-term liabilities.

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in other words, current assets are what the company owns and current liabilities are what the company owes. Working capital is the difference between the current assets and the current liabilities. The term "Current" usually represents the firm's operating cycle or period. Usually, it & one year. . An important provision under working capital is to make arrangements for raw material procurement, utilities and the payment of salaries and wages. This is a critical area to be looked into by entrepreneur. Sometimes, an entrepreneur becomes overcautious and spends more on these items. This not only blocks the capital but money borrowed for his purpose becomes highly costly. In this case, the entrepreneur has to bear additional costs such as the payment of interest on the money borrowed for procuring inventories, storage costs of the inventories, watch and ward expenses, insurance charges and possible loss due to part of the inventory becoming obsolete in storage. Moreover, if the price of the inventory comes down, the entrepreneur has to bear the indirect loss. Sources of working capital Working capital loan is a short-term loan. An entrepreneur can obtain a short-term loan to meet working capital requirement from commercial banks and cooperative banks. He can also obtain loans from the banks either by hypothecating current assets like inventories, semifinished goods and stock or by discounting accounts receivables. The facility to take an overdraft from the bank is also available for an entrepreneur. An overdraft is taken without security. Bank charges a very high rate of interest for such overdrafts. Sometimes, the provisions made for depreciation, payment of interest and taxes come to the rescue of the entrepreneur as he can utilise these resources to meet the requirement. Nowadays, some entrepreneurs use part of their long-term loans or borrowings to meet working capital requirements. {In working capital management, it is always said that, "when you need money, look to your inventories before you look to your bankers." Nearly 50 per cent of the working capital is tied up in raw materials, work-in-process or semi-finished goods and finished goods stock. Particularly, raw materials constitute a major part of the expenditure. Therefore, a careful calculation of raw materials requirement, procurement schedules, quality of the raw materials and price variations and careful purchasing leads to substantial savings. ^^i* /Capital is also tied up in semi-finished goods or work-in-process. Inventory blocked up in semi* finished goods vary from industry to industry. For example, an automobile manufacturer may have to spend a large amount of capital in semi-finished goods as compared to a manufacturer of biscuits.iput, to reduce the inventory on account of semifinished goods, an entrepreneur has to improve the system of handling as well as the cycle time or the production process. The effective management of finished goods is an important source of cost reduction and working capital requirement/Fluctuations in the quantity demanded, transport time and cost, safety stock

I I Pt and packaging requirements are some of the critical areas on which the requirement ng capita) can be kept at a lower side. An entrepreneur supplies the goods on credit. Even though selling the goods against cash is desirable, it may not be always advisable because selling on credit may increase sales and

profits. In such a situation an entrepreneur needs to formulate a suitable policy for the i of receivables. The risk and the cost involved in credit and the benefits have to be assessed and balanced. The selection of the parties to whom credit facility is given, the terms on which credit is given are important considerations. Inspite of all the care and efforts to recover the credit, tane parties do not pay the sum, a suitable policy is to be designed to wipe off the bad debts. The management of cash is the prime concern of working capital management. An idle cash >alance is to be always prevented. A certain amount of cash is always maintained by an entrepreneur osettle the transactions promptly. But, the opportunity to earn interest should not be overlooked. \ golden balance in liquidity and profitability should always be achieved. Anticipated transactions ind expected expenditure should be carefully calculated. Accordingly, cash balance should be naintained. Similarly, shortterm investments in fixed deposits, bonds and securities can be made, rhich will also achieve the purpose of both safety, liquidity and profitability. 11.2.3 Investment Decisions mother important area of money management is investment. It involves the decisions regarding he long-term investment taken by the entrepreneur. The

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long-term investment is made in the ixed assets like land and building, machinery and equipments and furniture and fixtures. To acilitate decisions about investments, to assess the profitability of the projects and to select a specific project, certain analytical techniques or methods are used by entrepreneurs/Some of the commonly used important techniques are as follows^); IH-'I. Simple rate of return method 2. Payback period method 3. Compound interest method 4. Discounted cashflow method Simple rate otreturn method In this method, the original investment in the project is deducted the receipts expected from the project during its life cycle. This gives the net benefit accruing kpany over the entire period of investment. When it is divided by the number of years over project life was spread, the average profit per year is derived. The average profit per year reased as a percentage of the initial investment gives the average rate of return earned by The formula used for this method is as follows. Average rate of return = Avera8e Profit per year x {QQ Initial Investment

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For example a person purchases a piece of land for Rs. 20,000 and sells it after 5 years for Rs.40,000. He earns a profit of Rs. 20,000 . The average annual profit is Rs.4,000. This average annual profit of Rs. 4,000 is earned on a capital outlay of Rs. 20,000. It means that, the entrepreneur has earned a return of 20 per cent on the original investment. It means that, Rs 4 000 - ' xl00 Rs.20,000 The basic drawback with the simple rate of return method is that it does not take into consideration the period and the profit. Let us understand how a comparative analysis of the projects with the help of this method can be made. Suppose, an entrepreneur desires to invest Rs. 20,000. He has four different opportunities or alternative project proposals. The net profit from these proposals is indicated in the followinf table The comparative analysis of these proposals suggests that proposal 'C is superior Alternatives than th remaining proposals, because from the first year, an entrepreneur starts obtaining profit. There i a continuous cash inflow. Profit obtainedthe earlier years InvestmentProfit during in the can be reinvested on year12345ANilNil10,000Nil10,000BN which ai entrepreneur can earn a substantial profit. y

Table 11.1 Investment

il5,00010,000Nil5,000C4,0004,0004, Payback period method The payback period method calculates the period of time 0004,0004,000DNilNilNilNil20,000 required h recovering the capital outlay. For example an entrepreneur has to choose between two alternativi investment proposals. He can invest Rs.20,000/- in either proposal A or proposal B. In proposals the expected annual cash inflow is Rs. 4,000/per year, whereas in proposal B, the expected annua cash inflow is Rs. 5000/- per year. The formula to calculate the payback period is as follows:Payback Period = Total Investment in the project Annual Cash Inflow/Profit Pe: Year By applying this formula, the Payback Period for proposals A and B can be calculated as und< Proposal A Proposal B Rs. 20,000 Rs. 20,000 . =5 Rs. 5,000 4 years years JU, 4,000 an entrepreneur will select proposal B because the investment will be recovered in four Tbe payback period method considers the period of time required in recovering the capital f-jr. Recovery of capital arises out of net profit earned, depreciation, development rebates,

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i allowance, etc. Therefore, the annual cash inflow consists of profit earned, depreciation, ent rebates as well as investment allowance. It is a very simple method of calculating the period required for actualising the return on investment. But even this method is criticised for not considering the time value. Similarly, many tojects continue to give returns even after the payback period is reached. Such projects are more profitable but this method fails to analyse such projects as it concentrates only on the payback period. Compound interest method The compound interest method gives consideration to the time value of money. Therefore, it is treated as preferable and the best method for project comparisons. For example, a person has invested Rs. 5,000 in the fixed deposit which earns him an interest of 10 percent per annum but has another investment proposal. He can invest Rs. 5,000 in a piece of land anticipating that he will get Rs. 12,000 after a period of 10 years. He has two alternatives to keep the money in fixed deposit or to buy a piece of land. Suppose he decides to invest the money the fixed deposit for 10 years earning a rate of return of 10 per cent per year. At the end of the 0 years period, a deposit of Rs. 5,000 would become nearly Rs. 13,000. If a piece of land is bought and is sold after 10 years, the person expects to get Rs. 12,000. Therefore, the first alternative of investing the money in the fixed deposit is better than the second alternative. This method sounds simple and correct but the practical difficulty with this method is that it mils to consider the difference in investment life between the two alternatives. For this purpose, the compound interest method is not used for project appraisals. Discounted cashflow method In order to overcome the drawbacks of the compound interest method, another method, namely the discounted cash flow method, is used for project^profitability appraisals. In this method, the project proposals are compared with each other with reference to the year in which the investment commitment is made. The benefits arising from projects in nt years are brought forward to the year in which the investment is to take place. Therefore, outlay is to be brought forward to the first year. In other words discounting is applied instead pounding. The discounting method is the reverse of the compounding method. For example, ]HH a person expects to get Rs. 10,000. The rate of interest is 10 percent per annum. t much is he expected to invest in the first year? With the discounted cash flow method, 10,000if discounted by 10 per cent for a period of 10 years. The following table indicates the H the discounted cash flow:

372 Entrepreneurship Management

Table 11.2 Discounted Cashflow YearDiscounted Amount (Rs.) (a)Interest (Rs.) (b)Total (a+b)109,09890910,00798,2 718279,09887,5197528,271 76,8376837,51966,2156216, 83655,6505656,21545,1375 135,65034,6704675,13724,2 464244,67013,8603864,246
Thus, Rs.3,860 is the amount now invested by the person which is the discounted amount of the final sum to be received by him at the end of 10 years at a stipulated rate of interest. The discounted cashflow method basically consists of two methodsthe present value method and the internal rate of return method. Present value method requires a discount rate which is usually the opportunity cost. The present value of a sum is derived by discounting the net cash flow in future years by the discount rate. The present value of a sum is derived by discounting the net cash flow in future years by the discount rate. The present value factor to be used in discounting is derived as, PVF = l m where, PVF- present value factors r-rate of interest desired (usually the opportunity cost) n number of years Readymade discount tables are available for the use of the investors. In short, in the present value method, we discount cash outflows and inflows at the cost of the capital to the firm. If the discounted sum of inflows is equal to or greater than the discounted sum of outflows, then the project is acceptable. But if the discounted sum of inflows is lower than the sum of outflows, the project is rejected. Internal rate of return method is basically a trial and error method. By using higher or lower rates of discount than the desired rate of return, we arrive at a rate that equates the discounted sum of inflows of the project to the discounted sum of outflows of the project. The discount rate that equates the discounted sum of inflows and outflows is the internal rate of return of the projajm IH.3 RECORD KEEPING AND REPORTING H^other important area of financial management is record keeping and reporting popularly known "accounting". The accounting services are broadly classified into three types: a. Financial Accounting b. Cost Accounting c. Management Accounting 11.3.1 Financial Accounting

Finance Management 26

JFinancial accounting consists of systematic recording of all business transactions. A 'transaction' l;is any activity arising out of business which is expressed in money terms. While writing down all the business transactions, an entrepreneur must know the following basic terms and concepts:

1. TransactionIt is the beginning point of bookkeeping. A transaction is an


activity, event or a deal which can be expressed in terms of money. Any activity, related to sales or purchase, payments or receipts is a business transaction 2. EntryIt is the proper recording c f a transaction in the books of account and the basis on which the accounts are prepared. 3. Books of original recordThese books are known as books of primary entry or books of original entry. All the transactions are first entered in these books. It is popularly known as a Journal.

4. AccountIt is a summarised record of transactions. Business dealings


related to one person or one type of asset or expense is known as an account. The word, account, is written as A/C. 5. Debit and creditEvery transaction has two sides - debit and credit. The account that gets benefit is debited and the account which gives benefit is credited. The accounts are written in two columns. The debit side is written on the left hand side and the credit side is assigned the right hand side. 6. Head of accountIt relers to the name of the account. All transactions related to that particular head are grouped together^nTl are written in that sperificjcolumn. For example, raw materials, wages and salaries, transpbrtTelectricity bill, rent, etc. are the heads of account. LedgerIt is the general book in which all the figures arising out of the business transactions are recorded. Machinery, wages, raw materials, and rent are the heads of accounts under which the entrifi&are madeV"ftie number of accounts in one ledger would depend upon the size and the nature of the business. Every entry in the ledger comes from the books of original record .Thais, the transactions are first recorded in the books of Sal record. They are classified as per the heads of accounts and are entered in the

27 Entrepreneurship Management

ledger accounts. The transactions are not written directly in the ledger. A ledger account is written as follows Table 11.3 Ledger Account (I) Dr. Date Particular JF Rs. Particular JF Rs. s s T)r' on the left hand side represents debit and 'Cr' on the right hand side represents credit. On the debit as well as on the credit side, it is necessary to write the date on which a particular transaction has taken place. In the second column, particulars of the transactions are given. For every debit there is a corresponding credit. The third column is for the journal folio number. This number is taken from the books of original record. The fourth column is for the amount to be either credited or debited. When the account is debited, "To" is written before the name of the ledger account in the particulars column. When the account is debited, "By" is written before the name of the account in the particulars column. For example, if an entrepreneur pays Rs. 1,000 to Mr. Anand on 26.6.1999, the journal entry i >r this transaction will be made as follows: Table 11.4 Journal Entry Date Particulars LF Dr. Cr. 26-9- Mr. Anand's A/c 50 Rs. 02 Dr 1,000 To Cash A/c 70 Then, this transaction is written in the ledger. Mr. Anand's account will be debited and the corresponding amount will be credited 'To' Cash A/c. Thus, Mr. Anand's account in the ledger will be written as,

Finance Management 28

Table 11.5 Ledger D Account (II) C r. r. DateParticularsLFRs.DateParticularsLFRs.2 6 6-9-02To Cash A/c121,000


On the credit Side, "By" is written which represents the name of the account by which the relevant account gets the credit. In this example, the cash account gets a credit "By" payment of money to Mr. Anand. In other words, the cash account is credited "By" Rs. 1,000 because of the to Mr. Anand.

D C r. r. D DateParticularsLFRs.DateParticularsLFRs.i 26-9-02By Mr. Anand's A/c121,000


When an entry is made from a journal to the ledger, the folio of the ledger account is written in ttLF" (Ledger Folio) column in the journal. The folio on which the entry appears in the journal [ffritten in the (JF) journal folio column of the ledger. The journal entry about the payment of i to Mr. Anand appears on page 12 of the journal. Mr. Anand's account appears on page 50 of the jr. The cash account appears on page 70 of the ledger. Thus, against each entry in the journal, has to be a ledger folio number in the respective column. The journal and ledger entries give sar picture of the business transactions. 8. FolioIt represents the page number of the ledger. The folio number helps in locating the particulars of the transactions. 9. AssetsIt refers to a property owned py a person. For example, land, building, machinery, vehicles, etc. represent assets. 10. LiabilitiesIt represents the debits or amount payable by a person in return for which he receives cash, goods, etc. 11. VoucherIt is a written documentary evidence of transactions in a business. It provides all the necessary information about transactions. 12. Receipt BookIt contains receipts. For every transaction an entrepreneur has to give a receipt worth the amount transacted. 13. Subsidiary BooksThe business transactions are recorded in a journal. Then, the entries are posted in the ledger. When the business is small and the number of transactions are comparatively less, all the transactions are entered in a journal. But, when the number of transactions increases, it is difficult and complicated to record all the transactions in one journal. In such a case, the transactions are classified according to their nature and are then written in separate journals. These separate journals are recorded from vouchers. The business transactions are broadly classified in the following groups: a. Purchase of goods on credit b. Sale of goods on credit c. Return of goods out of purchases (purchase returns) & Return of goods out of sales (sales return) t . Receipt of cash (including cash sales) mm Payment of cash (including cash purchase) For purposes of convenience, even the purchase book is further divided into specific subsidiary books like raw materials, machinery, packing materials, tools and equipment, consumable stores, wage books, etc.

Table 11.6 Cash Account

14. Debtor A debtor is a person who has to pay a given amount to another person. 15. CreditorA creditor is a person who is to receive a given amount from the other person. In other words, a creditor is a person to whom a given amount is payable. Classification of accounts Accounts are of various types. The broad classification of the accounts is given below Accounts

Persona l

Imperso nal

Real us Fig 1. 1 1 Accounts Nominal/Fictitio Classification of

Personal accounts are related to individuals, partnership firms, a limited company, government department, co-operative society, charitable institution or a trust. Impersonal accounts are related to assets and are known as real accounts. These accounts deal with all types of property like land and building, furniture and machinery. All the impersonal accounts are related to income and expenditure. They are also known as the nominal or fictitious accounts. The following table gives examples of different types of accounts. Table 11.7 Classification of Accounts No. 01. 02. 03. 04. 05. 06. 07. 08. 09. 10. Name of the Account Capital account of Mr. Anand Rashmi Park Co-op. Society A/c State Bank of India A/c Postage A/c Interest A/c Stationery A/c Travelling Expenses A/c Furniture A/c Equipments A/c Rent A/c Classification Personal Personal Personal Nominal Nominal Nominal Nominal Real Real Real

Double entry book-keeping Double entry book-keeping is a scientific method of recording business transactions. A transaction takes place between two parties. As a result, two accounts are involved in the transaction. For example, when an entrepreneur sells goods, the goods "go out" (are sold (ia return of it) cash "cornea in". One account receives the benefit and the other account gives benefit. The account that receives the benefit is debited and the account that gives the benefit edited. Thus, two sides of the transaction are of any one type of the following:

1. Cornea in 2. Receiver
Debit

Goes Out Giver a. Credit

Considering the double aspects of the transactions, two entries are passed for every transaction, is known as 'double entry book-keeping'. Separate rules of debit and credit are applied for personal, real and nominal accounts. Debit and credit rule for Personal Account. "Debit the Receiver, Credit the Giver". The personal account which receives the benefit is debited and which gives the benefit is credited." Debit and credit rule for real account. "Debit what comes in and Credit what goes out." Real account represents the assets or the property. When an asset is purchased, the asset comes pa. Therefore, it is debited to that account. If the assets are sold, assets go out. Therefore, such assets are credited. Debit and credit rule for nominal account. "Debit expenses and losses, Credit income and Gains". All nominal accounts are concerned with either the expenses and losses or income and gains. When there are expenses, there is a cash outflow. Cash is classified as a real account. Therefore, it is credited, as it goes out. But the expense account will be debited. When there is an income, the income account will be credited but when cash is received on this account, cash is debited. Trial balance A trial balance is an important statement in accountancy. It helps in finding out the mathematical accuracy of the books of accounts. It is the pre-requisite in the preparation of the profit and loss accounts and balance sheet. The trial balance is a list of the balances in the ledger accounts. The reference is a particular date. As on a particular date, the balances in the ledger accounts are written in two different columns debit and credit. The totals of all the ledger accounts written in the two separate columns are taken. The totals of the two columns must tally. When there are no mathematical errors in the books of accounts, the totals tally. The Mowing is an example of how to prepare and write the trial balance.

Table 11.8 Specimen Trial Balance (I) As on 31st March 2002, the following balances are written in the ledger accounts of M/s. Sampada Enterprises Trial Balance No.Name of the AccountAmount (Rs.)1.M/s Sampda Enterprises Capital A/c25,000.002.Salary A/c6,000.003.Wages A/c2,000.004.Travelling Expenses A/c1,500.005.Rent A/c2,000.006.Postage A/c500.007.Interest A/c (Paid)500.008.Interest A/c (Received)100.009.Machinery A/c10,000.0010.Furniture A/c7,000.0011.Purchase A/c1,99,000.0012.Purchase Returns A/c5,000.0013.Sales A/c2,15,000.0014.Sales Returns A/c10,000.0015.Commission A/c1,000.0016.Discount A/c (Paid)150.0017.Discount A/c (Received)1,650.0018.Opening Stock5,000.00

Finance Management 33

Sr. No .

Account

Table 11.9 Specimen Trial Balance (II) M/s Sampda Enterprises Trial Balance As on 31st March 2002 1,650.00 | M/s Sampda Enterprises Capital Folio Dr. (Rs.) 5,000.00 A/c Salary A/c Wages A/c Travelling Expenses A/c Cr. Rent A/c 6,000. (Rs.) Postage A/c 00 Interest A/c (Paid) 2,000. Interest A/c (Received) 25,00 00 Machinery A/c 000 1,500. Furniture A/c 00 Purchase A/c 2,000. Purchase Returns 00 A/c Sales A/c Sales 500.00 Returns A/c I Commission A/c 500.0 Discount A/c (Paid) 0I 1000. Discount A/c 00 (Received) Opening 10,000.00 Stock 7,000.00 1,99,000. 00 5,0000 0 ] 2,15,000. 10,000.0 00 0 I 1,000.00 1 150.00 Total 2,46,150.00 2,46,150.00 1

Thus, an entrepreneur should remember that if the totals of the debit and the credit side do not v> then there are mistakes committed while writing down the accounts, original books of Unts, while preparing the ledgers, the trial balance or while taking the total of the two columns, necessary to find out these mistakes in order to tally the columns. The following table indicates ere to write the various balances. Table 11.10 Debit and Credit Accounts Sr.No. Accoun Sr. Credit No. Balance 1. 1 Bank Overdrafts 2. I Bank Loan A/c 3. I Creditors A/c 4. Capital A/c 5. Income A/c , 6. Lender's/Deposi

A/cs of people to whom loans are given. Bank A/c Cash A/c Debtor's A/c Drawing A/c Expenses A/c Opening Stock A/c Purchase A/c Real/Property A/c Sales 3. 1. 2, Returns A/c

4. 5. 6. 7.

Finance Management 34

tor's A/c I Returns A/c 7. Purchase 8. Sales Account 380 Q Entrepreneurship Management___________________________________ Profit and loss account Entrepreneurahip is a profit-oriented activity. The goal of an entrepreneur is to earn profit. At the end of a given period, an entrepreneur would like to know whether he has earned a profit or whether he is incurring losses. The statement which indicates either the profit or the loss is known as the profit and loss account statement. It is the history book of the business. It tells us what has happened over the year to sales and expenditure. It reveals how well the business has been managed. The profit and loss account statement shows how much of a net profit or loss the business has made during the year by recording i. Invoiced sales for the year ii. Invoiced expenditure associated with these sales. The period for which the profit and loss account is drawn up is normally 12 months. The period over which the accounts are drawn up is called the accounting period. The trial balance is the essential supporting document for the preparation of the profit and loss account statement. (In case of non-profit making organisations, this statement is known as the income and expenditure statement). The profit and loss account statement focuses on two important aspects of the business:

1. The income or the revenue earned during the given periodone year. 2. The money spent or the expenditure incurred during that periodone
year. This gives the idea of either the profit or the loss. Because 1. Income > Expenditure 2. Income < Expenditure = = Profit Losses

An entrepreneur always desires to attain the first situation. While preparing the profit and loss account statement as well as the balance sheet, the "matching principle" is applied. Matching principle According to this principle, the income earned and expenses incurred during a given period should be matched and correlated in order to get a clear picture of the financial position of the unit. According to this principle, a. When the income/revenue is entered, all the expenses, either paid in cash or otherwise, should be entered, b. If the amount is spent against which the revenue will be earned in the successive period of time, the amount should be carried down to the next period and then should be treated as an expense but for the period concerned, it should be shown as an asset. c. If an amount is received but against which the goods or the services are to be supplied in

Finance Management 35

the next period of time, the amount is not treated as the revenue for the given period but it is treated as a liability. Similarly, while preparing the profit and loss account statement and balance sheet, two (pais 'capital expenditure' and 'revenue expenditure' are used quite frequently. Income and expenditure related to the acquisition or disposal of long lasting assets like land, building, machinery, equipments, furniture and communication equipments is known as the capital fdpenditure. Income and expenditure related to the items concerned with the current year's activity such as sales, purchases and expenses is known as revenue expenditure. Sometimes, an expenditure is of a revenue nature but the benefit is spread over a couple of years. Such an expenditure is not debited to the profit and loss account of one year only but is spread over a longer period. Such a type of expenditure is known as a deferred revenue expenditure. Table 11.11 Profit and Loss Account For the year ended March Expenditure Cost of goods and service consumed during the period shown above in producing the goods and services which generated the income. Income Income earning output (e.g.) sales achieved during the same period.

and Loss Account Balance sheet A balance sheet For the year endedfirm's possessions and of its shows the value of the March liabilities on a given date for a given period. ItNo.Income1.Opening looking Sr.No.ExpenditureSr. is essentially a backward statement or document. It shows the wealth of the business at a past date. Stock1.Sales2.Purchases2.Other The balance sheet is a Income3.Salaries, the balances in fringe statement which shows wages and the various accounts classified into two columns namely assets and liabilities. It is divided into two columns. benefits3.Closing stock4.Production Assets are written on the right side column and the liabilities are written on the left side expenses4.Losses5.Administration column. e expenses 6.Selling All the property items, stocks, debtors, prepaid expenses, etc. are the assets of a business. Generally, assets are written in the order of liquidity. The liquidity of 1 asset is e expenses7.Interest8.Depreciation9.Taxes an 7 8 9 how quickly it can be converted into cash. In a typical11.Profits statement, "Cash in balance sheet 0 0.Distribution expenses1
Hand" is always written first and then the other assets. All the liabilities like loans and provisions for expenses are written in the liabilities column on the left side of the balance sheet. The habilities which are to be paid immediately are written first. Therefore, "Outstanding Expenses" are written first and then the other Habilities.

The groups of accounts listed in the expenditure and income columns of the profit and loss account statements are shown in the following Table. Table 11.12 Specimen Profit 282 Entrepreneurship Management

Finance Management 36

Table 11.13 Balance Sheet Balance Sheet as on 31st March LiabilitiesAssetsItems on this side show where the firm's capital, its borrowings and trade credits came from.Items on this side show how the total amount of funds and credit was used. It details the assets of the business at the above date.
The difference between assets and liabilities is capital. It is the actual amount which belongs to the entrepreneur. This capital can be used for further development of the business. Capital appears on the liabilities side of the balance sheet. If the habilities are more than the assets, the capital account shows a debit balance. It is written on the assets of the balance sheet.

11.3 Intfc serv tost oft! proc firm pro! busi fina exaj toh P*oi the

_____

Finance Management Q H

Table 11,14 Specimen Balance Sheet iutie Outstanding Expenses Prepaid Income Creditors Bills payable Short'tann loans Bank overdraft Long-term loans Proprietor's capital account Cash in Hand Bank balance Outstanding income Debtors Total Amoun t (Rs.) Assets' Bills receivables Finished goods Raw materials Furniture Vehicles Plant & machinery Building Land Goodwill Total Amount (Rs.)

11.3.2 Cost Accounting In the record keeping and reporting area of financial management, the second important type of service is cost accounting. It is another area of specialisation in accountancy. An entrepreneur has to study the behaviour of the costs of the firm. According to the nature of the business and the type of the project, the costs behave differently. The pattern of cost is different for a manufacturing product and a service product. Similarly, it is different for a process production and a job order firm. Financial accounts are concerned with whole business. Financial accounts represented by the profit and loss account statement and the balance sheet do not examine the operations of the business in details. If the business functions are operated through various departments, then financial accounts do not examine the position of each department. Therefore, to analyse and examine the strengths as well as the weaknesses of each department and to prepare a scenario as to how these strengths and weaknesses are reflected in the financial position of the business, an entrepreneur has to apply the method of cost accounting. With this method, he can understand the profit earning capacity of each centre and can concentrate on the profit earning centres. Similarly, the weak areas can be identified, and an entrepreneur can design strategies to overcome these problems. A detailed discussion on production costs, behaviour of costs and break-even analysis is made III the Chapter on "Cost of Production and Break-even Analysis".

11.3.3 Management Accounting Management accounting is a new concept particularly applied in the large-scale industries. It is basically concerned with the costs related with the specific management decisions. In the small-scale industry as well as in the tiny industrial sectors, an entrepreneur himself is supposed to analyse the costs involved in his specific business decisions. 11.4 CONTROL FUNCTIONS Another important area of financial management is the Control Function. An entrepreneur decides the objectives of the firm. These objectives are expressed in qualitative terms like estabhshing market leadership, achieving maximum market share, maximising profits, etc. These objectives are further expressed in quantitative terms like increasing the sales by 5 percent every year or attaining 20 percent market share in 3 years period or increasing profitability by 7 percent every year, etc. These objectives are set for a specific period mentioned in the business plan. To evaluate the progress of the firm with reference to the pre-set objectives, an entrepreneur evolves a control system. It is known as the Control Function in Financial Management. Broadly, control function comprises of three types: 1. Strategic control 2. Administrative control 3. Operational control Strategic Control is mainly the responsibility of the entrepreneur. It refers to all the qualitative and quantitative targets. The quantitative controls are known as the physical targets which are assigned to each functional area like purchases, production, sales and marketing. Administrative control is in the hands of the managers, junior managers and supervisors. The major instrument of control used for this purpose is the annual budget. The annual budget is mainly of two types

1. Revenue budget 2. Commercial budget


I Revenue budget is an estimate of incomes and expenditures. Commercial budget is in the form of either sales plan or production plan. g Operational control evaluates the efficiency and effectiveness of day-to-day operations. Various controls are suggested for different operations. For example, for production control, an entreprene needs production planning and control. For materials management, ABC analysis and inventory eonirols are applied, and for financial operations, control techniques like internal audit, funds flow analysis, liquidity and profitability analysis are used.

______Finance Management 39

1$ RATIO ANALYSIS xt i:\vpoint of time, an entrepreneur is always interested in the principle of "growth and profitability filfe stabilityRatio analysis is aimed at Bp liquidity of the firm b. Solvency of the firm 'c. Operating efficiency of the firm d. Profitability of the firm ALiquidity of the firm In order to ascertain the liquidity status of the firm liquidity ratios are used by the entrepreneur. Liquidity refers to the ability of the firm to meet its liabilities. For this purpose, customarily two ratios are used:

1. Current ratio 2. Acid test ratio or quick ratio

>*rftKi

Current ratio It is a parameter of the liquidity of the firm. It is a ratio between the current assets and the current liabilities of a firm. In other words, it indicates whether short-term assets are sufficient enough to meet the short-term liabilities. It is calculated as current assets. Current assets are the cash, assets which can be converted into cash, and can be sold or consumed in a short period less than a year. Current liabilities are the items payable or expected to be turned over in a short period less than a year. The ideal current ratio should be 2:1. Very high current ratios indicate unproductive use of the funds and very low current ratios can indicate that the firm has difficulty towards working capital. Because the net effective working capital of a firm is derived as the difference between the current assets and the current liabilities. It is essential to know the composition of the current assets. If a higher percentage of current assets is held in the form of inventory which cannot be sold easily or accounts receivables which cannot be realised easily, inspite of good current ratio, the liquidity of the firm is very poor. Acid test ratio or quick ratio It is another parameter of the liquidity of the firm. It is calculated to know whether the firm can generate funds quickly to pay off the liabilities. In this ratio, stock (the assets which can not be converted quickly) and work in process are deducted from the current assets and the quotient is further divided by current liabilities. b. Solvency of the firm Solvency is the ability to pay off the debts. Solvency ratios ascertain whether a firm faces the risk of becoming insolvent. The solvency ratio is calculated as a relationship between the outside funds (loans, share capital, institutional finance, etc.) in a business to the funds employed by the owners in the business in the form of shares and reserves. Higher the outside funds, greater is the possibility of the firm becoming insolvent. Usually, two ratios are used ^g|}iind the solvency of the firm. Debt-equity ratio It is known as the financial leverage ratio. It refers to the use of outside funds in the business. It analyses the risk arising out of the use of debt capital. The longterm debt to equity ratio represents the respective proportions of debt and equity capital in the total investment.

______Finance Management 40

As mentioned earlier, smaller the equity capital, higher is the income per unit of share. Therefore, equity owners favour high debt-equity ratio. It gives more power to control the firm. But financial institutions prefer a higher proportion of equity so that they have a less risk in the firm. Debt to total assets ratio It is also known as the financial leverage ratio. It focuses on the long-term solvency of the company. If the ratio is lower, there is a greater cushion against creditor's losses in case of the liquidation of the firm. Operating efficiency of the firm To improve the operational efficiency of the firm, an entrepreneur can use operating efficiency ratios. Even though many ratios are formulated to study the operating efficiency of the firm, some important ratios are mentioned below

1. 2. 3. 4. 5.

Receivables turnover ratio Inventory turnover ratio Working Capital turnover ratio Fixed Assets turnover ratio Payables turnover ratio

It is evident from the titles of these ratios that everywhere the relationship or the comparison of the variable is established with the turnover of the firm. Maximum turnover is the prime objective of all the departments or the operational areas of the firm. In the first ratio, the relationship between the receivables and the turnover is considered. It is derived by dividing the sales of the firm by accounts receivables during a given time period. An efficient firm should promptly recover the receivables from the sundry debtors. If the recovery is fast, the firm does not require higher borrowings from the banks and the financial institutions. It saves the cost of capital. Generally, firms decide the credit period to be given to the clients. Usually, 40 days credit is given. Then, the efficiency of collection and recovery is assessed against this period. Inventory is a critical area for any firm. The efficiency of the firm is assessed with the proportion of inventory to the sales turnover of the firm. The ratio is calculated by dividing the sales turnover during the given time period by the closing inventory. It indicates the level of control of the firm on the inventory. Working capital management is a crucial area for a firm. The ratio of working capital to sales turnover throws fight on the operational efficiency of the firm. As defined earlier, working capital is the capital required for raw materials, semifinished goods or goods in process, finished goods, y^urcost and utilities required during a given time period. Working capital turnover ratio is toulated by dividing the sales turnover in a given time period by the amount of working capital jgring the same period. Higher the sales turnover, higher is the efficiency of the firm by applying |s parameter. Operational efficiency of the firm is calculated with the help of yet another indicator, namely, fixed assets turnover ratio. Fixed assets represent the investment of the firm mainly in the land, building, machinery and equipments and furniture and fixture. Sometimes, unnecessarily entrepreneurs increase their investments in fixed assets without considering how effective and productive these

______Finance Management 41

investments are. The fixed assets to turnover ratio is calculated by dividing the sales turnover during a given period by the fixed assets at the end of that period. Payables to turnover ratio throws light mainly on the finance department of the business. Prompt payments of all the bills and dues establishes a creditworthiness, goodwill and reputation of the entrepreneur. The efficiency of a business depends upon the earlier payment of the bills. Many firms decide the norms and standard time for the payment of the bills. The ratio is calculated by dividing the turnover by the amount payable during the given period. Profitability of the firm Earning profit and profit maximisation is the main aim of the entrepreneur. Various parameters are applied for measuring the profitability of the unit. Some frequently used important parameters or ratios are mentioned below 1. Gross profit = Sales - Cost of goods sold. Gross profit is also termed as profit before tax. 100 Gross profit Sales Gross profit to sales ratio = This helps the entrepreneur to assess the financial situation of the firm and the margin available for the payment of interests, taxes, selling and distribution expenses and available profit. As one variable of the gross profit is sales, it is essential to remember that in certain situations, sales turnover comes under the influence of intensity of competition, concessions and price rebates given to consumers, pricing policy, product-mix, marketing policy, etc. This situation reflects on the gross profit earned by the entrepreneurs during a given period of time. Net profit = Gross profit - tax and interest. It is also termed as profit after tax. jlg^ Net profit Net profit to sales ratio = gk: x 100 Sales The productivity of the funds employed is calculated by dividing earnings before interest and taxes by the total funds employed in the business multiplied by 100. The earnings per share is very important for all those people and parties who have invested :1a K ft*m Earnings per share is calculated by dividing the net profits of a firm by the

288 Entrepreneurship Management number of ordinary shares. The dividend given to the preference shares is deducted from the profit. This ratio is useful and applicable only when the entrepreneur has raised the funds through share. ____Net profit____ 5. Return on paid-up capital = Paid.up equity capital x iUU Net profit 6. Return on networth = rr ~r Net worth 11.6 ADVISORY FUNCTION In recent years, advisory function in financial management has occupied a prime position. In the proprietary concern, an entrepreneur himself takes all the decisions related to finance. When necessary, he may take advice from a professional financial consultant. But, particularly in large-scale industries, the finance managers play an important role of advising the top management. The advice is sought on important matters like pricing, dividend policy, mergers and acquisitions, diversification, modernisation and expansion. Bigger the organisational structure, larger is the scope for the advisory function in financial management. 11.7 CASHFLOW ANALYSIS In the survival, management and growth of any business, cash flow is a very important concept. Particularly its importance for the small-scale entrepreneurs in manufacturing, service, as well as trading industry is over emphasised. The main objective of preparing the cash flow statement is to enlighten the entrepreneur about how much cash the business will need over the coming 12 months period and when additional funds will be required. Cashflow is defined as the net cash being generated by a firm as a result of its trading activities. It basically describes the flow of cash into and out of the business. The process of calculation of cash flow is as follows: Cashflow Cash paid into the bank - Cash paid out to creditors (Sales turnover + loans + subsidies, etc.) - (cash paid to supplier, employers, taxes, bank repayment, petty cash expenses, etc.) inflow is positive when cash income from sales and the return on investments exceeds its outflows resulting from its use of the various factors of production and services (labour, raw terials, overheads, etc.) required for its production and sales. Cashflow is negative when cash inflow is less than the cash outflow. flow can be calculated hourly, daily, weekly, monthly but it is conventional to calculate the caah flow on a monthly basis.

US it is essential to remember that the forecast need not be accurate but it should be realistic ^ose, cashflow is used as a guideline in financial management in general and business planning d management in particular. SUMMARY Financial management is a crucial area in entrepreneurship management. The success or the failure of any business unit is highly influenced by the financial management. Financial management is basically classified into the following broad areas. 1. Money management 2. Record keeping and reporting 3. Control function 4. Advisory function Money management Effective and efficient management of monetary resources consists of three major tasks:resource mobilisation working capital management Investment decisions The amount of money deployed and the sources from where it is mobilized have a serious impact on the operational efficiency of the enterprise. Long term and short term requirements of funds are satisfied by specialised financial institutions, banks, and subsidy, own investment and other sources. He has to pay a cost in the form of a rate of interest for the money borrowed from such sources. The identification of the alternative sources from where money can be mobilized, the cost of capital of each source and the desirable mix of these sources is to be done effectively to acquire the capital at the lowest cost. Working capital has serious implications on the success of the business. Working capital is the money deployed for the short term requirements particularly for the operational purpose. Working capital is deployed for day-to-day operations of the business like payment of wages, management of cash, recovery of the receivables, procurement of raw material, etc., providing credit to the customers and current liabilities. Important sources of acquiring working capital are the loans from banks and overdraft facility. Inventory management is directly related with the working capital management because it is always said, "when you need money, look to your inventories before you look to your bankers". While deciding the investment priorities, entrepreneur uses some analytical techniques and methods for identifying profitability of the project. Commonly used techniques are Hfe Simple rate of return method 2. Payback period method 1 3. Compound interest method 4. Discounted cashflow method Record keeping and reporting Record keeping and reporting is known as the accounting. The accounting services are broadly classified in three categories:

a. Financial accounting b. Cost accounting c Management accounting Even though management accounting is a new concept particularly used by the large-scale industries, financial accounting and cost accounting is equally important for the small entrepreneurs. Financial accounting consists of systematic recording of all business transactions. Common formats methods and techniques are developed for maintaining the records and preparing the reports. Trial balance, profit and loss account statement and balance sheet are the important statements, which give the entire picture of the project. Cost accounting examines the strengths and weaknesses of each department and their impact on the financial position of the business. Control function To evaluate the progress of the firm with reference to the pre-set objectives, entrepreneur evolves a control system, which is known as the control function in financial management. Broadly, the control function is comprised of three types of controls 1. Strategic control 2. Administrative control 3. Operational control Strategic control refers to the attainment of all the qualitative and quantitative targets of the business. Annual budgets provide administrative control. Operational control evaluates the efficiency and effectiveness of the day-to-day operations. Ratio analysis is a tool to assess the "growth with stability and profitability" of the business. ' Various ratios are commonly used for analysing the following. a. liquidity of the firm b. Solvency of the firm c Operating efficiency of the firm d. Profitability of the firm Advisory function In recent years, advisory function in the financial management has occupied a prime position. The scope of advisory function largely depends upon the scale of operations of the business. Cashflow analysis Cash flow is defined as the net cash being generated by a firm as a result of its trading activity. It basically describes the cash in flow and the cash outflow of the business. Marketing Management FTER

OBJECTIVES r reading this chapter you will learn:

1. Concept of a market 2. Types of market 3. Market segmentation Objectives


of pricing a product Market research Distribution channels Sales promotion and advertising 8. Importance of packaging CONCEPT OF MARKET , marketing is viewed as a separate function of an entrepreneur. It is important to understand not only an entrepreneur, but all the people working in the firm in various departments with rent designations and responsibilities are involved in the marketing activity. Marketing activity begins even before production begins. Every person in the firm adds to the uct/service with the ultimate goal, "consumer's satisfaction". Marketing management centres I the idea that the firm's effectiveness, profitability and competitiveness entirely depends the scientific planning of identification, anticipation and satisfaction of customers' uirements. In simple words^a market is a place where the buyers and the sellers meet, where JhH| continuous interactionBetween the demand for and supply of the product. The demand side is governed by the Law of Demand which explains the buyer's behaviour in : market. The Law of Demand states that, "other things remaining the same, as the price (of any product/service) falls, quantity demanded (of that product/servlc- ) <pands and a* t'. rises, quantity demanded contracts." Thus, there io an inverse relationship between the price jj the quantity demanded. The "other things" in the definition reef#to s .imjkio*"- \ the buyer, his tastes and preferences, number of substitutes, prices of the substitute^ i government poHcy etc. remain constant. The supply side is governed by the Law of Supply which explains t' z seller's behaviour in f)| market. The Law of Supply states that "other things remaining constant, as the price (of a pwfe -2 service) falls, quantity supphed (of that product/service) contracts and as the price rises, quantity: supplied expands". Thus, there is a direct relationship between the price and the quantity suppljp The "other things" in the definition are the assumptions like technique of production, technology, number of sellers, supply of the substitute products, supply of the factors of productions etc. remain constant. The buyers and sellers are assumed to be "rational human beings." The rationality of the buyers lies in the fact that the buyer attempts to get the maximum satisfaction for the money he spends for the product/service. The rationality of the seller lies in the fact that the seller attempts to get the maximum profit from the product/service he sells in the market. ^ 9.2 CONCEPT OF PRICE

The price of the product is determined by the intersection between the demand and Sf Injjther words, at the equilibrium price, demand is equal to the suppiyi; It is indies following example with the help of the Table and the Figure: Table 9.1 Determination of Pric Price of Orange per dozen Rs. 10 20 30 40 50 Q.D 100 80 60 40 20 _-------~ -j 20 40 80 100

In the Figure 9.1, DD represents the demand curve. SS represents the supply curve. BothuV curves intersect at equilibrium point Q. It indicates that at price Rs.30, the quantity demanded if equal to the quantity supplied of the product. ra*. It is important to remember that we always make a difference between the "free goods and "economic goods". Free goods have utility but they are not scarce. Their supply*] HKtoited Therefore, price does not exist for free goods. But for the "economic goods," there is utility as well as scarcity which make them a priced product. lUtttfty is a wants satisfying capacity of the product. Only these products/services will be demanded which possess utility. Demand is not only "desire" to buy but also "ability to buy". Effective demand is a desire to buy backed by the necessary purchasing power. Market is any organisation whereby the buyers and the sellers of the product/service can interact with each other. It need not be a specific location which represents a typical, traditional concept of a market. Telephones, e-mail, fax, tele-shopping, and satellite communication have enabled the buyers and sellers at distinct places to interact with each other. Y P S/ 0 60 ; Q D/S Fig 9.1 Determination of Price 3 FORMS OF MARKET hen an entrepreneur approaches the market for selling his product/service, he has to develop a mplete understanding about the market. According to the number of sellers in the market, amber of substitutes for the product and nature s

of the product, the market is classified in five ain forms/types. These market forms are: 1 Monopoly 2. Duopoly m Oligopoly H Perfect Competition 5. Monopolistic Competition Even though most of the entrepreneurs have to sell their products/services in the monopolistically npetitlve market, it is desirable to know the main features of other forms of the market?. ZQS Entrepreneurship Management 9.3.1 Monopoly / A monopoly market is defined as a single seller's market. In this market, there is a single the product/service which has no substitute/no close substitute available in the market. \ monopolist has complete control over the supply and the price of the product. He can charge, single uniform price for all the buyers or he can discriminate the price for groups of buyers in order to maximise profit. 9.3.2 Duopoly A duopoly market is defined as a market where there are only two sellers of the product/gervice, The duopolists sell either an identical product or a differentiated product. Whether the product^ identical or homogeneous, in duopoly, the individual seller should be very careful about the price and supply of his product in the market. This is because any change made by one seller brings further changes in the price and supply of the product of the other seller. This leads to a chain reaction. In thfc>r effort to maximise profit, the duopolists could arrive at some understanding or join hands and establish monopoly like situation in the market. If the product is somewhat differentiated, the duopolists enjoy some freedom to charge higher/lower price than the other seller without fear to lose buyers. 9.3.3 Oligopoly In the oligopoly market there are more than two but few sellers. Oligopolists sell either a homogeneous/identical product or a differentiated product. When there are four or five sellers constituting an oligopoly market, it is difficult for them to arrive at a consensus either by mutual understanding or by general agreement regarding the price and supply of the product. At the same time, it is not possible and desirable for them to charge completely a different price eithervery high or very lowthat the price charged by the other oligopolists. Therefore, the given price level is observed by all the oligopolists. When oligopolists purposely differentiate the product, they develop their own group of buyers. There, they can control the price and the supply of the product in order to maximise profit.

9.3.4 Perfect Competition Perfect competition or perfectly competitive market is defined as a market with a large number of | sellers selling identical product/servica The individual seller is a "price-taker". By the quantity to 0eM* in the market, he cannot influence the price of the product. Therefore, all the sellers seJlaii identical product at a given price level. 'If any individual seller charges a higher price, he is] to lose all the buyers, as all other sellers are selling that product at a lower price. The individual seller adjusts his output to the given price and earns maximum profit.

_________Marketing Management Q 2Q9

MvU

iopahstic Competition

Jp*Ny competitive market, there are a large number of sellers. Product differentiation _,v.^hM^tvM^ feature of the monopolistic competition. A seller purposely differentiates $x>m the other substitute products and create a distinct image ofjjproduct. By iw ways, the product is differentiated with respect to either colour, smell, taste, appearance, fiftcatioa&t aiae, shape, some specialingredient, technique of production, after-sales-service, ty ^compatibility with the jointly demanded product. The unique differentiation is focused jfewght to the attention of the buyers by way of aggressive advertisements.

_________Marketing Management Q 2Q9

f Huge selling cost is another characteristic feature of the monopolistical^cj^^etiJtise.Biai'kety Jy^tvejtisements, psychological impact is made on the buyers. The brand image of the product fetablished and brand loyalty is created. Once the buyers are habituated to use the product, for jp group of buyers, a seller becomes a monopolist. Because of brand loyalty, the seller has assumed fcaand from these buyers. Then, he competes with other sellers to increase his market share, prefore, the market is described as the monopolistically competitive market, "j | yt is important to remember that the market for a small-scale entrepreneur is a monopolistically competitive market. Initially, he has to face an acute competition.

_________Marketing Management Q 2Q9

He has to prove his uniqueness and distinctness in order to establish his image. Once he captures the buyers, he is assured of that market segment. Then, he has to sharpen his I competitive abilities to penetrate further into the market. | MARKET SEGMENTATION Whom to sell" is an important question all entrepreneurs would like to ask and perhaps would ohave an easy and readymade solution. "Whom to sell" implies a decision regarding a market entation. An entrepreneur comes across a variety of buyers who come with different profiles ih respect to their needs and requirements, income, education, knowledge, tastes and preferno3& Inceptions, habits, options, expectations, motivation and demand pattern. They also differ in ^Mrabcio-

_________Marketing Management Q 2Q9

economic and cultural backgrounds. Therefore, the selection of a right market segment JpSifficult task for an entrepreneur. hile selecting the market segment, an entrepreneur should ensure the following three prethe segment must be measurable H segment must be substantial enough to justify the efforts the segment must be accessible |J|t segmentation reflects the creativity and innovativeness of an entrepreneur^

_________Marketing Management Q 2Q9

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Sntreprenaurahip Areawise

Management 9.4.1 Market Segment

An entrepreneur has to decide the geographical area in which he will sell the product. Geographically, a market is divided into the following segments:

1. World market or an international market 2. National or domestic market


:' 3. Interstate market where a couple of states in the country are identified as a potential market 4. State market where only one state is selected for concentrating the marketing efforts 5. Interdistrict market in which certain districts in a state are selected as a potential market 6. District market where only one district is selected as a market 7. Local market restricted to a particular city or part of a city 9.4.2 Ownership of the Organisation

When a buyer for a product/service is an institution, then the market is segmented on the basisof the ownership of the organisation. Broadly, for the marketing purpose, organisations are classified as public sector, private sector and cooperative societies. The public sector organisations are owned, controlled and managed by the government. The private sector organisations are owned, controlled and managed privately by individuals or their groups. The cooperative societies are owned^controlled and managed by members of the cooperatives which are formed under the Cooperative Societies Act. The public and the private sector organisations as well as cooperatives have different profiles as buyers because their purpose, objectives, rules and regulations, bye-laws, management styles, organisational structure, method of purchases and mode of payment is entirely different from each other. The characteristics of private organised sector are further different from private unorganised sector. An entrepreneur can identify a huge market potential in the private unorganised sector also. 9.4.3 Urban and Rural Market

As per the volume of population, level of economic development and industrialisation of the area, market is divided mainly as urban and rural market. The sub-classification is semi-urban and semi-rural market. There is a significant difference between the socio-economio_and cultural background and conditioning of the urban and rural buyers. There is a wide difference between their exposures, knowledge, understanding, language, buying habits, expectations, problems and 'd^pOulties. It reflects immensely on the marketing policy, advertisement strategy, distribution flannels, etc. This necessitates complete understanding of the profiles of the urban and rural

Entrepreneurship Management

fi. /l^ewise Market Segment SEa important criteria which has drawn the attention of not only the entrepreneurs but also .advertisement and marketing agencies. The product/service is brought into the market for a Scalar age group of a target buyer. Sometimes, specially the products are designed and iifactured for certain age groups. For example, a wide range of product mix (baby oil, baby poo, baby soap, baby powder, baby cream, baby comb and baby brush) manufactured by on and Johnson is very popular in the market. This product mix is mainly targeted for ^particularly below two years. But a similar product mix brought into the market by companies Lakme India Ltd. is targeted for young people between the age group 20 to 25 years. The urs, designs, fashions, prints, shapes, and sizes demanded by different age groups differ largely, example woollen sweaters during winter season. For furniture designing and manufacturing : the age group is taken into consideration. Specially, designed furniture is available for children dicapped children, and old people. Thus, for most of the products, age of the "end-user" or the rget buyer" occupies an important place in market segmentation. The age grouping for market segmentation is as follows: Children upto 5 years Children from 6 to 10 years Children from 11 to 20 years Young people from 21 to 40 years Middle-aged people from 41 years to 60 years Senior citizens or old people above 60 years 4.5 Income wise Market Segment come is another major determination of the market segmentation. The income of a buyer indicates 'purchasing power. Therefore, in market segmentation, buyers are grouped on the basis of their icome. An entrepreneur addresses a specific income group. Accordingly, he decides the design, tiality, presentation, packaging, selling techniques and distribution channels, for the product/ Igce. While grouping the buyers on the income basis, an entrepreneur should not use sensitive, 1 ective words like 'rich' and 'poor'. But objective terms like 'income level' should be used. Following IB the important market segmentations on the basis of the income: ||--. Buyers below the poverty line H Low income group people || Middle income group people a Higher middle income group I income group Affluent people with a very high income Most of the products/services are targeted at middle income group, higher middle and high income group people. 9.4.6 Sexwise Market Segment This criteria divides the market into two sub-groups; namely men (male buyers) and women (female buyers). Some products/services are targeted only for men, whereas some products/services are targeted only for women. For example, shaving cream, and after shave lotion are directly targeted towards male buyers. Nail paints and nail polish removers are directly targeted towards female buyers. Design, packaging,

Marketing Management 56

marketing technique, advertisement method and media change largely as per the category of the "end-users." 9.4.7 Educationwise Market Segment The level of literacy or education is an indicator of the knowledge, exposure and enlightened approach of the buyer. It is customary to categorise the buyers on the basis of their educational level. In practice, it is experienced that both, illiterate as well as highly educated buyers are snobbish. Similarly, they posses a critical attitude towards the product/services as they are intelligent enough to know the utility, uses and applications of the products/services. But, in general, educationwise market is segmented in the following sub-groups: mk 1. Illiterate 2. Literate and having education upto secondary school level 3. Graduates 4. Post graduates and above 9.4.8 Seasonwise Market Segment

Seasonal availability of products/services tends to classify the market as seasonal and off-season market. Certain products are available during certain seasons. For example, mangoes are available during summer. Woollen sweaters are in demand only in winter. Fans, coolers and air- conditioners have a peak season in summer. Crackers are in demand only during Diwali. Thus, many products/ services are demanded in huge quantity only in a certain period/season. The remaining period/ season is the off-season. An entrepreneur has to plan the production and marketing activity according to the seasonal demand. Therefore, seasonwise market segmentation should also be taken into consideration. 9.4.9 Conventional and Unconventional Market

IN Conventional market represents a group of buyers who buy specific products at specific time. |H example, during Christmas, Christians will buy a Christmas tree, Santaclause, etc., During Wl11 buy PaPer lanterns (Akashkandil), during Makarsankranti period, Gujarat will buy .kites. But the buyers who are otherwise not used to buying certain products/ t a specific time join the demand for such products are known as unconventional buyers a market is classified as the unconventional market. 1 Nature of the Product lature of the product is an important criteria for market segmentation. Broadly, products are ^sifted as capital and consumer goods. Capital goods are also known as industrial products. For mple, machinery, accessories, chemicals, dyes, etc. These goods directly participate in the Ruction process. The market for these products is naturally the industries, which use these ds as the factors of production. As the buyers are specific, these products do not need special Birketing efforts like advertisement and sales promotion. On the contrary, consumer goods need luge selling cost in order to capture the market. Particularly, when the market is flooded with be too" products, advertisement and sales promotion becomes an inevitable

Entrepreneurship Management

part of the marketing s. Moreover, consumer goods are targeted as special segments discussed earlier. Consumer Bdsare again classified as consumer durables and consumer perishables. Accordingly, the market iegments differ. P MARKET RESEARCH || the days of intensive competition, where the stakes in the business are high and penalties great, Kpr miss type intuition is not accepted. In-depth market research is an immensely desirable way for entrepreneurs/Market research provides an X-ray vision for an entrepreneur for his marketing prts/pince marketing decisions require information to support them, market research plays an fcportant role in marketing activities. In other words, it is a backbone of the marketing activity of q enterprise irrespective of its scale of operation. In the past, many of the successful companies bardly saw a market report. They faithfully relied on their market knowledge generated out of heir own experience or just adopted the trial and error method. But, with the complex business *%vironment today, professional management of the enterprise needs market research for launching he product/service successfully. The ultimate objective of market research is to induce action. It jpHtates an entrepreneur to take quantitative and qualitative decisions about the product/service > its marketing strategy. A working definition of market research can be given as, "the systematic gathering, recording I analysing the data about problems related to the marketing of products and services which better decision-making." research covers a large spectrum of activities such as existing market size, market ^recasting market trends, product acceptance, effectiveness of distribution channels, &i new products, product development needs, market segmentation, sales promotion

ajj$ a^y^tjgjpn^ent techniques, strengths and weaknesses of competitors, understanding attitudes of fauyers, piu'cliasing procedures, factors which influence purchasing decisions, identification and evaluation of government activity and legislation effecting the product and the market share, packaging, social impact and social cost involved. 9.5.1 Market Research Method Two distinct methods are followed for data collection. (1) Desk Research Method (2) Field Research Method. Desk research method Desk research is the search for data from published as well as unpublished materials.The data can be collected from government published statistics, directories, trade associations, trade and technical magazines, published research, specialist libraries, company annual reports, newspapers, journals, data published by non-government organisations, political parties, trade unions, commercial banks, exhibitions, buyer's guides, surveys, opinion polls, experiments and consumer panels. field research method Field research is the systematic and scientific method of collecting the data from the field with direct interaction with the buyers. Various methods used for field research are questionnaires, telephone interviews, personal interviews, sample testing, demonstrations, and opinion polls. The desk research method and field research method are external sources of data collection. An entrepreneur has also an access to the internal source of data collection. The important internal sources are the firm's sales records, delivery and stock records, quotations, report of salesmen, audit reports, advertising and its effectiveness. | /fvTarket research facilitates to take quantitative as well as qualitative decisions. The external ina internal sources described above help an entrepreneur to take quantitative decisions. A market survey can be conducted to analyse and identify the values, attitudes, beliefs, culture and motivations $1 the buyers. |'fjven though market research has become inevitable for the entrepreneurs, it is necessary to H H following questions before he designs a framework for market research. How much information is already available in the firm? What is the goal of market research? What are the objectives of market research? What is the geographical area to be covered? What is the duration? Which methods to adopt? How much budgetary provision?

er the methods and the budgetary provision are compatible with the objectives? er to employ outside agency or whether to create an in-house cell? will happen if a decision is taken without market research? much the firm will be benefited by the outcome of the research? I Market Research Process I are mainly four stages in the market research: Refining the problem ij. Model construction

3. Data collection 4. Data interpretation


Market research process begins with defining the problem. An entrepreneur must have a clear lerstanding of the purpose of market research. Defining a problem means defining the specific lives of the market research. As market research involves time, money and personnel, it not be designed on vague and absurd ideas. It is essential to have a clear perception about the jectives of market research. Once the problem is denned or the objectives are framed, an entrepreneur has to design a research si. A research model is the specific designing of the research procedure. It is the scheduling of pie, time, course of action, if necessary training the people for research, material, etc. In the data collection phase, actual data is collected. As mentioned earlier, internal and ernal data is collected by an entrepreneur. Desk research method and field research method is ed for data collection. According to the purpose or the objective, the data is tabulated in a pre-designed format which 'litates to interpret the data. The conclusions are drawn. They are actually the answers to the i denned as an objective or purpose for the research. On the basis of the contents of the research, a report can be proposed. Major recommendations, Inclusions and findings are summarised as the first part of the report. In the second part, all the al and statistical details are provided. 9.6 DISTRIBUTION CHANNELS ive physical distribution (distribution of products) is a crucial act in marketing efforts of the e effective distribution channel is a bridge between an entrepreneur (producer) and the l (ultimate consumers). In other words, it bridges the gap between production and consumption, linaking the product available to the buyers, a definite value is added to the product/service. A

lit Entrepreneurship Management

distribution channel is a channel which facilitates the exchange or transaction of the prodi service from the entrepreneur to the buyer. These channels help the entrepreneur to know n choice of the buyers and also help them to know what an entrepreneur can offer them entrepreneur and the buyers of a given product/service have specific expectations from a distributi channel. Table 9.2 Entrepreneur's Motive and Buyer's Motive Entrepreneur's Motive 1. Wider market share 2. Easy contact with buyers 3. Knowledge about the Middlemen buyers 4. Low cost of exchange 5. Edge over the competitors Buyer's Motive 1. Wider choice 2. Easy access with supply of product/ service 3. Knowledge about the product/service 4. Low cost of exchange 5. Best product/service

This necessitates the entry of middlemen in the marketing activity of the firm. For most of the products, industrial as well as consumer, middlemen play an important role in the distribution. Figure 9.2 gives complete clarity about various distribution channels. Manufacturer - Entrepreneur

Distrib utor

Retailer

Door to Mail order/ door Telesales shopping/ ExhibiDirect tions. selling Retaile r

Buyer Fig 9.2 Distribution Channel The distribution strategy covers the following basic activities: 11, The choice of channel r 2, Whether to confine to one channel or multiple channels 3. Whether to sell directly to the buyer or through channels i.e. middlemen

lit Entrepreneurship Management

jfctuencUture to beincurred. on the distribution R| financial responsibility |fc Distribution cost with respect to available funds. I ipue selection of a specific distribution channel depends upon the following important factors: I Customer imber of buyers If the number is small, direct marketing is possible but if the number is large and the product is of mass consumption, a large network of middlemen is necessary. Area coverage If the product is to be sold in a restricted area, direct selling is possible. If the product is to be sold in a wider area, a large distribution network is necessary. Purchase frequency If the product is purchased occasionally, a less number of distribution outlets will suffice. If the product is purchased frequentlyrecurring demand a wide distribution network is necessary. .6.2 Product Perishable/Durable If the product is perishable, the quick disposal of the product becomes essential. It necessitates a large network of retailers. But, if the product is durable, which has a long shelf-life, a small size of distribution network is sufficient. StandardisedTUnstandardised If the product is standardised, it can be sold with a wide distribution network but if the product is unstandardised and manufactured according to the needs of the buyers, it does not require a distribution channel. It can be directly sold to the buyer. .6.3 Competitor tie selecting the distribution channel, an entrepreneur should take into consideration the channel cted by his competitors. The buyers are used to a given channel/outlet for a given product. If similar channel/outlet is selected, it is easier to attract buyers. U services In case of the technical service or any other service, it is always desirable to avoid middlemen. It is necessary to provide the service directly to buyers. 9.6.4 Firm While selecting a distribution channel, an entrepreneur should also take into consideration the size of ihc fir00' fef^cial resources> nature of the product and product mix, marketing policy, I t%iayeTB and market. While selecting the distribution channel, one comes across various terms used for the 9.6.5 Middlemen a. Sole selling agent These middlemen have an exclusive right of distribution over a certain area. They enjoy monopoly to sell the given product in the specific area. b. Distributors These middlemen are appointed for selling the product in a district or a

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city. They are authorised agents of the firm and perform the activities like holding the stock, booking orders independently with the firm, supplying the product to the retailers, collection of payment and attending to complaints from either the buyers or the retailers, and giving a feedback to the firm. c. Wholesaler He is not an authorised agent. He collects the stock from the sole selling agent or the distributor. He collects orders, supplies the product to the retailers, provides credit facility to retailers, gives feedback about the product to the firm and makes suggestions to the entrepreneur. d. Stockists These people just stock the product and provide the depot/warehouse facility to the firm. e. Retailer He is the ultimate link between the entrepreneur and the buyer. He can push a certain product and helps to increase the market share of the product. There are different categories of retailers. Important categories of retailers are as follows: Independent retailers They provide efficient local services at a comparatively higher price than the other multiples and large chains of retailers and provide credit facility to the buyers. Usually, they sell the products which fetch a good demand. They are also useful for new product promotion. For example, grocery shops. Voluntary groups of retailers Often, to strengthen their position in the market, independent retailers form their voluntary groups. They follow common policies related to product range, stocks, prices, store layout and store promotion. Multiple stores These outlets can be run by a small sales force who are interested in fast moving items. Some multiple stores enter into production activity after gaining good contact with customers. Retail chains Some entrepreneurs prefer to sell their products through a chain of retail stores. For example, Cambridge Men's ware varities are sold only through their own shops. Cotton King has followed the same policy. Departmental stores In big cities, departmental stores are very popular. A large number of products are available under one roof. The standard of service to the buyers is maintained ieveJ. Many of these stores are run by professional managers and have become ipititutions. For example, Asiatic, Akbaralys, Shoppers stop in Murabai. QHptrath* societies In India, there is a growing tendency to establish Co-operative and promote sales through cooperative stores. These stores sell the products at a Bp Jiff) safeguarding the interests of the buyers in the motto of the cooperative societies. Satfofthe co-operative societies have entered into the production field also. For example, Bazar in Mumbai, She tkari Sahkari Sangh at

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Kolha pur, etc. Cooperative dairies sell fray products through their own cooperative stores outlets. For example, Warna, Amid, They also use other outlets to increase the market share. Supermarkets These are the outlets of multiple retail stores and the self-service selling jrifets. They sell a large variety of products with a wide product range They are particular about packaging, service, delivery time etc. Some supermarkets concentrate on low volume, high profit products but most of the supermarkets cover fast moving products These markets Be very conscious about the quality of the products. Cash and carry These channels are developed by wholesalers in which people select the jroducts they would like to sell, collect the required quantity from the wholesaler, pay and transport to the selling points. These channels are very small selling outlets where the turnover is small. These channels do not provide any service to the buyers. But, from the entrepreneur's point of view, these channels are useful for the promotional activity. The test examples of cash and carry outlets are canteens, roadside dhabas, restaurants, pan-jSfishops, newspaper stalls and fruit stalls. Mobile retailers These outlets supply the products at the door-step. It is a personalised It is a form of direct selling. Grocery products, milk, vegetables and fruits, bakery frozen products are prominently supplied by mobile retailers. Service charges do not e the price. van selling This channel is also popular in crowded cities like Mumbai as well as areas. In a city like Mumbai, convenience to the buyers is the prime consideration,: in the rural areas, availability of a variety of products to the buyers is the main ration. The vans are parked at a specific place at a specific time. Consumers are of this arrangement. Mobile vans fetch a good clientele. For example, Sahkari Bhandar, iBazar, Jute goods production centre have provided ATM facilities to the buyers. %$hdoor selling An entrepreneur can create a wide network of salesmen to sell the door-to-door. It requires detailed training about the product to the sales personnel, paratively a costly outlet. For example, Oriflem, Amway, Tupperware products tar a chain of salesmen. 220 O Entrepreneurship Management ____________ Petrol pumps There is an increasing tendency to establish superbazaars or fast selling counters to sell consumer products at petrol pumps. Hindustan Petroleum, Indian Oil, Bharat Petroleum are the leaders in this field. They have also adopted this technique. Exhibitions Another popular outlet which draws huge crowds is the exhibitions. Products are displayed and sold in the exhibitions. It gives a chance to the entrepreneur to advertise his product and prove his superiority over the competitor's product. Exhibitions are good outlets for promotional activity. National Handloom Expo, Best of India and Handicrafts products exhibitions are very popular in Mumbai. Party plan selling In this method, an entrepreneur identifies and appoints some women/ households who hold sponsored parties at their residence and invite their neighbours, relatives and friends to either see the product or the demonstration of the product. Samples are distributed. Orders are taken. Products are advertised. Many of the kitchen items, equipments,

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convenience food products, masalas, pickles and jewellery items are sold in this fashion. Mailorders and teleshopping This outlet is very popular but this needs a huge investment on television shows, stationery printing and postage. This is also a direct outlet. For example, Sky shops are very popular on television. 9.7 SALES PROMOTION AND ADVERTISING There is always a controversy regarding whether a small-scale entrepreneur should spend on sales promotion, advertising and publicity or whether he should avoid this extravaganza. But in practice, irrespective of the size of the firm or the sale of operation, all the entrepreneurs need to think about the sales promotion, advertising and publicity of their product/service. Most of the buying decisions are made of feelings, habits, instincts and impulses. Advertising and sales promotion aims at understanding the feelings, habits, instincts and impulses of the buyers and offers them the product for achieving the desired level of satisfaction. While advertising the product/service an entrepreneur has to consider the following points:

1. Entrepreneur has to decide precisely the target audience/buyers he would like


to reach. In other words, he has to address to the pre-determined market segment. The tone, contents and the treatment given in the advertisement differ accordingly. 2. Having decided the market segment, an entrepreneur has to decide the message to be given to the target buyers. Entrepreneurs are interested not only in giving a message (about the product/service) to the target buyers but their prime interest is to know what buyers immediately notice in the product (target reaction), what they should feel about the product (target feeling) and ultimately what they should believe in the product (target ' G The message is a two-way communication. It conveys the information about the ; ^uct to the buyers and reciprocates the buyers' impression to the entrepreneur. The message given in the advertisement should capture the attention, arouse interest and show benefits to the buyers, i Quce the message is designed, an entrepreneur has to set specific objectives for the sales promotion and advertising. It gives proper orientation and direction. It represents the marketing intentions. Important objectives for advertising are: a. To convey a particular message, e.g. Family Planning aids, no discrimination between a boy and a girl, etc. b.Introduction of the product, e.g. Amul Masti Dahi, Natural brand ice creams, etc. c. To educate the buyers, e.g. Breast feeding superior to baby milk powders, etc. d. To convey information, e.g. HDFC loans for housing etc.

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e. To create a brand image, e.g. brand ambassadors like Kapil Dev, Sachin Tendulkar, Zakir Hussain are appointed to promote products like shirts, cars, cool drinks f. To create awareness, e.g. "Smoking is injurious to health"Cigarette companies g. To affect attitude, e. g. Promotion of "Ayurvedic concepts" products to prevent the buyers form using chemical based beauty products h. To affect loyalty, e.g. convenience foods, Bisleri mineral water, garments, etc. i- To induce the buyers to buy, e.g. Maggie noodles, soups, hair dyes, etc. J- Reminder, e.g. Pulse polio drops k. To induce the buyers for inquiries, e.g. weight gain/loss programmes of health clubs 1- To give "buy now" message, e.g. magazine subscriptions, consumer durables by annoucing price cuts, exchange melas etc. m. To correct false impressions, e.g. advertisements issued in "public interest" n. To imbibe impressions, e.g. nasal spray medicines for treatment of Asthma, health drink products, jewellery, garments o. To attract new buyers, e.g. ATM cards, credit/debit cards, Mediclaim Insurance p. Industry level promotion of the product, e.g. Classified advertisement, B to B commerce |. To support the personal selling, e.g. Eureka Forbes equipments like vacuum cleaners Aqua guard water purifying machines, etc. To achieve a certain penetration level in the market, e.g. sanitary napkins, tooth pastes soaps, TV serials, TV channels, etc. To influence the buyer behaviour, e.g. chocolates, ice cream party packs, fast food Total market development, e.g. Internet banking, dotcom services, PC marketing etc. Most advertising objectives are defined in qualitative terms but quantification is also necessary to make advertising result-oriented. 4. The selection of a right media adds to the success of advertising. The conversion rate of potential buyer to an actual buyer depends upon the message as well as the media. Media selection depends upon (1) target buyers, (2) message, (3) budget. Accordingly, an entrepreneur has to choose from the following options: a. Television b. Radio c. Internet d. E-mail e. f. g. h. Hoarding Posters Brochures Banners

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i. Pamphlets j. Newspapers, magazines, journals k. Bus slides, railway slides (transportation advertising) 1. Slides in the cinema theatres m. Direct mail n. Exhibitions, trade fares o. Demonstrations p. Free samples q. Balloons r. Mobile vans, cycles, etc. s. Packagingplastic bags, boxes, etc. t. Sponsoring big events like cricket matches u. Telephone calls Media selection also depends upon the following factors: Habits of the target customers in relation to media Reports from Audit Bureau of Circulation (ABC) and National Readership Surveys (NSR) which are available with reputed magazines and newspaper* Potential listeners and viewers for radio and television respectively The time of releasing the advertisement Advertisement budget is to be decided by an entrepreneur. There is no connection or hard and fast rule regarding how much to spend on an advertisement. But there are some criteria to decide the expenditure on an advertisement. Availability of funds Bpu, Percentage of annual sales revenue How much is spend by the competitors To fulfil the task and reach the objectives Sales promotion is different from advertising. Sales promotion does not compete with advertising. Rather, it is compatible and makes the advertising effective. It is accepted as an effective tool in marketing. Sales promotion is defined as "a featured offer of tangible advantages not inherent in e"product or service promoted for the achievement of marketing objectives." We come across lysuch schemes. Toothbrush free with toothp aste New Year calender free on purchases in January A comb free with hair oil Send 4 coupons of purchase to get a free pack 50% off this week only Air travel free if you book before April

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A soap dish free with 2 soap cakes


A baby towel free with six cakes of baby soap A trolley free with a colour TV A wrist watchfree with one refrigerator These schemes are for the buyers who are tempted with these offers. Similarly, the retailers, distributors and stockist are also given some schemes like A fiat car free with a sale of Rs. 100 lakhs Foreign trip free if a target sale is' achieved in 3 months only Sales promotion activity is short-term and is designed to produce quick and numerically ^measurable results. There is no rule or guideline about the date when a firm should go for advertising and when ales promotion activity should be introduced. Sometimes, both the activities are adopted ftmultaneously. HraCKAGIltfG aging gives personality to the product. Almost all products need packaging for their protection the journey from the manufacturer to the buyer. But packaging is not only for protection. It <EM O Bntrepreneurship Management serves many other purposes. It helps easy handling of the product and establishes the identity of the product. It may increase the brand loyalty of the product. It provides information. It preserves qualities like polish, colour, freshness and smell and adds to the convenience of use. It provides storage to the product and enhances the availability of the product for a long time. In other words, the shelf-life of the product increases. It contributes in advertising the product It prevents adulteration. It differentiates between the substitutes. It increases sales, reduces cost, improves distribution, and contributes to the profitability. Thus, packaging to become effective, serves all the above functions and becomes an integral part of the marketing strategy of the firm. Packaging effects into "impulse buying" where the buyer has no predetermined idea/option for a particular product. If packaging is attractive, the buyer confirms the selection of the product. Some sales are effected only because of the craze for a particular packaging. Thus, packaging plays an enormous role in increasing the sales of the product. Elements of packaging As packaging has become a job requiring specialisation, there are professionals offering advice on the elements of packaging. The crucial elements which affect the sales due to packaging are (1) colour combination, (2) shape, (3) size, (4) material, (5) design, (6) layout, (7) legal requirements (8) script and lettering (9) surface pack, (10) durability.

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9.9 PRODUCT, PRODUCT-LINE, PRODUCT-MIX AND PRODUCT LIFE CYCLE In the marketing strategy, product, product-line, product-mix, product life cycle and new product development plays a crucial role. All these concepts with their relative significance are discussed in Chapter "Opportunity Identification and Product Selection." 9.10 PRODUCT PRICING Pricing at which the given product is offered for sale by an entrepreneur is an important deciding factor in the success of the marketing strategy. Product pricing is discussed in details in Chapter "Cost of Production, Pricing and Break-even Analysis." 9.11 SUPPORT INSTITUTIONS The government has established various institutions to support and guide the entrepreneurs in marketing development of their products. The role and functions of these support institutes is discussed in Chapter "Role of Support Institutions to Promote Small Entrepreneurs." SUMMARY Marketing is a specialised activity of an entrepreneur. It is an art as well as a science. The Entrepreneur's ultimate goal is to reach to the end user and give him highest level of satisfaction I Entrepreneurship: PTER An Indian Scenario

OBJECTIVES ?Affcer reading this chapter you will learn:

1. Conceptual framework of entrepreneurship 2. Advocacy in favour of small scale industry 3. Definition of an entrepreneur 4. Working definition of entrepreneurship 5. Distinction between wage employment, self-employment and
entrepreneurship

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6. Enterpreneurship in India in pre-British period 7. Decline of entrepreneurship in India during the British period 8. Entrepreneurship development in Independent India 9. Role of women entrepreneurs 10. Misconceptions about entrepreneurs 11. Entrepreneurship training 12. Distinction between entrepreneurs and managers
1.1 CONCEPTUAL FRAMEWORK Entrepreneurs are normally considered as agents of change in the socio-economic development of a country. They are also seen as innovators, risk-takers, decisionmakers and people with a definite vision. They have different characteristics as compared to the people accepting jobs or wage employment and also managerial functions. Earlier, it was believed that entrepreneurs are born and entrepreneurship is hereditary. But in the last couple of decades, it was confirmed that people could be identified, trained and developed as entrepreneurs. The misconception that entrepreneurship

?. Capital saving 8. Import substitution and export promotion 9. Saving foreign exchange 10. Promoting the sense of participation in the economic development efforts. In the days of multinationals, small-scale industry and first generation entrepreneurs have 66 contribute significantly in the country's economic development. The main thrust of all the polk: is on the development of new entrepreneurs. Let us understand the term "entrepreneurs". 1.2 DEFINITION OF ENTREPRENEURSHIP Even though the term 'entrepreneur' and the process of entrepreneurship development are prominently used in recent literature on economics and management, the profit theories have considered profit as a reward for entrepreneurial function. Entrepreneurship was defined in earlier days with respect to profit theories. Some important definitions are discussed in the following paragraphs: 'Self- Made Impact Making Entrepreneurs published by the Entrepreneurship Development Institute of India profiles 26 successful entrepreneurs. The study reveals three important drives: "The urge to implement new ideas and take

challenges; the need for independence or autonomy, and to improve the quality of life. All these three factors are consistent with the concept of achievement motivation." 1. F.A.Walker defines "Profit" as a "rent for ability of entrepreneurs. Like land factor oi production, entrepreneurs differ in their abilities. Accordingly, there are marginal and supra-marginal entrepreneurs with respect to their efficiency. Marginal entrepreneurs earn only normal profits, which is a reward for their marginal ability. More efficient entrepreneurs are considered as supra-marginal. They earn super-normal profit as a reward for their organisational talent and business efficiency". 2. Prof. Taussing considers profit as a wage of the entrepreneur for his mental and directing abilities. Stingier, Champion and Edgework advocated that profit is the reward determined by the marginal productivity of the entrepreneur. EBpSflLS. Mill, Marshall and Hawley define "profit' as a compensation payable to the entrepreneur for his risk bearing function. 5. Knight defines 'profit' as a reward for the uncertainty bearing capacity of the Entrepreneur. Risk bearing function is acknowledged by Knight. According to this definition, risk and uncertainty are classified as insurable and non-insurable risks. &. import substitution and export promotion 9, Saving foreign exchange 10. Promoting the sense of participation in the economic development efforts. In the days of multinationals, small-scale industry and first generation entrepreneurs have to contribute significantly in the country's economic development. The main thrust of all the pouci p on the development of new entrepreneurs. Let us understand the term "entrepreneurs" 1.2 DEFINITION OF ENTREPRENEURSHIP Even though the term 'entrepreneur' and the process of entrepreneurship development are prominently used in recent literature on economics and management, the profit theories have considered profit as a reward for entrepreneurial function. Entrepreneurship was defined in earlier days with respect to profit theories. Some important definitions are discussed in the following paragraphs: 'Self- Made Impact Making Entrepreneurs published by the Entrepreneurship Development Institute of India profiles 26 successful entrepreneurs. The study reveals three important drives: fThe urge to implement new ideas and take challenges; the need for independence or autonomy, and to improve the quality of life. All these three factors are consistent with the concept of achievement motivation." I 1. FA.Walker defines "Profit" as a "rent for ability of entrepreneurs. Like land factor of production, entrepreneurs differ in their abilities. Accordingly, there are marginal ami supra-marginal entrepreneurs with respect to their efficiency. Marginal entrepreneurs earn only normal profits, which is a

reward for their marginal ability. More efficient entrepreneurs are considered as supra-marginal. They earn super-normal profit as a reward for their organisational talent and business efficiency". ; % Prof. Taussing considers profit as a wage of the entrepreneur for his mental and directing abilities. Z. Stingier, Champion and Edge work advocated that profit is the reward determined by the marginal productivity of the entrepreneur. 4, J&. Mill, Marshall and Hawley define "profit' as a compensation payable to the entrepreneur for hi* risk bearing function. JK Knight defines 'profit' as a reward for the uncertainty bearing capacity of the Entrepreneur. Risk bearing function is acknowledged by Knight. According to this definition, risk and uncertainty are classified as insurable and non-insurable risks.

4 Entrepreneurship Management Every entrepreneur has to bear certain risks in the business. Some risks like fire, theft and accidents and natural calamities like flood, earthquake, etc. are predictable and can be anticipated. The entrepreneur can frame policy to meet the challenges of such types of risks. These are insurable risks. Profit does not arise out of insurable risks. But there are some non-insurable risks like changes in the demand, government policy, technological changes, trade cycled competition, etc. These risks are unpredictable and cannot be anticipated. Entrepreneurial skill lies in bearing and handling these risks. Profit is a reward for bearing non-insurable risks. 6. Joseph Schumpeter defined "profit" as a reward for introducing innovations. An entrepreneur is an innovative and creative person who introduces innovations in the business. Innovation means commercial application of the inventions and scientific discoveries. Innovations are of two types: a. Innovations related to production b. Innovations related to marketing The production function represents the relationship between the input and the output. If an entrepreneur introduces innovations related to inputs like new sources, types and substitutes for raw materials, new packaging styles, new machinery, technological changes, fuel, management techniques, enriched labour qualities, etc it is an innovation related to the production function. It may be a cost-effective change but ultimately all innovations result in developing a competitive edge. The market function is represented by the interaction between the demand and the supply forces. Market function innovations are the result of the changes in assumptions of the demand and / or supply forces. Changes in the customer needs, preferences, fashions, demand pattern, government policy, foreign trade, taxation policy, number of substitutes, prices of the substitutes, advertisement and marketing policy are some of the innovations related to the market function. An innovative entrepreneur becomes a market leader and in order to sustain his position as a market leader, he has to introduce innovations continuously. Profit is a reward for innovative entrepreneurs. When a given innovation is copied or adopted by other entrepreneurs, profit disappears. To regain his position, the entrepreneur has to introduce another innovation. This expands the scope for product improvement and research and development strategy. 7. Peter Drucker has supported the views expressed by Schumpeter. According to Drucker, innovation is an important tool of an entrepreneur. He can perceive new opportunities, can convert the opportunities in attractive projects and become the market leader. All these definitions describe various qualities of an entrepreneur and profit as the aim of the entrepreneurial efforts. The word "entrepreneur" is derived from the French Verb "entrepredre". In the 16th century, a first reference to the word "entrepreneur" was made in military expeditions. The French who organised the military expeditions were known as entrepreneurs. Therefore, "to organise" or "to undertake" is the then established meaning of entrepreneurship. Then the construction people, architects and builders were referred as entrepreneurs. But it is popularly known to the masses in the descriptions of the profit theories. Economists and business management consultants used the term "entrepreneur" as a

factor of production which was distinctly differentiated from all other labour categories. Thus, "entrepreneur" represented an "owner and organiser" of the business. In recent literature on economics and management, the term "entrepreneur" represents an owner of the small-scale business. Various studies and researches described the entrepreneur as a person with organisational capacity, distinct values, attitude, aptitude, skills, belief and qualities. He is a creative, imaginative and innovative person. He bears calculated risk. He is a decision-maker and a goal-setter. He is committed and a hard-working person. He is a best time manager with excellent team building and problem solving abilities. He is an achiever with a clear perception who can identify opportunities. Thus, many descriptions and expressions are associated with entrepreneurial personality. Another important attribute is the profit orientation of the entrepreneurial activity. 1-3 WORKING DEFINITION On the basis of all the definitions given by various economists and management experts as well as with the help of the descriptions of the term "entrepreneur", let us prepare the working definition of an entrepreneur. It will facilitate us to know the functions of an entrepreneur. It will give us guidelines for entrepreneurial development. Definition "An entrepreneur is a person who combines various factors of production, processes the raw material, converts the raw material into a finished product and creates utility in the product and sells the product in the market in order to earn profit". Client features h Entrepreneur plays a distinct role in entrepreneurial activity. He invests his valuable, scarce financial resources and organises the production function. ^J^JEIe takes the decisions about: a. What to produce: product selection. b. Howjp produce: technology. c. Where to produce: location. d. When to produce: Duration, time planning. e. For whom to produce: target consumers/market. f. At what price to sale: price determination. g. How much profit to earn: profit margin, h. What to do with the profit: profit sharing/reinvestment. i. No other factor of production participates in the decision-making process. It is the? domain of the entrepreneur. 3. Entrepreneurship is a need-based function. 4. As a logical outcome, the product or service offered by an entrepreneur possesses utility. It; is the want satisfying capacity of the product. 5. Production is not for self - consumption but is offered for sale in the market. 6. Entrepreneurship is a profit-oriented activity and is a commercial proposition. An entrepreneur aims at profit. 7. An entrepreneur possesses distinct qualities like risk-bearing, goal-setting, decision making, information seeking, problem solving, time planning and mamteining good

interpersonal relations in addition to the other set of special characteristics like innovativeness, creativity, communication skills, high level of confidence, perception, team building, trustworthiness, hard work, consistency and analytical strengths. These qualities, skills, aptitude, vision and capabilities differentiate the entrepreneur from the owners of other factors of production as well as the managers. 8. In order to achieve success in entrepreneurial venture, he must possess the following "Ds" DESIRE DISCIPLINE DETERMINATI ON DEDICATION

DIGNITY Fig" 1.1 Ds for Success

9. The entrepreneur is the owner of the venture. He has employment generation


capacity. 10. He is a creator of wealth. |*4 DISTINCTION BETWEEN WAGE ISlfLOTSffl3,SELF-EMPLOYMENT AND ENTREPRENEURS!!!? The terms, "wage employment", "self-eiupluyment'' and 'entreprenearshi^'' are uaed in au&deiai* discussions and in career guidance programmes. Let us understand the difference between the Kfage mmpeWftmmmt It is a contractual form of employment, which involves employee-employer relationship > An employer pays wages to the employee for the services rendered by him. With his te knowledge, experience and expertise, an employee contributes to the process of production pind wage is a reward for his contribution to this process. The productivity of an employee is the basis for determining his wages. Different terms like wages, salary, remuneration, labour charges, [consultation fees, etc. are used for the contractual amount paid by employers to the employees. As rage employment offers security of job and guaranteed income, this has remained an attractive [form of employment. Sell-employment It has been treated as the best form of employment. It is the employment rated by an individual for himself. As the opportunities for wage employment are diminishing and the employment market is saturated, more and more people are turning towards self-employment. Government policies are emphasising the generation of self-employment as a solution the increasing backlog of unemployment. Various schemes like Prime Minister Rojgar Yojana (PMRY),

Jawaher Rojgar Yojana, etc; are introduced by the government Special incentives, benefits and support are provided by the government to the people opting their careers in the fields of self-employment. A self-employed person identifies opportunities, selects a product either in the manirfacturing, service or trading industry, and organises required factors of production and by offering the production in the market earns profit. In the present market situation, the service sector flourishes as the single largest source of self-employment. Entrepreneurship It is the extended form of self-employment. As a self-employed person generates mployment for himself, an entrepreneur generates employment for himself as well as for others. ientrepreneur possesses employability or employment generation capacity. As discussed earlier, entrepreneurship is an economic concept. An entrepreneur represents a high level of achievement ptivation as well as certain skills, capabilities, attitude, values and beliefs. Manufacturing, service trading are three categories of industrial ventures. It is a pressing need in our economy to promote entrepreneurship as the best career choice. The government, management institutions, academicians and researchers have brought entrepreneurship into the mainstream with the thrust ptthe "first generation entrepreneurs". 1.5 ENTREPRENEURSHIP AND ECONOMIC DEVELOPMENT 1.5.1 Entrepreneurship in Pre-British India During the pre-British period, India was constituted mainly by villages. There were cities, which were die capitals of the princely states. Villages were self-sufficient. The village population used to satisfy their daily requirements and needs within the village. The village economy was constituted partisans, craftsmen, balutedars and members of the gram panchayat. The

% Q Sfrtraprsnsurship Management craftsmen and balutedars used to produce various products and provide necessary services represented the entrepreneurial culture and possessed the characteristics of an entreprene There was the barter economy, in which commodities were exchanged for commodities. Certa1 products like spices, needles, and salt were brought from outside by the village traders. Farm produced the fbodgrains. Members of the gram panchayat established law, peace and order. Thus; the village people were completely dependent upon each other. They represented well knit, harmonioul relationships. Indian handicrafts, marble carvings, wooden articles, woollens garments, Jewellery and textiles attracted the world market. Particularly, the Indian 'Mulmul', a type of Muslim cloth was world 1 famous. Village craftsmen and artisans received special patronage from the Indian kings and princes. Indian spices, jute, jute goods, minerals, raw cotton and handicrafts were exported all over the world. There was prosperity. Indian culture was an entrepreneurial culture. There wal "value for Labour." India was described as the "land of gold". But Indian economy received a tremendous setback during the British rule. 1.5.2 Decline of Entrepreneurship During the British Period During the British rule, Indian village economy received a big jolt from the competition by the British industries. Mechanisation in the British industries initiated the industrialisation process in Britain. On one hand, British industries, particularly, the textile industry required raw material which was supplied by the Indian agriculture On the other hand, British industries were in need of a ready market for their machinemade goods. Raw materials were exported from India and the imported machine made British goods flooded Indian markets. As these goods were cheap, compared to the handmade goods, they received a huge response from the common man. The Indian market ] was flooded with the British goods. This caused a complete destruction of Indian handicrafts and | village industries. Princely states were merged in the British empire. This adversely affected the Indian artisans and craftsmen as they lost the valuable patronage of the Indian Kings and the Princes. The British introduced a new system of education. The value of labour was completely lost People took pride in serving in the administrative services of the British Offices. Bluecollar jobs were substituted by the white-collar jobs. Unfortunately, entrepreneurial culture was submerged The British period witnessed the emergence of the employment-oriented mentality among th Indian artisans and caraftsmen. They became 'servants'. Risk-bearing ability and confidence were! substituted by complete obedience to the British administration. Creativity and innovativene were substituted by submissiveness and a blind imitation of the British. Once a 'land of gold', Indian economy was completely paralysed. At the time of Independence, India was described as a underdeveloped country. *-

Jtt

rapes-* <up

agricultural activities Agricultural production was undertaken mainly for selfoiwsuiapiii-u Buf. the t*chruqt*e* of cultivation wore primitive. The share of the agricultural produce on the fjonal Product (ONP) was negligible Industrial sectors were completely underdeveloped. was an acute shortage of capital. skilled workers, infrastructure facilities and industmag ge&oJe was totally absent Technique of production was. labour* intensive and foreign trade tuftwed fro* a eanou* balance of payments Rxports were constituted of agriculture products,, partieid&riy Bp iittrni spaea, jute, tndtgo etc. Imports were composed of scare raw materials, machinery and equip me he. food grains etc. Foreign exchange earning waa meagre aa compared to the foreign exchange expenditure. Infrastructure facilities like electricity, irrigation, tranaportation. postal services, telecom m un tea t ion*, god own facilities reeearch institution and laboratories ware not available The ediicational *y*teni wa* faulty and was not design^a^ per the requirements of the ,Tbt rate of growth and volume of population arte very high. The problem of unemployment 'wee severe. rVrtKularry. In the agricultural sector, there was diaguieed unemployment. The productivity in the "tural and industrial eectore waa at a very low level. Markets waft underdeveloped and entrepreneurial culture waa absent Considering the diamal picture of the economy, the government of the newly Independent India had a gigantic task before it-the task of rehabtbtation and reconstruction of the economy of the country. 1948, when it publish

flat government of India declared tta economi futam


Socialist* pattern of the society t Mixed economy waa the economic philosophy S..k&mmmiri&umth concept 4. Planned economy development altjIWaiiaaiiiit under the leadatahipof the then Prime Minister, Shri Jawaharlal Nehru, adopted etitam pfinclpaaa aa guide Unea fo grve orientation to the economic development. ilie*a^f^c>'^p between K^utajwm and socialism and aimed at combining the aierttadf -foam it in the pruceae of eeenemte dev*l^sj*e4oft** country. It is owned, controlled and managed by the government. It initiated the development^ such industries, in which, private sector was reluctant to enter due to heavy capital investm and long gestation period. The Industries like infrastructure development including the developm of road and rail transport, telecommunications and postal services, irrigation, power generatio construction of dams and canals, iron and steel, fertilisers, ship building, aircraft building, heaj machinery and equipment, mines and minerals, pharmaceuticals, arms and ammunition a" industries important for defence and security of the country were included in the public secto These industries are known as SOC (social overhead capital) industries. The remaining industries were included in the scope of the private sector. The private sector owned, managed and controlled by the private individuals. Since then, as per the need of the time, many industries were included in the public sector an some public sector industries were allocated in the private sector. The concept of imbalance divided the economy into three sectors namely the primary sector of agriculture, the secondary sector of industries and the tertiary sector of transport and communications. It was advocated by the supporters of the imbalanced growth theory that the development of one sector would create necessary pressure for the development of the other sectors. Thus, the development of one sector would result in the automatic and cumulative development of the other sectdrs in the economy. Economic planning was adopted as the strategy to achieve the following goals: 1. Removal of poverty 2. Increasing the national income 3. Increasing the per capita income 4. Agricultural self-sufficiency

5. Speedy industrialisation 6. Production of capital goods to create a base for further industrialisation 7. Production of consumer goods 8. Removal of economic inequalities 9. Removal of regional disparities
10.Promotion of exports and import substitution Economic planning was introduced in India in 1951 with the commencement of the First Five-Year Plan. During the First Five-Year Plan, the major emphasis was on the development of the agricultural sector and agricultural self-sufficiency. Due to good monsoon all the targets fixed for the agricultural sector were overreached, buffer stocks of foodgrains were created and agricultural self-sufficiency was established. Satisfied with the progress of the agricultural sector, the government shifted its priority anc emphasised the establishment and growth of large-scale industries. Rapid industrialisation wifl the aim of the government. But during the second plan, the country experienced serious droughts and famines. Agriculture came up as a limiting factor for the growth of the economy. The emphasis on the capital-intensive large-scale heavy and basic industries generated income in the hands of the people. But shortages of all the commodities and particularly, the commodities of mass consumption, resulted in the sharp rise in their prices. The rate of inflation was very high. Concentration on high yielding variety program (HYVP) failed to bring the desired Green Revolution in the country. On the contrary, it brought serious regional disparities and income | inequalities in the rural sector. Unemployment was increasing at a high rate. Poverty, hunger and shortages of basic necessities shifted the focus of the planners and the government from the imbalanced growth pattern to the balanced growth pattern. Based on this, from the Third Five-Year Plan, top priority is being given to the development of small-scale and tiny industries as well as the promotion and development of the first generation entrepreneurs. Advocacy in favour of small-scale industries and entrepreneurship development 1. Small-scale industries are labour intensive. Their employment generation capacity is very high. The country was facing severe unemployment problem. Small-scale industries and self-employment was looked at as a solution to the unemployment problem. Capital requirement of the small-scale industries is comparatively less. As the country was facing the problem of shortage of capital, it was essential to emphasise the promotion of small-scale industriesForeign capital, foreign technical know-how and imported machinery is not a prerequisite for the establishment of most of the small-sale units. Small-scale industries use indigenous lachinery and equipment. This saves the precious foreign capital. Quick production is possible in small-scale industries. As the country was facing

problem >f shortages of essential commodities of mass consumption, it was necessary to promote the small industries to combat inflation arising out of the scarcity of essential goods. )ecentralisation of economic power and balanced regional development is possible with the promotion of the small units. je then the small-scale industry has remained the focus of all government policies related wld business. All the five-year plans have favoured the growth of small and tiny y allocating substantial financial resources. Another remarkable change in the government policy was brought about by the 1956 Industry Policy Resolution. Industrial policy resolution To respond to the various changes brought by the First Five-Yea Plan and the planning process and the changing needs of the economy, the government of Indij introduced its second Industrial Policy Resolution in 1956. It divided the large-scale industries in three categories. Schedule A industries were strict] under the control of the state, Schedule B industries were progressively state-owned and prival sector can play a supplementary role and all the remaining industries were left to the initiative i the private sector in Schedule C. An important contribution of the 1956 Policy resolution for the small-scale sector came in tl form of differential taxation and direct subsidies, modernising the technique of productio strengthening the infrastructure for the development of the small-scale, tiny scale and cotta industries. Realising the importance of the smallscale sector, the government reserved certa items to be manufactured only in the small-scale sector. With the reservations of 55 products in 1970, the list of reserved items increased to 124 1971,177 in 1977 and with announcement of the 1977 Industrial Policy Resolution the list inflal| to 807 products, Now, it covers around 1000 products. A major change in the outlook and philosophy towards the small-scale industry was brouj about by the Industrial Policy declared by the Janata Party Government in 1977. Industrial Policy Resolution, 1977 The industrial policy of 1977 was the reflection of the think! of the Janata government. It categorically mentioned that the emphasis of the earlier industr policies was on the establishment and development of the largescale industries. The village a the small-scale industries were not given justice and were neglected. The 1977 policy brought 1 small-scale industries in the focus and committed for an effective promotion of the small-sci sector. The small-scale sector was now classified into three categories:

1. Cottage and household industries which provide self-employment on a wider


scale. 2. Tiny sectors with investment in plant and machinery upto Rs.l lakh situated in tow with a population of less than 50,000.

3. Small-scale industries comprising industrial units with an investment upto


Rs. 10 lak and in case of ancillaries with an investment in fixed capital upto Rs.5 lakhs. The following measures were suggested for the promotion and rapid growth of the si: and village industries, 1. The number of products reserved exclusively for the small-scale sector increased to I Jwproposed to set up in each district, a government agency, District Industries Centre (DIC), as a focal point for the development of the small-scale industries. The DIC would provide guidance, support and services required by small entrepreneurs. as 3. A separate wing of Industrial Development Bank of India (IDBI) would exclusively deal with the financial assistance programs for the small entrepreneurs, particularly the first generation entrepreneurs. ite 4. Khadi and village industries were to be strengthened. 5. Special programmes for technological improvement and upgradation were to be planned for small-scale sectors. Thus, the 1977 Industrial Policy Resolution provided a solid foundation for the small-scale industry in India. The successive industrial policies declared in 1980 and 1990 reconfirmed the role of small-scale industries in achieving a speedy industrialisation of the country. 1.5.4 Instrumental Role of Industrial Policy As discussed earlier, Industrial Policy resolutions are instrumental in bringing a change in th< outlook, policy guidelines and treatment to the small-scale industries. 1. Industrial polices defined the investment limits for the small-scale, tiny, ancillary an< cottage and village industries providing larger participation of people in the industria development. I 2. Reservation of products exclusively in the small-scale sector 3. Tax differentiation in favour of small entrepreneurs like excise, sales tax etc. ||' 4. Reservation of items (nearly 404) exclusively to be purchased from small entrepreneurs b; government agency, "Director General of Supplies and Disposal" and the stores purchas* programme ^5. Another list of nearly 12 items for exclusive purchase by Director General of Supplies an< Disposal to be purchased from the small entrepreneurs. This purchase is to be done upti I; 75 percent of the requirement of the DG. I 6. Price reference scheme |fc7. Subsidies

lip, Exclusive purchase from the handloom and the handicrafts sector m$* Supply of inputs at easy terms, finance, raw materials, market, machinery, and land

Iff!

Ifotrepreneurship Management Infrastructure institutional support Exemptions from registrations Problem solving assistance Special rewards : It is evident from these facts that the government is continuously planning to strengthen t] small-scale industry and the small entrepreneur. 1.5.5 Entrepreneurship Development: 1980 to 2000 The Entrepreneurship Development Movement gathered momentum particularly in the last twei years from 1980 onwards. During this period, efforts were concentrated on identifying, traininl motivating, equipping and developing people who would not otherwise accept entrepreneurship as a career. The term al l "entrepreneur" gained popularity during this period. The main thrust of government policies was on the development of the "first generation 1 entrepreneur". The movement was initiated by opening up of a separate wing in IDBI to provide financial assistance for entrepreneurship development and training the new entrepreneurs. IDBI in collaboration with national level institutions like NIESBUD, EDI, NISIET and NIMID organised series of training programmes in entrepreneurship development for various target groups. Th training packages were developed to fulfil the needs of the target groups. The main components* tne training programmes were (1) Entrepreneurial Motivation Training (EMT), (2) Opportuni Guidance, (3) Enterprise Launching Formalities, and (4) Enterprise Management. To facilita highly qualified trainers to organise these training programmes, an expert team of accredite trainer-motivators was trained and equipped particularly by NIESBUD, New Delhi and ED Ahmedabad. Different target groups like women, technocrats, science and technology graduate exservicemen, handicapped, economically and socially backward classes, artisans and craftsme: etc. were identified. The response to these efforts and its success rate was so encouraging, that JL980, a special apex institution - Small Industries Development Bank Of India (SIDBI) w ^stabhshed. The main concern of SIDBI was again promotion, finance and support to sm entrepreneurs. Institutional support was enhanced during this period with establishment and strengthening of the network of large number of institutions at the national, state, regional and district Ieve||j ^Institutions and organisations like SISI, NSIC, Directorate of Industries, TCOs, NIESBUD, EDI, j ^SSIDCs, DICs, SIDCs, NISIET, KVIB etc, have given tremendous support to first generationl Entrepreneurs and small entrepreneurs to such an extent that it will not be exaggeration to sayj piat in the absence of these institutions, India would not have achieved the transformation of thfl fepnOUty from job minded mental set-up to entrepreneurial culture. nduatries at the state level. Centre for Entrepreneurship Development and Centre (DIC) with its wide network at the district and the taluk levels are in the promotional activities. Organising training programmes for various target $ buyers - sellers meets and interactions, facilitating infrastructure and inputs, unities, supplying market avenues, providing registrations, licenses, subsidies, and rewards, publishing news -

12. 13. 14. 15.

bulletins and magazines are the turning points in the urial careers leading them to success. tbers of commerce and industries, federations of employers are also supplementing to the E^eneurship development by providing assistance, guidance, training and a platform to develop BP the large-scale industries, multinationals, world trade organisations and foreign markets. For the development of the products of the small entrepreneurs, there is an increasing use of the exhibition medium. At the local level, exhibitions give good publicity to the products. With a low coat, exhibition is a good medium of market promotion and itself has become an entrepreneurial ptrepreneurship development has attracted the academicians and researchers. Realising the jig need of the time, entrepreneurship is being introduced in the school and collage curriculums. Many researches have been organised and research papers have been published on the related | and subjects concerned with entrepreneurship. the year 2000 Indian economy is posed for transformation as the hightech industrial and culture as the entrepreneurial culture. BOLE OF WOMEN ENTREPRENEURS jpaditional Indian society, a distinction was made between 'mens' work and 'women's' Hpfcicularly that of the women with family responsibilities. It curtailed the employment nitaes for women in conventional and unconventional fields of economic activity. This led to I of work suitable for women. The persisting concept of women's work as auxiliary to resulted in the continuance of the traditional definition of women's work. This the past rather than the present or the future. fight* of women to public employment recognised under Constitution, Articles tthe Constitution, grant the right of equal opportunities in regard to employment |il bout any distinction. ^^(fjsssed/'Are women entrepreneurs a separate categoiyf1or*0o women tiT Let ua first clarify the coneepfc Kntrep^neur ah^; Ttltf <ntrpnrnnmir

JM3 Entrepreneurship Management

attitudes, beliefs, capacities and values. Irrespective of sex, an individual with these distinct qualitiesI can become an entrepreneur. In explicit terms, sex is no bar for entrepreneurship. Therefore, women entrepreneurs should] not be considered as a separate category. But in the maledominated, traditionally orthodox Indian?! society, economic independence of women did not have a social sanction. The entry of women in the! field of industry and business as an owner of the enterprise is a recent development. To facilitate 1 women to take up more challenging entrepreneurial careers, to equip them with essential support! system and strengthen them in the struggle to establish themselves economically, socially and 1 culturally at par with men in the initial stages, additional motivation, guidance, support and opportunity is necessary. To harness women in the economic restructuring programme and to actuate them as productive human resource, it is necessary to provide special schemes, incentives, 1 benefits and concessions in the form of a special treatment. Not as the weaker sex, but as an economically weaker class, a separate treatment to women entering the gamut of entrepreneurship is justified. The main reasons behind the entry of women in entrepreneurial careers are:

1. Limited job opportunities. 2. Pressing need to earn income to supplement the family income due to a high cost
of living. 3. Social pressure of increasing standard of living. 4. Utilisation of sp are time. 5. Self-esteem need. 6. Increasing socio-economic awareness. 7. Impact of role models in industry and business. ('She is doing, why not me?' feeling) 8. Constant motivation by government institutions. 9. Impact of media. 10. Attractive incentives, subsidies and schemes. The existing women entrepreneurs in India can be classified into three main categories:

1. Forced entrepreneurs who are compelled by circumstances or family business


responsibilities to take up a career in business and industry.

2. Chance entrepreneurs who went into business by luck or accident without any p
rep ar a tion. 3. Created entrepreneurs, who are specifically identified, motivated, trained, equipped and developed as entrepreneurs. In recent years, there is an overwhelming response from women for the entrepreneurship development training programmes, which is increasing the band of women entrepreneurs in India.

v;v\:

_____________________Entrepreneurship: An Indian Scenario MM

1.6.1 Opportunities for Women Entrepreneurs Considering the flow of women entrepreneurs in the traditional and conventional industries and product lines, it is often criticised that the women entrepreneurship in India is caught up in "3 Ps." (papads and pickles, food industry, petticoats, readymade garment industry, paintings and handicrafts). The entry of women entrepreneurs in the conventional product is justified on the grounds that they have acquired the skills required for these products traditionally. If they could excel in these product lines, let them excel. But many all-India level surveys have proved that in recent years, women entrepreneurs have entered all fields of business and industry. In the last decade, there has been a remarkable shift in emphasis from the manufacturing industry to the service industry. Considering this, some important opportunities are identified for the women in urban areas:

1. Computer services and information dissemination 2. Trading in computer stationery 3. Computer training at various levels 4. Computer maintenance 5. Travel and tourism 6. Quality testing, quality control laboratories 7. Sub-assemblies of electronic products 8. Nutrition clubs in schools and offices 9. Poster and indoor plant library 10. Recreation centres for old people 11. Culture centres Screen printing,
photography, and video shooting Stuffed soft toys, wooden toys 4. Mini laundry, community eating centres 15. Community kitchens 16. Distribution and trading of household provision as well as saris, dress materials, otc 17. Job contracts for packaging of goods H Photocopying, typing centres 19. Beauty parlours H Communications centres like STD booths, cyber cafes, etc. Kiiitches

wship Management

The opportunities enlisted above for urban women are representative and such opportune can be identified. Opportunities tor women in semi-urban areas Considering the socio-economic, cultural and educational status and the motivational levels of women in semi-urban areas, particularly projects with low investments, low technical know-how and assured market are suggested for them, Important opportunities identified for semi-urban women are enlisted below:

1. Production of liquid soap, soap powder, detergents, deodorants etc. 2. Office stationery like cushion pads, gum, ink, ink pads etc. 3. Convenience, readymade, instant food products including pickles, spices,
papads etc. 4. Community kitchens 5. Communication services 6. Different types of training and coaching classes 7. Child care centres and culture centres for children 8. Nursery classes 9. Manufacturing of leather goods 10. Garments Opportunities for women in rural areas In the recent industrial policy, the government has given tremendous importance for the agro-based products and allied products. Only one to two! percent of the total production of fruits and vegetables is processed every year in India. This! reveals a huge scope for the food, fruit and vegetable processing industry. Women have a natural) flair and instinct for food preparation and processing. A new market is developed for the processed fruits and vegetables in form of baby foods, ice cream, convenience food, cold drinks, canned products,! fetditional medicine preparations etc. Thus, there are plenty of opportunities available for women j IjStttrepreneurs. 1.6.2 Problems of Women Entrepreneurs Research in the women entrepreneurship development in India by various people and institutes pas identified some common problems which are the obstacles to women entrepreneurship ia India, Some important problems are discussed in the following paragraphs: ious constraints imposed by traditional society, women entrepreneurs ] | of confidence in their own abilities. The confidence level of and moti t achievement further declines due to a low degree of acceptability and society's . of confidence in women about their abilities and strengths as business persons. In many cases, women entrepreneurs face the reluctance

of the male members in the family in giving financial and moral support in running the business. 2. The legal, statutory and procedural formalities to be completed before and after launching an enterprise frighten women entrepreneurs as they possess little knowledge about it. In the absence of a proper escort, continuous guidance and assistance in all such legislative and administrative procedural formalities, women are so confused that in all possibilities, a large number of women abandon the idea of running an independent business. tie success of any enterprise depends upon the survival of the product in the competitive market. It is a common experience of most of the women entrepreneurs that they face a tremendous problem while marketing their products. The cost of advertisement is too heavy for their stringent resources. They are untrained when it comes to salesmanship and marketing techniques. When they are initiated to set up an independent enterprise, their first worry is marketing. Many of the women entrepreneurs close the business due to a lack of market. Quick decision-making and problem solving approach is not commonly found among the women entrepreneurs. They get emotionally involved in tackling problems. When problems are brought down to one's personal level, objective analysis is lost and solutions to the problems are hardly found. Inadequate vocational and technical training among women reflects upon their project selection. Usually, they select low technology projects. A large number of women entrepreneurs are found in the traditional and conventional businesses. The basket of opportunities, government schemes and incentives do not promptly reach the aspiring women entrepreneurs. Awareness about the new openings in the field of electronics, software, television, radio, repackaging and service industries, and vendor management is not neveloped sufficiently. Many women entrepreneurs face operational problems particularly when dealing with the workers. Due to sociological norms, it is observed that male workers do not like to take rs and obey women executives. This, among others, is a cause for conflicts and labour women entrepreneurs lack management inputs like business planning, ation, marketing, finance, labour laws, taxation etc. This makes them "weak PUNT, No specific support system is available to develop the skills, abilities and of women entrepreneurs. 8. Women entrepreneurs must keep themselves updated on the rapid technological changJi The scale at which the innovations are introduced in the raw materials, machineil equipment, designs, packaging, storage, durability, advertising distribution network etc! have changed the magnitude and dimensions of the entrepreneurial activity. For strengthening the women entrepreneurship in India, the following areas need to be! concentrated upon: 1. Socio-cultural attitudinal change

2. Development of support system to reduce women's family responsibilities 3. Managerial skill improvement training 4. Vocational training 5. Easy procedures to be followed by banks 6. Marketing support 7. Development of "Women Industrial Estates" 8. Manila (women) banks and Manila Co-operative Credit societies should
widen their activinH in the development of entrepreneurship

9. Intensive entrepreneurship development training programmes 10. Special effort for women in rural areas
1.7 MISCONCEPTIONS ABOUT ENTREPRENEURS In this section we will discuss some common misconceptions and misunderstandings about entrepreneurs. The purpose is not to clarify the misconceptions but to develop a healthy and confident approach towards entrepreneurs and entrepreneurship.

1. Entrepreneurs are born and entrepreneurship is hereditary: This belief


prevailed for a long time in Indian society. This developed a sense of reluctance, apathy and negative approach towards entrepreneurial career. This was the major hurdle in the entrepreneurship development efforts in India. But consistent training in developing entrepreneurial careers and the stupendous task performed by the entrepreneurship training institutes like EDI, NIESBUD, NISIET has disproved this belief. Instead, now it is believed that people from various strata of society with different backgrounds can be identified, trained, equipped and motivated to opt for entrepreneurial careers. 2. Entrepreneurs are profit hungry and exploit labour: This belief is the outcome of disadvantages of capitalism. In the earlier years of industrialisation in Britain, it was believed that the owners of the productive resources, particularly the capitalists, exploited* labour in order to maximise profit. The capitalists were criticised as profit hungry people* ': This belief spread wherever industrialisation was introduced. But, it is believed now that the entrepreneurs are wealth creators. In the absence of entrepreneurship, converting the raw material into products with utility for consumers would have been difficult, if not impossible. Entrepreneurs, with their distinct qualities have accelerated the process of industrial development. 3. Entrepreneurs are dishonest: Criticism is levelled at entrepreneurs that they are greedy, dishonest and do not believe in ethical values. But this is a wrong perception. Entrepreneurs like all other career people are the products of society. Entrepreneurs equally observe and practice social values. Entrepreneurs like J.R.D Tata believe in self-esteem, dignity of labour and maintain high level of work culture. But the growing materialism and an urge to earn fast money is responsible for the deterioration of the value system. Entrepreneurs are not responsible for this situation.

4. Entrepreneurs are favoured by luck: Even though luck plays a marginal role in
the success, of entrepreneurs, it is not merely luck which brings success to them. Other qualities like hard work, persistence, consistent efforts, intuition and

imagination are necessary to achieve success. Luck is not the only factor that favours an entrepreneur. 5. Only rich people can become entrepereneurs: Rich people possess financial resources. Any business needs investment or finance. Rich people have an easy access to money. It was believed that only they can become entrepreneurs. But, in order to develop entrepreneurship in all the segments of society, the government provides all financial assistance to the potential entrepreneurs through banks and specialised financial institutions. Any person with a viable business proposition can enter into an entrepreneurial career. 6. Entrepreneurship is a monopoly of certain communities: Traditionally, certain regions in India were engaged in industry and business. People belonging to some groups like Marwaries, and Gujaraties, had the necessary qualities required for a successful entrepreneur. Therefore, it was believed that entrepreneurship is a monopoly of certain immunities. But now, it is an accepted fact that irrespective of communities, castes, regions, language, education, sex or economic status, any person can become anentrepreneur. ENTREPRENEURSHIP TRAINING 4 Historical Background ipmeurship training provides a scientific, organised, systematic and comprehensive approach It development of entrepreneurship in the non-conventional communities and people. With the | income inequalities, regional disparities, urban-rural imbalance and a huge backlog of jyjE&ent in educated and uneducated youth, policy makers at the government level felt an ntrepreneurship Management ^urgent need to concentrate on entrepreneurship as a critical input in the process of economic! development. Entrepreneurship training, development of vocational skills and professionalise became the thrust areas in the policy guidelines. Indian experiment in entrepreneuship trail in Gujarat state in 1970 became a pioneering work. The concept of Entrepreneurship Development Programme (EDP) originated in Gujarat wiuv the efforts made by Gujarat Industrial Investment Corporation Ltd. (GIIC). Two innovative scheme^ namely, New Entrepreneurs Scheme (NES) and Technicians Scheme (TS), were introduced by GIIC for the promotion of new entrepreneurs. Loans upto 100% of the project cost were given under these schemes. A large number of technical, non-technical employees, artisans and craftsmen J were given loans. This initiated an upsurge of new entrepreneurs who did not have either thi background of a business family or any financial strength. The success prompted the continuation of the EDP. Ultimately, it resulted into the establishment of the Centre for Entrepreneurship Development (CED) in 1979. Thus, the foundation was laid down for the unprecedented work of entrepreneurship training and development in India. 1.8.2 Entrepreneurship Development Training Programme

Entrepreneurship development, training has uprooted the belief that "entrepreneurs are born and entrepreneurship is hereditary". EDP is a systematic, methodical effort to identify, train, motivate, equip and develop "first generation entrepreneurs". Nonconventional communities and people whc will otherwise not accept entrepreneurship as a way of life are brought into the network of entrepreneurial activity by scientifically designed motivation exercises and pre-designed enterprise launching and enterprise management inputs. The ultimate goal of EDP is to create an j entrepreneurial culture in Indian society. 1.8.3 Objectives of EDP The objectives of EDP are discussed at the macro and micro levels. Macro level objectives of EDP liter To develop entrepreneurial culture in the non - conventional groups. I 2. To accelerate the process of industrial and economic development by increasing the number of entrepreneurs. K.vTo increase the national income. I jl, To reduce the income inequalities. I g. To decentralise the economic power. 6. To utilise the untapped productive resources, natural resources and raw materials. [Ql] Entrepreneurial CHAPTER Personality

OBJECTIVES After reading this chapter you will learn:

1. To understand the process of motivation 2. Differentiation between affiliation, power and achievement motives 3. Distinction between achievement motivation and entrepreneurial motivation 4. Qualities of an entrepreneur
2.1 ACHIEVEMENT MOTIVATION The term motivation and theories of motivation have occupied an important place in the world of entrepreneurship management.

Every individual acts in a distinct manner. Since individuals act differently, the basic question is 'why they do what they do?' The answer to this question lies considerably in the explanation of the term "motivation". The term "motivation" comes from the Latin word "movere" which means to move. Motivation is considered as the base building for human action. The studies of motivation broadly refer to two areas:

1. Motivating self 2. Motivating others


Theories of motivation are based on the fact that behaviour is essentially purposeful and directed towards the attainment of a goal. Thus, the concept of motive refers to the purpose underlying all goal-directed actions. Psychologists have described the term "motivation" as: lip the process of stimulating action sustaining the activity direct influence on orientation, strength, emotional upheaval inner strength, force, strong urges and instincts which guide and direct behaviour Motivation is essentially a process. The main aspects of the process are needs or expectations] behaviour or action, goals and feedback. Inner state of disequilibrium needs expectancies Behaviour or Goal I Incenti ve or Goal

Feedback kFig 2.1 Process of Motivation This model suggests that every individual has a number of needs, desires and expectations! which are described as stimulators. They stimulate, encourage and activate the behaviour or: action. When the need is felt, a state of disequilibrium is experienced by an individual. He make an effort to reduce the disequilibrium. The effort is an action which is initiated witn the expectatioi or in anticipation of reduction of the disequilibrium. The goal or an incentive is the satisfaction o; the need. This further leads to a resultant change and equilibrium is established. This is a feedback received by an individual. Take the example of a person who is feeling thirsty. The thirst causes aJ sense of disequilibrium within him. He is unable to concentrate on anything but he has a strong] inner desire to drink water. He searches for water. Here, thirst caused an action/behaviour. He finds water, and consumes two glasses of water. The action io goal-oriented. Thirst was satisfied. Goal was achieved. The feedback of satisfaction of the need was received and equilibrium W established. Accordingly, he stops taking action. Thus, the model refers to three stages: _ 1. Behaviour is caused (Need arousal)

2. Behaviour is motivated (Motive) 3. Behaviour is goal-oriented (Process)


All motives may not be equally important in the context of the goal. Some actions result out physiological or biological needs as suggested by Maslow in his Needs Hierarchy Theory. Eve individual experiences the physiological needs in varying degrees. These motives and needs a common. But there are some motives and needs which are not commonly found among all individu Very few individuals possess them. These motives are particularly in the form of intellectual needs, self-esteem and self-actualisation needs. David McClelland advocated the Theory of Achievement Motivation. David McClelland and his associates in their "Kakinada" experiment established the fact that a direct increase in the achievement motivation in individuals has a significant economic impact on the community and the main strategy was to increase achievement motivation in entrepreneurs. Achievement motivation is defined as "a desire and effort to accomplish something difficult, to master, manipulate or organise physical objects, human beings or ideas, to do this as rapidly and as independently as possible, to over come obstacles and attain a high standard of excellence". McClelland in his famous book The Achieving Society defines achievement motivation as "a desire to do well, not so much for the sake of social recognition or prestige but to attain an inner feeling of personal accomplishment." Achievement Motivation is represented by Hjgfo, An urge to excel mMi Desire to achieve success in competition with self (previous performances) Desire to achieve success in competition with others (role models) wBR[ Long-term goals and long-term involvement (consistent efforts) Unique accomplishment Bp Perfection and excellence Two other motives identified by McClelland were I Affiliation Motive (N Aff personality) & Power Motive (N Pow personality) stands for intense need. R?. An individual with a high need for Affiliation is concerned with maintaining an effective If-relationship with others. It is a psychological need to be at par with others, to get approval I for behaviour and gain appreciation or praise from others in the given social circle. Individuals with a high power motive have a strong desire to exert dominance, authority | and control over situations and people. They enjoy the roles involving leadership and control. I Individuals with a high need for achievement are innovative and creative trend-setters. I Th#lifctrive hard to achieve high standards of excellence in the performance related

McClelland's Achievement Motivation laid down the foundation to analyse and explain tl entrepreneurial behaviour. But it has always remained a domain for psychologists, behaviours scientists, researchers and academicians. Many studies and researches have been conducted tf explore the motives and inputs to explain and highlight the entrepreneurial behaviour. The studies have focused on the need to supplement other inputs like knowledge, information support and skills to strengthen achievement motivation. But, it is a combination of other factory like affiliation, power, dependency, status, prestige, and self-esteem. In this respect, entreprenei motivation is different from pure achievement motivation. The fact is reiterated that a high level of achievement motive can be an asset to a prospectr entrepreneur, but it may be a drawback in his entrepreneurial career because an entrepreneur depends much upon the external assistance and good teams for his success. High standards of excellence may make you intolerant for others who cannot reach those standards which may inhibit team building. Extreme self-reliance and self-confidence may become a hurdle in the organisational development. Therefore, in developing entrepreneurial motivation, in recent years importance is given to the affiliation motive also. Team spirit, harmonious interpersonal relation resolution of conflicts and clashes, information seeking and support from the external organisations depend largely upon affiliation. This may help the entrepreneur in reducing his initial tensions in his struggle for survival in the competition. Thus, entrepreneurial motivation is a combination of the need for achievement, affiliation and! to a certain extent power too. 2.2 ACHIEVEMENT PLANNING "In the process of achieving the best, it is important to know where you want to go in life. You can reach your goal, your best dreams can come true, you can get where you want to go only if you; know what your goal is. Your expectation must have a clearly defined objective. Many people cannot achieve success because they do not have a precise idea of their goal. You cannot expect the best if you Table 2.1 think aimlessly." Achievement 2.2.1 Strategies for Motivation Development

Planning Motivation development is an important attribute of the EDP exercise.lt is based on the belief that No.FactorAbbreviation1.GoalGa2.Action "people can acquire motives and develop through education and plan towards the influence +3.Goal the newly aroused motives are more likely to goalActfuture thought and action." A Anticipationa. Positive goal training (EMT) provide the The complete exercise of entrepreneurial motivation anticipationGa potential entrepreneurs b. NegativelearninganticipationGa help them to + experimental goal situations which analyse and understand their own Problemsa. Personal -4.Blocks or attitude and behavioural pattern towards entrepreneurship. EMT laboratories Worldly, Environmental theories of B BlocksBpb. are based on psychodynamic personality formation, development and acquisition of of otherThe EMT is BlocksBw5.HelpH6.Feelings motives. conducted by the accredited trainer-motivator who acts as Positive The EMT p people towards your goala. a facilitator. is usually conducted for a period b. a Negative feelingsFeof the EDP. f feelingsFe + of week in the beginning Preferably outside locations in the proximity ofThemeNAch -7.Achievement the nature are selected to enhance the concentration of the participants and to make the process of internalisation uninterrupted. The main focus of EMT is to develop achievement motive and enrich the personality of the participants with entrepreneurial qualities and traits.
2.2.2 How to Bring Desirable Change Through EMT

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certain mechanism is involved in bringing a change in the personality through EMT. The main parts of this mechanism are i. Know yourself stage Knowing the destination stage . Empowerment stage 48 Entrepreneurship Management Know yourself stage In this part, the trainer describes an ideal personality of an achievem oriented person. The qualities, values, beliefs, attitudes and skills of a highly achievement motiva person are described with suitable examples. Similarly, the trainee participants are given orientation to probe into themselves. They create their own image or picture with their preseiij] qualities, values, beliefs, attitudes and skills. Self-analysis is supplemented by the comments am observations of other participants. The discrepancy or the gap between the ideal image and the real present image is identified and understood. It sets the disequilibrium or discontent among tl| participants. The need is felt to reduce the disequilibrium by action. The process of internal chanJ ns. Knowing the destination stage In this part, the facilitator helps the trainee participants to close the gap between the ideal and the present. The aim is not to disturb the trainees by creating discontent but to set the process of motivation. In this stage, alternative ways of thinking and action are described to them. Participants are encouraged to identify new ways, methods, actions and resources to close the gap. Spoon-feeding by the facilitator is to be strictly avoided) Selfrealisation of new alternative techniques sets the development process and accelerates the change. The changed attitude and behavioural pattern is practised in the real life situations. The feedback is analysed. owermenf stage During this stage, the trainee participants are allowed to take their own decisions and formulate their own strategies for experimenting with this newly acquired qualities.. This is to strengthen their belief or conviction that they can change and they have changed. Thus, the EMT aims at bringing desirable changes in the trainee participants. Depending upon the education, experience, aptitude and EMT training needs, there can be marginal changes in the design of EMT. But in a broader perspective, EMT is concerned about the "entry behaviour" and the "exit behaviour" of the participants. Entry Behaviou r where the participant is

Gap / Discount

training need identified

Exit Behavio ur

where the participant ought to be

Fig 2.2 Focus of EMT 2.2.3 Learning Objectives of EMT As discussed earlier, the main objective of EMT is to facilitate the trainee participants to improve and strengthen their achievement motivation and qualities of an entrepreneurial personality. Based upon the needs of the trainee participants, the specific objectives of the EMT can be changed. Such specific objectives can be decided in areas like: achievement motivation risk bearing creativity, innovativeness and imagination helping behaviour goal setting decision-making influencing, convincing and communication leadership problem solving coping tolerance to ambiguity lH personal growth emotional and attitudinal change skill development 2.2.4 Methods to Bring the Desired Change Once the objectives and the contents of the EMT are finalised, the facilitator - trainer has to decide the methods to be applied for bringing a change among the trainee participants. The presentation methods and techniques by the facilitator should be simple enough so that the internalisation and learning of the achievement motive and entrepreneurial qualities becomes easy and natural. I In Chapter 1, Table 1.2 describes the exercises and games for the EMT with their specific objectives. kfn addition to these exercises and games, the facilitator - trainer can develop more training aferial and methods with his innovative abilities. He can choose from the following available Video cassettes Stories T.V. demonstration Slides T.groups Demonstrations Recording Role play Lectures

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Experience sharing Exhibits Field visits Case - methods Non-verbal demonstrations, etc. The National Institute for Entrepreneurship and Small Business Development (NIESB1 New Delhi, has evolved a NIESBUD Model of EMT in 1985 and a Trainer's Manual on developing entrepreneurial motivation. 2.3
QUALITIES OF AN ENTREPRENEUR

Entrepreneurial personality is distinct from the personality of a common man. An entrepreneur possesses special qualities, values, skills, attitudes, aptitudes, capacities, capabilities and motivation. By learning these skills and inculcating the qualities, it is possible to transform the common man's personality into an entrepreneurial personality. Systematic motivation and training accelerates the process of transformation. A trainer-motivator plays an important role in equipping j people to learn these qualities and skills. 2.3.1 Confidence An entrepreneur is a confident person. Confidence develops an edge over the competitors. Confidei is always impressive and wins others. Entrepreneurial personality demands a high level of confidei If you feel nervous, defeated, humiliated, introverted or unable to make a point, then, certainly you need to develop confidence. Confident personality projects: if Confident Appearance III Confident Body Language Confident Communication Confident Work Style I I Confident Relationships Your appearance shows your confidence level. A composed and clean appearance, well-tailored dress, hairstyle, light make-up, and type of shoes worn adds to your professional appearance. You should always remember to have your wristwatch, pen, scribbling pad, handkerchief, identity card, enough money, cheque book, credit card, ATM card, etc. with you. Your body language gives instant signal of your confidence level. Body language includes your posture, sitting position, way of walking, way of standing, movements of hands and fingers, facial expressions and gestures. Remember, sometimes words may deceive but body language cannot. It is necessary to act confident. A smiling face is a sign of a confident personality. When you meet people look into their eyes. Eye to eye contact establishes confidence. Listen patiently to others. Remember, even others have to make a point. Confident people do not interrupt others when they are talking. How effectively you can communicate with others also shows your level of confidence. Before any meeting, interviews, discussion sessions or a talk, prepare yourself thoroughly for the event. In the beginning, it is always desirable to write down the points (even speeches) which you want to say in your meeting. Collect

references, statistical data, addresses, quotations, past experiences, events, slides, pictures, articles, information about the subject of the meeting and the people participating in the discussion and prepare for the meeting. You will be able to impress others and you will emerge a winner. Your work style should represent confidence. Particularly, preparation, participation, presentation and professionalism are the main attributes of a confident work. You should be able to develop confident relationships. Emotional outbursts, subjective attitude, false concepts of insults and humiliation, particularly jealousy and a crab mentality are the enemies which destroy relationships. Confident personality projects positive attitude. 2.3.2 -Clear Perception Perception plays a very important role in our life. Perception has 'a make or a break' capacity. The making is associated with "Positive Perception". The breaking is associated with "Negative

trepreneurship Management Perception is to understand to interpret to draw inferences and to form an opinion. Usually, we are guided by our 'set perceptions' which are comprised of the knowledge, < rooted impressions and pieces of information which we have acquired over the years. It is accepa without analysis. The facts are not examined and statements are not questioned. For exampl when you see two lines drawn as:

Fig 2.3 What do you perceive? "It is a plus sign". When the same two lines are drawn as:

Fig 2.4 What do you perceive? "It is a multiplication sign." In this process, you have accepted the knowledge without examination. You have learnt i This is the information passed on from one generation to other. This is a set perception. An entrepreneur cannot achieve a desired goal with a set perception. He has to develop his perceptions about people (consumers), events, objects, relationships, etc.

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There are a number of products and services which are the outcome of the strong develope perceptions of the entrepreneurs. For example, emergency lamps, mobile phones, transistor radiosj audio-visual cassettes and CDs, computers, etc. are the perceptions of the changing technology .Iff such cases, the needs of the different customer groups are perceived by the entrepreneurs arid] products are designed with the new techniques and technologies. Perceptions have helped thi entrepreneurs to offer convenience to the buyers. I simple example is the change brought in the packaging of the coconut oil. The form< cylinder type bottles with small nozzle have been replaced by jar type bottles with a wide openi ifFhe difficulty of frozen oil during the winter season was perceived and promptly a change in fl was introduced. "Maggie Noodles" is another successful product which has brought revolution in the convenience food industry. an think of new products, new raw materials, new designs, new packaging nd applications with a developed perception. Developing a perception means to e tails, to analyse all relevant facts and to draw impartial inferences. A developed tive impartial Positive Prompt Perception involves a mental analysis. But often it is observed that perception is guided by emotions. For an entrepreneur, any emotional decision may prove harmful. Perception helps the entrepreneur in decision - making, goal-setting, team-building and conflict management. Perception leads to creativity, imagination and innovativeness and gives a competitive edge to the entrepreneur. JP When you want to transform your personality into an entrepreneurial personality, you will have to develop your perception. You have to collect more details, go for an indepth scrutiny of objectives and make impartial, positive decisions. 2.3.3 Risk Bearing Ability In a business, no other factor of production, except the entrepreneur, bears risk. When the behavioral pattern of a large number of people is studied, some people are identified as zero risk-takers. They do not take any risk and are afraid of taking challenges. They select easily attainable goals. Some people are hundred per cent risk-takers. They are excited by the challenges and risks involved. They are neither bothered about the methods nor about the attainment of the goals. They are charged only by the risk. But an entrepreneur is not a zero risk-taker. He is not interested in |an activity or work which anybody can do easily. He is not hundred per cent risk-taker also. He cannot afford the luxury of not reaching the goals because his investment is at stake, An entrepreneur is careful and cautious while selecting his goals. He will examine his strengths and weaknesses. He will assess the available resources, and will decide the strategy. He will consider alternative courses of action and will identify people and institutions for support. Thus, he WILL prepare the background before he takes a decision

about the goals. He will take a moderate or calculated risk. By attaining the goal, he desires excitement, satisfaction, thrill and happiness. When you wish to opt for an entrepreneurial career, you should be ready to accept moderate risks in the business. Rather, the very decision to pursue an entrepreneurial career involves risk. Further challenges and risks are involved in identification of an opportunity and product selection,

Give credit to the team members for their success. If there is a failure, do not criticise and blame a particular member in front of others. Call the person separately and discuss the factors responsible for the failure. Anticipate obstacles in the completion of tasks and frame a strategy to 13. 14.overcome or surpass 15, them. Monitor the progress. Arrange for the feedback. According to the feedback, decide the goal again. For a Common man IIP You WE For an Entrepreneur WE You

An entrepreneur always talks in terms of "WE". 2.3.5 Time Consciousness and Time Planning Time planning is achievement planning. An entrepreneur is a time conscious person. Time is a valuable resource. How do you experience time and how do you use it depends upon what do you expect from it. It is important to remember that time cannot be created nor destroyed but time has to be managed effectively. Time is an important resource in a competitive environment. Time planning is achievement planning. For an entrepreneur goals or targets are always with reference to time. Time scheduling, time monitoring and time management is an important entrepreneurial skill. In order to equip yourself to utilise your time effectively and Fig 2.5 Time Planning productively, begin with a week's worth of planning. Once successful, you can plan for longer time periods like a month or an year. While learning the skills of time planning, the following preparation is useful. H* Make a list of your activities. Objectivity is necessary for time planning. You cannot plan for a week, if you do not know what do you want to achieve if* that week. $jB )Q Entrepreneurship Management ^Understand the purpose of time planning. Meetings, paperwork, activities, tours, perl work, visits, telephone calls, bank work, developing contacts and relationships, etc. includ daily, routine activities should be listed down. H Routine, daily activities of a recurring nature are to be separated. Calculate the approximate time required to complete these activities. Fix the time slot for the rou activities.

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For the remaining activities priorities are given. A stipulated time to complete themi considered. Accordingly, the weekly plan of activities to be completed in a given time fram is considered. Let us remember, time planning is not hundred per cent rigid. Time planning is a tool fl enhance personal efficiency and achievement of goals. Rigidity may bring tensions. Yo^ objectives, activities and time planning changes due to completely unknown circumstance; Do not get tensed if you have to adjust your time plan. You have to anticipate interrupt! All interruptions may not cause worry. Some are positive interruptions. Accept themi Once you prepare the time plan for each activity, implement it with determinate Consistency is a virtue. If you are keen to achieve your goals, time planning has to successfully implemented. At the end of each day, check whether you have completed t day's schedule. If some of the activities or work is not completed, it is an addition to I next day's list. If you continuously add a backlog, it may ruin the entire time planning Successful time planning depends on how quickly you realise and overcome your tin wasters. Find out the activities, people, habits, relationships and addictions which result in wasting your time. Some of the common time wasters are Lack of objectives Lack of understanding priorities Inability to plan Inability to say "No" Unscheduled visitors Unplanned meetings and discussions without bearing any results Ineffective delegation of work Lack of necessary resources Lazy and inactive mood Indecisiveness

Cluttered and unorganised desk B^P^Lttempting too much at once SIP*1' Addictions - smoking, drinks, drugs These are some examples of time wasters. Find out your time wasters. Make a plan to overcome at least two time wasters every week. Signs of bad time management-Concentrating upon least important activities and least important details Unending work Poor preparation Making errors too frequently Feeling tired all the time Always feeling harassed Continuous backlog of work Working sequentially instead of strategically Inability to think about one's job Inability to achieve goals Inability to plan the future course of action 1 Inability to manage any job effectively | Becomes a "crisis - manager" Rarely gets "Merit" promotions I Taking office work to home H Always working late, during lunch-break also Always complains, "I would like to do it, but I don't have time." As efforts are necessary to find out time wasters, you have to develop an insight for identifying gi|j&r time savers. Find the time savers like waking up an hour early, clubbing some activities, p|efegation of work, identifying sources of help and right people for right work. ^On-time Performance" is a key word for success. 2.3.6 Interpersonal Relations An entrepreneur has to make special efforts for developing harmonious and cordial relationships with others. The success of an entrepreneurial venture depends upon effective team-building which needs interpersonal relations competencies. While developing interpersonal relations you must know that there are two parties or people involved in the relationship. One person is yourself. Let us realize that our own personality represents values, attitudes, aptitudes, beliefs, emotional and psychological patterns, urges i instincts, qualities, needs and expectations from others. Similarly, the other person involved you also represents the combination of all these. While developing harmonious relationships i others, you must develop an approach to know his/her personality type, your expectations frj him/her, his/her expectations from you and the ultimate goal you want to achieve with tl relationship. Let us first know how personality is classified. Classification with personality traits

1. Inhibitory Personality

2. Excitatory Personality
Some people have certain in-built inhibitions, blocks and difficulties in their personality. Thei inhibitions are mainly developed by themselves. They may be related to their appearance, educatij social status, inferiority complexes, or family circumstances. But these inhibitions result in al| level of self-efficiency. They are unaware of their rl| feelings, wants, expectations and desires a always give excuses for every thing they could not do. They carry the feeling that the entire wo; is doing injustice to them. Thus, they have a low self-image. Some people are excitatory. They are always free and fearless. They are open-minded and hail a clear thinking. They can take decisions and possess strong convictions. They are completed aware of their feelings, wants, needs, expectations and are willing to take responsibilities. Ti|| are committed to their work and have a very high self-image. Classification with nature types 1 1. Submissive 2. Assertive 3. Aggressive Kfrople with a submissive nature are self-protective. They will never argue with anybody. T not take any decision and are reluctant to take any risks. They will wait for things to hap patiently wait for opportunities. They immediately submit themselves in any situation. assertive person is positive, assured, open, communicative, responsive and responsible^ dear thoughts, he is not afraid to reveal them. He has a high self-image and self-reapi III orientation and does not wait for opportunities. Often, he creates GppGrtu^||el things happen.

Entrepreneurial Personality Q 108

^^^^rson represents an autocratic or dictatorial personality. He is dominating, pm and imposes upon others. Even in relationships, an aggressive person has one-relationships. Sometimes, he may not give importance even to values or the social Spa does not create opportunities for himself and also does not feel bad to snatch the opportunities from others. Classification with behavioural motives |g|f| Affiliation Motive (N Aff) 2. Power Motive (N Pow) 3. Achievement Motive (N Ach) Generally, it is observed that it is easy to handle people with a high need for affiliation. As seen earlier, affiliation means the desire for approval, appreciation and to be liked by others. An affiliation motivated person has a concern to establish, maintain and sustain effective relationships with others. People with a high need for power express domination, possessiveness and authority. They have an intense desire to control or influence an on-going situation. Achievement motivated people have success orientation, inner feelings of personal accomplishment, desire to excel and a high self-esteem. They have a strong desire to achieve a certain standard of excellence in performance related situations. on with attitudes People are usually classified as possessing a Positive Personality or a Negative Personality with respect to their attitude. Glass is halfempty (Negativ Fig 2.6 Attitude tilass is completely filled up, half-filled with water and half-filled with air: Strongly positive Some people are classified as negative personalities because they always look at the negative 31, drawbacks, short-comings, difficulties, worries and excuses as to why things will not Some people are classified as positive personalities because they always consider the brighJj side. They concentrate on positive aspects, merits, solutions, and ways and means which will hel| things to happen favourably. People are also classified as genuine personalities and superficial personalities Genua type of personalities are positive, approachable, assertive, assured, committed, communicativ|l responsive and rich in knowledge, expertise and experience. They do not exhibit these qualitiesl)| just talking about themselves but people know about it from their work and relationship. Superficial type of people have no real ability but are showy.

Entrepreneurial Personality Q 109

When you want to develop a relationship with others, you have to develop an art of knowing the personality types. Let us remember that every person plays a specific role in the entrepreneurs venture. You should clearly understand the role of the person, his place and importance in your venture, scope and limitations of that role and important amongst all is the expectations from that role. Once you understand the role pattern, dealing with that person becomes comparatively easy and simple. Strokes you give to them: For cordial, smooth and professional relationships, you must give positive strokes to other, people. Types of strokes:

5. Unconditional strokes
make you feel encouraged, happy make you feel sad, depressed make you feel ignored, neglected planned, expected, predictable unpredictable, spontaneous

1. Positive strokes 2. Negative strokes 3. Zero strokes 4. Conditional


strokes

While developing interpersonal relations, positive strokes create a positive and constructiv impact on others. Positive strokes give "O.K." feelings to others. It is the way of understanding, appreciating,! approving and rewarding the other person. Positive strokes result in attachments, strong bond! and trusted relationships. Positive strokes can be given by words of appreciation like "good job", "excellent", "well done", "keep it up", "very well performance" etc. Even statements like "only j can do the work so perfectly", "it is difficult to work without you", "I am so much dependent upQ] you for this work", "You have special tactics to achieve such a performance", "Grateful to you", eti lso create a positive impact on others. Some gestures like a pat on the back, a liandshake,,| aaihetic look or glance, a smile, a salute, holding hands, putting hands on the shoulders while ng etc. are positive strokes which strengthen relations. The examples of positive strokes are given to develop your attitude. You can plan many more positive strokes to win both situations and Conflict, dissatisfaction, enemity and hatred are the results of negative strokes. When relationships end in fear, hatred and conflicts they cause irrational behaviour and increasing itation, low confidence and low work efficiency, absenteeism, frustration, inability to concentrate and think clearly, physical ailments like headaches, blood pressure, acidity and depression and finally withdrawal from relationships which are proving difficult. Negative strokes are given by criticism, sarcastic remarks, backbiting, gossiping, put downs, and abusing, talking about only the weaknesses and defects, using words like "Stupid", "Mad", and "Chamcha", and "It is not my work", "I cannot help you" type attitude, etc. Negative words hurt people. Negative gestures like a constant stare, a push, a kick, a punch, a pull, a slap, a

Entrepreneurial Personality Q 110

bite, a pinch and threatening gestures also damage relationships. Positive strokes encourage the people. Negative strokes discourage the people. In order to develop strong bonds with the people to tune up with them for "Win Win Situation" Care for the selfesteem of other people Concentrate on their strengths Be considerate for their weaknesses. If the weaknesses do not affect the work adversely, neglect them. If they do affect, help the other person to overcome them Appreciate them in front of others. Blame an individual when he/she is alone. Let the person know that the blame is not for fault finding but for improving work efficiency Do not overreact Do not complain, nag or give long lectures Make a list of the people who encourage you and give you positive strokes Make a list of the people who are important for you for your accomplishments *Remember that only strong relationships build strong teams.* 2.3.7 Communication Skills Communication is a distinctive skill of an entrepreneur. It is treated as the "X" factor in the managerial skills. Effective communication is necessary for achieving positive relationships. m |- Communication is classified in the following forms: Communication 1 r Verbal 1 r Written _JL_ Spo ken I Non-Verbal

Br ------1 Mass Personal Mass Personal Fig J?. 7 Forms of Communication s an entrepreneur, when you have to develop communication skills, you have to concentrate on personal, spoken and non-verbal forms of communication. Verbal communication is the communication through words. Non-Verbal communication 1 the communication with gestures, expressions or body language. The following are the important aspects of communication:

1. Speechlanguage, words, voice, tone, accent, speed 2. Facial expressions and gestures 3. Body language 4. Positive strokes 5. Confidence 6. Attentiveness

Entrepreneurial Personality Q 111

7. Praise for others


Communication is expressing ideas, giving instructions, sharing thoughts, imparting knowledge and exchanging information. The goal of communication is to create and enhance understanding. While communicating, the first step is to know which language is comfortably followed by th'ej other person. In the Indian environment, usually you should be able to speak at least your regional language (Marathi, Kannada, Tamil, Telugu, Tulu, Gujarathi, Bengali, etc.). You should be ablsj 'Communicate fluently in Hindi, the national language. If you are well conversant with Englisjj Pfljcan communicate in English, it gives you an additional strength. Words play an important role in communication because they are a medium of communicati^ G|gate an everlasting impact on the listener. Words reflect your personality. Words give strokeJ I For successful team-building, maintaining interpersonal relationship and to creatl ids of belongingness, you should be very selective of the words used in communication and tone are effective instruments of communication. You must have observed that I professionals and entrepreneurs make special efforts to groom their voice. Tone is the 1 of the voice. Tone communicates your affiliation with the other person. It communicates 'feelings. It is essential to cultivate a proper tone culture. Accent make one's speech attractive^ .thout accent your speech becomes monotonous. Accent is the ups and downs of the words or the stress on words. It indicates the importance of the words and the meanings you communicate. You should be able to understand the grasping power of the other person and accordingly adjust the speed of your speech. Facial expressions, gestures and body language constitute the non-verbal communication. Often you communicate more in a non-verbal manner than a verbal one. Facial expressions, gestures and body language have occupied a significant place in nonverbal communication. Movements, postures, use of hands, legs, fingers, eyebrows, sitting position, eye movements, hand shake, position of neck, way of standing and walking represent body language. It is always said that "Words may He but body seldom does". Communicating with body language is an art. Confidence and attentiveness are other attributes of good communication. As ninety per cent of people have affiliation motivation, praising others constitutes another important attribute of an effective communication. It gives a positive stroke and is essential for promoting team feelings. But it should be done sparingly and at the appropriate time. 2.3.8 Positive Attitude Attitude is one's way of thinking and feeling, how you see people and events and how you interpret them. It is your mental make-up. An entrepreneur comes across turbulent situations. How he responds in such situations makes him a winner or a loser. Positive attitude makes him win.

Entrepreneurial Personality Q 112

| Positive Attitude implies Positive Believing Positive Thinking Positive Action Positive Results

itrepreneurship Management It is to create an "I'm O.K.You're O.K." situation. Development of Positive Attitude: 1

1. 2. 3. 4. 5. 6. 7. 8.

Concentrate on your strengths Sharpen your skills, talents, resources Collect and rehearse happy experiences in your life Identify the strengths of others Know their happy experiences Value and enjoy your work Dream a little, plan a lot, work hard Develop the habit of giving positive strokes to others with words, gestures and action

9. Have positive interactions with others 10. Remember, any failure is not the end of the world. You can start again
2.3.9 Leadership An entrepreneur is the leader of his group of workers, managers, suppliers, financiers, advertiser, marketing personnel, vendors, government personnel, consultants and consumers. He is the 1 representative of his entrepreneurial venture. As a leader entrepreneur possesses the qualities like vision, dynamism,straight forwardness transparency, inspiration, achievement motivation, discipline, trustworthiness, futurist perspectives, convincing power, communicative abilities, sense of responsibility, perseveranc persistence and hard work. He is a role model in himself. As a leader, he has to take decisions, bear risks, solve problems, decide goals, set tasks, plan for implementation and build a strong team. The overall function of leadership is to lead effectively and efficiently in different ways wit different kinds of groups under a variety of situations. The general functions of leadership would include:

1. Helping individuals to become cohesive and co-operative groups 2. Helping the group:
to define its purpose to interpret these purposes into practical goals Ik to clarify the assignment of responsibilities Entrepreneurial Personality U 65 guide the processes of planning to open up the potentialities of available resources to keep operations consistent with purposes and goals to maintain action and change continuously to evaluate efforts and results Table 2.2 Classification of Leaders

Sl.No. 1 2 3 4 5 6 7 8

Leadership Style Autocratic Democratic Laissez - Faire Bureaucratic Paternalistic Charismatic Missionary Neurocratic

Characteristics Dictator, taskmaster Participative, consultative Works by group consensus Red tapism, formalities oriented Family atmosphere Mystical, magical, attractive Good fellowship, warm atmosphere Eccentric, emotional, task oriented.

2.3.10 Innovativeness, Creativity, and Imagination Innovativeness, creativity and imagination are considered as the basic ingredients of an entrepreneurial personality. In economic theory, innovation is treated as an origin of profit. Innovation is defined as the commercial application of invention. Innovation is the introduction of a new concept, a new way of doing things or a new approach. With reference to enterprise, innovation can be in terms of new technology, new technique of production, new sources and types of raw material, novel machinery, new labour saving devices, new packaging techniques and packaging materials, new way of advertising, product development, new application of the existing product and even developing a new market. b.The history of entrepreneurial development itself is a reflection of the innovativeness of the pTepreneurs. As a management principle, it is always said that, "Do something with the help of J you can surpass and surprise the competitor but do not get surpassed and surprised by the rInnovation and innovativeness surpasses and surprises the competitor .An innovative eur becomes a market leader. His market share and profitability increases till the

115 U Entrepreneurship Management

competitors catch that innovation and imitate it by bringing out "me-too" products in the m Until then, the entrepreneur enjoys a "surplus profit". Once the innovation becomes co surplus profit and market leadership disappears. The innovative entrepreneur has to hit the with another innovation to retain his market leadership and high profit margin. Creativity is another significant attribute of an entrepreneurial personality. It is a quality which need not be acquired because everyone possesses it. But often it is in a dormant state, has to train himself to reveal one's creative powers. Sometimes you take painstaking effort arrive at a solution to some problem. But your efforts are in vain. Then suddenly you arrive at solution effortlessly. This is due to your creativity. Psychologists divide the "Mind" into two sections. In recent literature, a third section has introduced. The conventional two sections are "Conscious Mind" and "Subconscious Mind", recent additon is the section below the subconscious mind. It is described as the "Depth Mi When you are struggling hard to achieve a solution, you have put your conscious mind at w Unable to get the solution quickly, your attention is diverted to something else. At that time,! first thought and the struggle to get the solution goes into the subconscious mind where the woj on the possible solution still goes on but without your knowledge. And suddenly, when actual3 are not thinking about it, the solution flashes. The truth is that all of us constantly absj information through our senses which is stored in the mind. When an access is established to tl piece of information, the mind offers a solution. Accessing the information can be described as'l "incubation period". The duration of incubation depends upon your knowledge, experie imagination and motivational level. Another interesting piece of research on the brain in 1960's and 1970's advocated that'll brain consists of two parts, the right and left hemisphere. The left brain is associated wil intelligence, logical, analytical work and a memory centre, whereas the right brain is associat| with creativity, intuition, spontaneity and memory for people and experiences. Maximum us^ the right brain makes a person more creative. 2.3.11 Goal-Setting A goal is a base building block of entrepreneurial career. It is described in many ways. "Goal is| dream with a deadline" "Goal is how you see yourself." "Goal is what you want to be and how you want to get there". "Goal is an end towards which you direct some specific efforts". Often, the goal is confused with an objective or a mission. Objectives are the tactics plaiii and steps to be taken to achieve goals. Goals are specific, measurable, accomplishments; achieved in a given time frame. Missions are the statements of general intent.

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v Mission

Objecti

Goal Fig 2.8 Goal-Setting Attributes of a goal: Goal is identifiable 1 Goal is clear and concrete Goal is measurable Goal is attainable Goal is always with reference to time ILkf Goal is sometimes related with cost factor Goal is action-oriented Goal is realistic Goal is an accomplishment Process of goal-setting Step 1 Identify opportunities for the goal. In personal life as well as in career development you desire to achieve many things. But goal-setting is not a dream or wishful thinking. A goal is a desired level of achievement. Goals develop put of ideas, opportunities, strengths, needs, problems and desires. These are the sparks, germs or the seeds. As a first step, write down all such sparks. Initially, it is not necessary to provide all the details. The purpose of writing down all the opportunities is to analyse their potential of enhancing the performance level. It is to specifically decide where you want to be after a specific time with .specific efforts. Uep 2 Write down goal statements. Lgoal statement gives direction to efforts and activities. It identifies the expected outcome after a Ppulated time. It indicates the people and resources involved in the process of goal attainment. Wbate Writing the goal statement, you must remember the above attributes of a goal. rocess of development of goal involves dividing the goal into sub-goals. A time limit or del * each sub-goal should be mentioned. The achievement of a goal is a continuous process! interlinked activities. Goals are categorised as: Essential goals (Survival goals) Hp* Problem-solving goals (Safety goals) Innovative goals (Performance goals)

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Once the sub-goals are determined, fix the time framework. Day-to-day achievement Shortterm goals Long-term goals Final accomplishment: It is necessary to provide regular check points for your goals. While achieving the goals, you may come across some problems, difficulties or blocks,] advisable to anticipate such problems. Some problems or blocks can be at the personal level. The] are internal problems related to you alone. Some are worldly or environmental problems wf are external to you and outside your control. Once you foresee the problems, you can develop strategy to overcome them. Step 4: Preparation of the action plan. An action plan is the strategy designed to achieve goals within a specified time with desired standard of performance. It is a step-by-step implementation of the predesigned activities to materialise! expected goals. I Goals cannot be achieved in isolation. It is teamwork. You have to develop a support systi Find the people who can help you to achieve your goals. In the action plan, other people ' constitute your team also play an important role. They should be aware of the goals and the ac plan. You should be able to develop a sense of participation and pride among your team memh lichen you fall short of your goals: Feed backfigure out what went wrong? EL-. Whether the goals were unrealistic? w| pVhether the resources were inadequate?

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Whether the blocks were not anticipated? Whether the efforts were less? Whether the time was too short/too long? Develop a suitable support system Decide to go back on your goal. Refix the goal and make a fresh beginning 4. Remember, an entrepreneur survives in adverse situations. Do not think it is the end of the world. Start again by revising your goal 2.4 ACTION PLAN TO TRANSFORM YOUR PERSONALITY Now, you are all set to take on the personality of an entrepreneur. Let us again take a look at the qualities of an achievement-oriented personan entrepreneur. Qualities of an entrepreneur: 1. 2. 3. 4. 5. 6. 7. 8. 9. 1 0. 1 1. 1 2. 1 3. 1 4. 1 5. Confident Calculated risk bearing Communicative Co-operative Committed Goal-oriented Punctual Innovative, creative, imaginative Leadership Perceptive Responsible Survives in adverse situations Problem solving attitude Harmonious interpersonal relations Positive attitude ||Now, you should be able to identify your own qualities and drawbacks. A simple technique jjplied to develop an insight is the "SWOT" analysis. fe S Strengths, qualities, skills, knowledge, expertise WWeaknesses, drawbacks

itrepreneurship Management OOpportunities, new openings T Threats, problems, difficulties. With the help of the "SWOT":

1. List all your strengths, plus points, qualities, attitude, skills, values and beliefs 2. Prepare another list of your weaknesses, drawbacks, shortcomings and stumbling of 3. Decide the goal 4. With respect to the goal, evaluate the strengths and weaknesses 5. Strengthen the strengths 6. Select two weaknesses and prepare an action plan to overcome the weaknesses and
areas which may become the barriers in the achievement of your goal

7. Decide the time span for the elimination of the weaknesses 8. Follow the same method to overcome the remaining weaknesses 9. Remember, your ultimate goal is to become a successful entrepreneur.
SUMMARY Entrepreneurship development training programme is designed to develop the entrepreneurial abilities among the target group of trainees. It is the process of initiating and imbibing the entrepreneurial motivation and equiping the participants to inculcate the qualities, attitudl aptitude, values, belief and abilities in the target group. Various theories are proposed to explain I the motivation. Even though, achievement motivation is largely identified as the motivational j force behind the behaviour of the entrepreneurs, affiliation and power motivation are also recognised* as necessary motivations as the entrepreneurial motives. The stages involved in the entrepreneurial motivation training are : know yourself stage knowing the destination stage empowerment stage Important qualities are to be inculted in the potential entrepreneurs in order to equip tfc, to face the real life challenges. Confidence, clear perception, calculated risk-bearing, team bmldin Hne consciousness and time planning, interpersonal relations, communication skills, perce I leadership development, innovativeness, creativity, imagination and goal settil ||flitified a the important entrepreneurial qualities. ship Management p of some communities and restricted to certain regions prevailed for a long time, is evident that entrepreneurship does not belong to a particular region, community, ucation. age, income level or a specific stratum of community.

In India, even today, certain regions and States are industrially and economically backward and among the regions certain communities are economically backward. It does not mean that they do not pos ses entrepreneurial traits. But socio-economic surveys of these regions an<| communities have proved that their entrepreneurial skills are dormant. If the proper conducive atmosphere is provided, even these regions and communities would respond favourably. Motivational input and the infrastructure of the support system occupied a significant position in equipping "the first generation entrepreneurs." In this context, various "target groups" are identified for concentrating the efforts of entrepreneurial development. One such important target group is "women". To bring them into the mainstream of entrepreneurship, the government fqrmulates special schemes and policies. We will discuss the growth of women entrepreneurship in India latter in this chapter. Now, target group is widened due to the ever-increasing backlog of unemployment in India. Particularly, the increasing rate of unemployment among the educated youth with technical qualifications poses as a serious threat. As the employment market is saturated in India new employment opportunities are not generated. As a result people have become frustrated hunting for jobs. Unable to seek a job, they turn towards self-employment and entrepreneurship. But this is a negative attitude. Entrepreneurship Development Training Programme (EDP) focuses on motivating the people to develop a positive attitude towards adopting entrepreneurship as a better career option. By entrepreneurship development, we want to fasten the speed of converting the Indian culture into an entrepreneurial culture. I Liberalisation, globalisation and open economy concepts have posed a challenge for the small-scale industry. Is this true? The small-scale industry in India is set to play a distinct role in the pbojitry's economic development. Even though, industrial climate has turned to be fiercely^ I the strength of being small is wonderful. The advocacy in favour of the small-scale J IJAECTOR which is still strong and valid is based on the grounds of: BfeI Promotion of economic well-being of masses LJ2. Decentralisation of economic power I. Defuaion of industrial growth Hp* - Removal of regional disparities I Creation of large*8cale employment

2. It proposed to set up in each district, a government agency, District

Industries Centre (DIC), as a focal point for the development of the smallscale industries. The DIC would provide guidance, support and services required by small entrepreneurs. 3. A separate wing of Industrial Development Bank of India (IDBI) would exclusively deal with the financial assistance programs for the small entrepreneurs, particularly the first generation entrepreneurs.

to be planned for small-scale sectors. Thus, the 1977 Industrial Policy Resolution provided a solid foundation for the small-scale dustry in India. The successive industrial policies declared in 1980 and 1990 reconfirmed the le of small-scale industries in achieving a speedy industrialisation of the country. .5.4 Instrumental Role of Industrial Policy s discussed earlier, Industrial Policy resolutions are instrumental in bringing a change in the utlook, policy guidelines and treatment to the small-scale industries. Industrial polices defined the investment limits for the small-scale, tiny, ancillary and cottage and village industries providing larger participation of people in the industrial development. Reservation of products exclusively in the small-scale sector Tax differentiation in favour of small entrepreneurs like excise, sales tax etc. Reservation of items (nearly 404) exclusively to be purchased from small entrepreneurs by government agency, "Director General of Supplies and Disposal" and the stores purchase programme Another list of nearly 12 items for exclusive purchase by Director General of Supplies and Disposal to be purchased from the small entrepreneurs. This purchase is to be done upto p5 percent of the requirement of the DG. Price reference scheme Subsidies a&xclusive purchase from the handloom and the handicrafts sector Supply of inputs at easy terms, finance, raw materials, market, machinery, and land Billing 1 assistance through technical consultancy organisations

4. Khadi and village industries were to be strengthened. 5. Special programmes for technological improvement and upgradation were

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54 Entrepreneurship Management facing the competition, marketing and advertisement, investment, feedback from the customed etc. If you are prepared to take a moderate risk, you can go in for an entrepreneurial career. An entrepreneur takes not only a risk but shoulders the responsibility of the outcome oH decisions. He takes the credit for his success and also is prepared to face the failures. If success! he strengthens himself to achieve a higher degree of success. If he fails, he examines the causeaf his failure and tries hard to overcome the problem. He does not leave anything to chance, fated any situation beyond his control. Therefore, he takes a moderate and calculated risk. 2.3.4 Team-building Capacity Team-building capacity is a key for entrepreneurial success. An entrepreneur requires a variety services and help from a large number of people and institutions including suppliers of rai materials, machinery, workers, utilities like electricity, fuel, water supply, transportation, financii organisations, government personnel, marketing people, advertisers and finally the consumer! All these people and institutions participating directly or indirectly in different capacities injfl entrepreneurial venture facilitate the entrepreneur to achieve his ultimate goal, "Success if Business". Therefore, an entrepreneur has to exhibit an excellent team-building ability. Developing the team spirit and team-building ability is a difficult but not an impossible task. A systematici of certain techniques will equip you with a team-building ability Easy way of team-building

1. 2. 3. 4.

Adopt a positive attitude that you are an excellent team-builder.

Know the importance, strengths and weaknesses of each member of the team. Arrange get-togethers, meetings so that all the members will know each other. Define the goal to be achieved by the team. Without a goal a team cannot function. 5. Explain the team goal to all the members of the team. Make them feel that it is their i too, and not simply your goal. Remember, in a team, there are no individual goals but or team goals.

6. Decide the time frame for the achievement of the goal. 7. Assign/Define the role, specific duties and responsibilities of each member of
the team. 8. Mobilise and allocate the resources including time to each member for completion of the duty/task.

9. Give incentives or rewards for the successful completion of the duty/task. Every
time fi need not give monetary incentives. Even timely appreciation is effective and brings positiv results.