Subject Code:U16BA5C8

GOVERNMENT ARTS COLLEGE (AUTONOMOUS), KARUR-05

B.B.A., - V SEMESTER – CORE COURSE -VIII

(For the candidates admitted from the year 2016-17 onwards)

ENTREPRENEURIAL DEVELOPMENT

UNIT- I Concept of Entrepreneurship – Entrepreneur and Entrepreneurship:Meaning – Definition – Characteristics - Functions of Entrepreneurs –Classifications of Entrepreneurs – Factors influencing Entrepreneur.

UNIT- II Institutional Finance to Entrepreneurs – Commercial Banks – DIC –SIDOS – SISIS – Khadi and Village Industries Commission – All India financialInstitutions – IDBI - IFCI – UTI – LIC –GIC – SFCS – SIDBI – IndustrialInvestment Bank of India.

UNIT-III Business Idea Generation Techniques – Identification of BusinessOpportunities – Market Feasibility.

UNIT-IV Financial and Economic Feasibility – Technical and LocationalFeasibility – Manager and Legal Feasibilities – Project Appraisal – Project Report.

UNIT-V Entrepreneurial Development Programme – Role of Entrepreneur inEconomic Development – Small Entrepreneurs – Tiny and Cottage entrepreneurs.

UNIT- I Concept of Entrepreneurship – Entrepreneur and Entrepreneurship: Meaning – Definition –Characteristics - Functions of Entrepreneurs – Classifications of Entrepreneurs – Factors influencingEntrepreneur.

CONCEPT OF ENTREPRENEURSHIP:

The word ‗Entrepreneur‘ is derived from the French word ‗Entrepreneur‘ meaning to undertake.In fact, in the 16th century, the Frenchmen who undertook military expeditions were referred to as‗Entrepreneur‘. Later on, in the 18th century, this term got associated with persons who started their ownenterprises. Richard Cantillon, an Irish man living in France, was economist who introduced the term‗entrepreneur‘ referring to the risk-taking of establishing a new venture. An enterprise is created by anentrepreneur. The process of creation is called ―entrepreneurship‖.

ENTREPRENEURSHIP:

MEANING: It is the process of designing, launching and running a new business, i.e. a startup companyoffering a product, process or service. It is the "capacity and willingness to develop, organize and managea business venture along with any of its risks in order to make a profit."

ENTREPRENEURSHIP: DEFINITIONS: Various experts have different words. Some of thedefinitions are as follows;

According to Collins Cobuild English Language Dictionary, 1987, ―An entrepreneur is a personwho sets up business deals in order to make a profit.‖

According to J.B. Say, ―An entrepreneur is the economic agent who unites all means ofproduction‖.

Richard Cantillon says, ―All persons engaged in economic activity are entrepreneurs.‖

In the word of Quesnay, ―A rich farmer is an entrepreneur who manages and makes hisbusiness profitable by his intelligence and wealth.

J.A. Schumpeter is of the view that, ―A person who introduces innovative changes is anentrepreneur and he is an integral part of economic growth.‖

Entrepreneur and Entrepreneurship

An entrepreneur is someone who locates the need of society and tries to meet the same, with his/herinnovative idea. On the other hand, ‘entrepreneurship’ which refers to the process of establishing abusiness entity, intending to get profit, as a return in the future.

You might have heard the names like Bill Gates, Jeff Bezos, Steve Jobs, Mark Zuckerberg, Larry Page,Jack Ma and many more, for their innovative and unique products given by them to the society. They arenot businessmen, rather they are entrepreneurs as they have established a business, to offer an innovativeproduct and took the risk in the hope of getting profit, as a return in future.

In this article, you will get to know the differences between entrepreneur and entrepreneurship, in anelaborated way.

Comparison Chart

BASIS FORCOMPARISON ENTREPRENEUR ENTREPRENEURSHIP

Meaning An entrepreneur is an individual ora team thereof, having aninnovative idea, and takes everystep to turn the idea into reality,while bearing the risks.

Entrepreneurship is a risky activity ofcommencing a business usually a start upcompany, offering distinct products andservices to the target customers, which mayor may not get success.

What is it? Person who has an idea and givesshape to it.

Process which gives shape to the idea.

Represents An innovator, who chased thedream, till it becomes true.

A procedure through which an innovation isdone.

Business Venture He/She is the one who sets up thebusiness venture, to turn a conceptinto reality.

It is the activity, which an entrepreneurundertakes to set up the business venture.

Definition of Entrepreneur

Entrepreneur refers to a person who conceives a creative idea and takes all the necessary steps required toconvert the idea into reality, such as taking initiative to sets up a new business enterprise by supplyingsufficient capital, land, labour and all the essential resources to produce the product, he/she has in his/hermind and bearing all risks so as to gain profits in future. The qualities of an entrepreneur

are:

The company formed by an entrepreneur is usually a startup enterprise, which can be understood as thelive manifestation of his/her idea. So, an entrepreneur is:

A beginner in the market, who has something new to offer to society and starts right from scratchto establish and run the enterprise.

An innovator, who has a thought-provoking idea or concept in his/her mind, that has thecapability to lead the marketplace.

A developer, who develops a business model, to give shape to the idea.

A leader, who provides guidance and support to his/her men, to work in a specific direction orchange the same (if required) so as to achieve the target.

An incharge who is accountable and responsible for the success or failure of the venture, for thedecisions made by him/her.

A promoter, who takes all the relevant steps to turn the dream into reality.

A forecaster, who foresees, future opportunities and threats which can affect the venture,positively or negatively.

A risk-taker, who has the ability to anticipate the risk in the future moves, and take the risk, ifthey are beneficial to the enterprise.

Definition of Entrepreneurship

Entrepreneurship is the process or activity, of initiating, developing, managing and operating a startupcompany, while taking all the risks involved, so as to make profits. It is one of the four factors ofproduction, the other being land, labour, capital. Now, we have discussed the entrepreneurial process as

:

Characteristics of Entrepreneurship

Process: Entrepreneurship is a systematic, purposeful, creative and continuous process, which anentrepreneur undertakes to run the business smoothly.

Innovation: Innovation is the key feature of the entrepreneurship, which creates a difference inthe market place. Indeed, it helps the enterprise to introduce the product quickly, as there ishardly any company which is selling the product in the market.

Development of network: Developing strong connections with the parties such as suppliers,distributors, banks, debtors, creditors and many more, which are directly or indirectly related withthe business process, to have a good worth, in the market.

Profit potential: Profit is something, that keeps the organization going, in fact, it acts as amotivation for the entrepreneur, to do better than before. So, before taking any decision regardingthe enterprise, priority is given to the profit potential, i.e. while taking any step further, theentrepreneur identifies whether it is profitable or not.

Forecasting of Market Trends and future possibilities: The entrepreneur has to keep a closewatch on the market trends and future demands so that the enterprise could continuously work toimprove the products or services offered, and grow further.

Risk Assumption: You might have heard the famous saying “no risk, no gain”, which means thatthe profit of business depends on the risk factor. So, risks and rewards are inherent to theenterprise; in fact, there is hardly any business which survives without taking any risks.

Functions of an entrepreneur

Function # 1. Decision Making:

The primary task of an entrepreneur is to decide the policy of production. An entrepreneur is to determinewhat to produce, how much to produce, how to produce, where to produce, how to sell and’ so forth.Moreover, he is to decide the scale of production and the proportion in which he combines the differentfactors he employs. In brief, he is to make vital business decisions relating to the purchase of productivefactors and to the sale of the finished goods or services.

Function # 2. Management Control:

Earlier writers used to consider the management control one of the chief functions of the entrepreneur.Management and control of the business are conducted by the entrepreneur himself. So, the latter mustpossess a high degree of management ability to select the right type of persons to work with him. But, theimportance of this function has declined, as business nowadays is managed more and more by paidmanagers.

Function # 3. Division of Income:

The next major function of the entrepreneur is to make necessary arrangement for the division of totalincome among the different factors of production employed by him. Even if there is a loss in the business,he is to pay rent, interest, wages and other contractual incomes out of the realised sale proceeds.

Function # 4. Risk-Taking and Uncertainty-Bearing:

Risk-taking is perhaps the most important function of an entrepreneur. Modern production is very risky asan entrepreneur is required to produce goods or services in anticipation of their future demand.

Broadly, there are two kinds of risk which he has to face. Firstly, there are some risks, such as risks of fire,loss of goods in transit, theft, etc., which can be insured against. These are known as measurable andinsurable risks. Secondly, some risks, however, cannot be insured against because their probability cannotbe calculated accurately. These constitute what is called uncertainty (e.g., competitive risk, technical risk,etc.). The entrepreneur undertakes both these risks in production.

Function # 5. Innovation:

Another distinguishing function of the entrepreneur, as emphasised by Schumpeter, is to make frequentinventions — invention of new products, new techniques and discovering new markets — to improve hiscompetitive position, and to increase earnings.

Types of Entrepreneurs

Entrepreneurs are classified into different types based on different classifications as mentioned below:

Based on the Type of Business:

1. Trading Entrepreneur:

As the name itself suggests, the trading entrepreneur undertake the trading activities. They procure thefinished products from the manufacturers and sell these to the customers directly or through a retailer.These serve as the middlemen as wholesalers, dealers, and retailers between the manufacturers andcustomers.

2. Manufacturing Entrepreneur:

The manufacturing entrepreneurs manufacture products. They identify the needs of the customers and,then, explore the resources and technology to be used to manufacture the products to satisfy thecustomers’ needs. In other words, the manufacturing entrepreneurs convert raw materials into finishedproducts.

3. Agricultural Entrepreneur:

The entrepreneurs who undertake agricultural pursuits are called agricultural entrepreneurs. They cover awide spectrum of agricultural activities like cultivation, marketing of agricultural produce, irrigation,mechanization, and technology.

Based on the Use of Technology:

1. Technical Entrepreneur:

The entrepreneurs who establish and run science and technology-based industries are called ‘technicalentrepreneurs.’ Speaking alternatively, these are the entrepreneurs who make use of science andtechnology in their enterprises. Expectedly, they use new and innovative methods of production in theirenterprises.

2. Non-Technical Entrepreneur:

Based on the use of technology, the entrepreneurs who are not technical entrepreneurs are non-technicalentrepreneurs. The forte of their enterprises is not science and technology. They are concerned with theuse of alternative and imitative methods of marketing and distribution strategies to make their businesssurvive and thrive in the competitive market.

Based on Ownership:

1. Private Entrepreneur:

A private entrepreneur is one who as an individual sets up a business enterprise. He / she it’s the soleowner of the enterprise and bears the entire risk involved in it.

2. State Entrepreneur:

When the trading or industrial venture is undertaken by the State or the Government, it is called ‘stateentrepreneur.’

3. Joint Entrepreneurs:

When a private entrepreneur and the Government jointly run a business enterprise, it is called ‘jointentrepreneurs.’

Based on Gender:

1. Men Entrepreneurs:

When business enterprises are owned, managed, and controlled by men, these are called ‘menentrepreneurs.’

2. Women Entrepreneurs:

Women entrepreneurs are defined as the enterprises owned and controlled by a woman or women havinga minimum financial interest of 51 per cent of the capital and giving at least 51 per cent of employmentgenerated in the enterprises to women.

Based on the Size of Enterprise:

1. Small-Scale Entrepreneur:

An entrepreneur who has made investment in plant and machinery up to Rs 1.00 crore is called ‘small-scale entrepreneur.’

2. Medium-Scale Entrepreneur:

The entrepreneur who has made investment in plant and machinery above Rs 1.00 crore but below Rs5.00 crore is called ‘medium-scale entrepreneur.’

3. Large-Scale entrepreneur:

The entrepreneur who has made investment in plant and machinery more than Rs 5.00 crore is called‘large-scale entrepreneur.’

Based on Clarence Danhof Classification:

Clarence Danhof (1949), on the basis of his study of the American Agriculture, classified entrepreneurs inthe manner that at the initial stage of economic development, entrepreneurs have less initiative and driveand as economic development proceeds, they become more innovating and enthusiastic.

Based on this, he classified entrepreneurs into four types:

1. Innovating Entrepreneurs:

Innovating entrepreneurs are one who introduce new goods, inaugurate new method of production,discover new market and reorganise the enterprise. It is important to note that such entrepreneurs canwork only when a certain level of development is already achieved, and people look forward to changeand improvement.

2. Imitative Entrepreneurs:

These are characterised by readiness to adopt successful innovations inaugurated by innovatingentrepreneurs. Imitative entrepreneurs do not innovate the changes themselves, they only imitatetechniques and technology innovated by others. Such types of entrepreneurs are particularly suitable forthe underdeveloped regions for bringing a mushroom drive of imitation of new combinations of factors ofproduction already available in developed regions.

3. Fabian Entrepreneurs:

Fabian entrepreneurs are characterised by very great caution and skepticism in experimenting any changein their enterprises. They imitate only when it becomes perfectly clear that failure to do so would result ina loss of the relative position in the enterprise.

4. Drone Entrepreneurs:

These are characterised by a refusal to adopt opportunities to make changes in production formulae evenat the cost of severely reduced returns relative to other like producers. Such entrepreneurs may evensuffer from losses but they are not ready to make changes in their existing production methods.

Following are some more types of entrepreneurs listed by some other behavioural scientists:

1. Solo Operators:

These are the entrepreneurs who essentially work alone and, if needed at all, employ a few employees. Inthe beginning, most of the entrepreneurs start their enterprises like them.

2. Active Partners:

Active partners are those entrepreneurs who start/ carry on an enterprise as a joint venture. It is importantthat all of them actively participate in the operations of the business. Entrepreneurs who only contributefunds to the enterprise but do not actively participate in business activity are called simply ‘partners’.

3. Inventors:

Such entrepreneurs with their competence and inventiveness invent new products. Their basic interest liesin research and innovative activities.

4. Challengers:

These are the entrepreneurs who plunge into industry because of the challenges it presents. When onechallenge seems to be met, they begin to look for new challenges.

5. Buyers:

These are those entrepreneurs who do not like to bear much risk. Hence, in order to reduce risk involvedin setting up a new enterprise, they like to buy the ongoing one.

6. Life-Timers:

These entrepreneurs take business as an integral part to their life. Usually, the family enterprise andbusinesses which mainly depend on exercise of personal skill fall in this type/category of entrepreneurs.

Factors Influencing Entrepreneurship Development

Entrepreneurs are visionary, creative, confident, opportunity seeker, relation builder, andrisktaker individuals who decided to ditch the nine-to-five lifestyle to set up their own businesses, takingon financial risks in the hope for profit. But what is the making of such individuals? What factors playbehind the scenes to produce them? Entrepreneurship, in fact, is a complex phenomenon influenced bythe interplay of many distinct factors.

Economic Factors

The economic environment exercises the most direct and immediate influence on entrepreneurship.This is likely because people become entrepreneurs due to necessity when there are no jobs. “In countrieswhere the economy is poorer, or where unemployment rates are high, citizens turn to starting their ownsmall businesses where they see opportunity,” Trilby Rajna of Approved Index said. Economic factorsimpacting entrepreneurship include:

1. CapitalCapital is one of the most important factors, yet one of the biggest barriers when launching a new

business. Entrepreneurs require capital to start risky ventures and also require instant capital toscale up the business quickly if the idea is found to be successful. There are however numerousways to fund a new venture including bank loans, crowdfunding, and bootstrapping.

2. LaborThe availability of labor impacts entrepreneurship. Nevertheless, the quality rather than thequantity of labor influences the emergence and growth of entrepreneurship.

3. Raw MaterialsThe necessity of raw materials consisting of natural resources hardly needs any emphasis forestablishing any industrial activity and the emergence of entrepreneurship. The absence of rawmaterials adversely affects the entrepreneurial development.

Psychological Factors

They say entrepreneurship is not for the faint of heart. But then for whom is it! What does it take for anindividual to become an entrepreneur? While there isn’t a single “ideal” entrepreneurial personality, onething remains constant: an entrepreneurial spirit. This type of spirit entails many traits and characters thatmake 400 million entrepreneurs out of 7 billion people worldwide.(1)

1. PassionStarting up a new business is not an easy task to pull off and a consistent and constantcommitment to the idea and the long hours it will require to turn it to a success is essential.Passion is the fuel of this commitment that motivates entrepreneurs to rise early in the morningand put their blood, sweat, and tears into their business.

2. Need for AchievementEntrepreneurs are self-starters with a need to achieve. This achievement motivation isn’tnecessarily driven by the incentives of financial gain only but also by the satisfaction gain. Toadd, entrepreneurs’ motivation extends to reach their employees and partners to keep them on thesame page and drive them to achieve as well.

3. ResilienceResilience comes with the package of the entrepreneurial spirit to help entrepreneurs staydetermined in the face of any defeat they might encounter throughout the process. Failure is thena mere lesson to learn from and continue instead of giving up.

Social Factors

Social factors can go a long way in boosting entrepreneurship. In fact, it was the highly helpful societythat made the industrial revolution a glorious success in Europe. Such factors strongly affect theentrepreneurial behavior, which contributes to entrepreneurial growth. The main components of the socialenvironment include:

1. Family BackgroundFamily background including the size, type, and economic status can influence entrepreneurs and;therefore, entrepreneurship. Nonetheless, the entrepreneurial spirit does not necessarily run in thefamily. According to some sources, 51.9% of all entrepreneurs were the first to launch a businessin their family.(2) Furthermore, less than 1% of all entrepreneurs come from extremely rich orextremely poor families.

2. EducationStudies state that 95.1% of all entrepreneurs hold a bachelor degree, 47% of those have advancedin their education and acquired masters, Ph.D. or the like.(2) This is a well enough indicator ofthe importance of education to the development of entrepreneurship.

3. Social NetworksInteracting with the surrounding society and forming a reliable network is essential. Socialnetworks facilitate access to information and influence the quality, quantity, and speed ofinformation reception thus help identify opportunities.

UNIT- II Institutional Finance to Entrepreneurs – Commercial Banks – DIC – SIDOS – SISIS – Khadiand Village Industries Commission – All India financial Institutions – IDBI - IFCI – UTI – LIC –GIC –SFCS – SIDBI – Industrial Investment Bank of India.

COMMERCIAL BANKS:

A commercial bank is a type of financial institution that provides services such as acceptingdeposits, making business loans, and offering basic investment products. Commercial bank can also referto a bank, or a division of a large bank, which more specifically deals with deposit and loan servicesprovided to corporations or large/middle-sized business - as opposed to individual members of thepublic/small business - retail banking, or merchant banks.

Role: The general role of commercial banks is to provide financial services to general public andbusiness and companies, ensuring economic and social stability and sustainable growth of the economy.In this respect, "credit creation" is the most significant function of commercial banks. While sanctioning aloan to a customer, they do not provide cash to the borrower. Instead, they

open a deposit account from which the borrower can withdraw. In other words, while sanctioning aloan, they automatically create deposits, known as a "credit creation from commercial banks".

Commercial banks accept various types of deposits from public especially from its clients,including saving account deposits, recurring account deposits, and fixed deposits. These depositsare returned whenever the customer demands it or after a certain time period

Commercial banks provide loans and advances of various forms, including anoverdraft facility, cash credit, bill discounting, money at call etc. They also give demand andterm loans to all types of clients against proper security.....

Core products and services

Accepting money on various types of Deposit accounts

Lending money in the form of Cash: by overdraft, installment loan etc.

Lending money in Documentary form: Letters of Credit, Guarantees, Performance bonds,securities, underwriting commitments, issuing Bank drafts and Bank cheques, and other forms ofoff-balance sheet exposure.

Inter- Financial Institutions relationship

Cash management

Treasury management

Private Equity financing

Processing payments via telegraphic transfer, EFTPOS, internet banking, or other paymentmethods.

Other functions: Along with core products and services, commercial banks perform several secondaryfunctions. The secondary functions of commercial banks can be divided into agency functions and utilityfunctions.

Agency functions include:

To collect and clear cheques, dividends and interest warrant.

To make payments of rent, insurance premium, etc.

To deal in foreign exchange transactions.

To purchase and sell securities.

To act as trustee, attorney, correspondent and executor.

To accept tax proceeds and tax returns.

Utility functions include:

To provide safety locker facility to customers.

To provide money transfer facility.

To issue traveler‘s cheque.

To act as referees.

To accept various bills for payment: phone bills, gas bills, water bills, etc.

To provide merchant banking facility.

To provide various cards: credit cards, debit cards, smart cards, etc.

To Make payment to my Clients through online payments

DIC – DISTRICT INDUSTRIES CENTERS:

It comes under the Department of Industries and Commerce. The primary objective of the DIC is togenerate employment by way of promoting Micro, Small and Medium Enterprises(MSMEs), Cottageand Handicrafts Industries. The packages of services offered by the District Industries Centre areMultidimensional and need based for facilitating industrial growth in respect of new and graduatingenterprises. The DIC is headed by General Manager who is supported by functional Managers, technicaland non-technical Officers

All the schemes of the Department, especially MSMED Act 2006, MSMI Policy 2008 Subsidyschemes- Capital Subsidy, LTPT Subsidy, VAT subsidy, and Back ended Interest Subsidy, GeneratorSubsidy Single Window clearances, Micro Small Enterprises Facilitation council (MSEFC) etc. NewEntrepreneur-cum-Enterprise Development Scheme (NEEDS), Unemployed Youth EmploymentGeneration Programme (UYEGP), Prime Ministers Employment Generation Programme (PMEGP),Quality Control Order, EDI Training Programmes etc. are implemented through this DIC.

Functions:

Employment Generation.

Motivating and guiding the entrepreneur.

Rendering escort services to set up anEnterprise (effectively thru single windowcommittee).

Conducting of motivation camps and dissemination meetings.

Implementation of subsidy schemes.

Testing facilities.

Project Profiles.

Technical Feasibility report to Banks

Issue of Production / Capacity Certificates.

Export Guidance Cell.

All the MSMEs are offered various services and support under the single roof of the DistrictIndustries Centre.

This Centre caters to Promotion of MSMEs as also Registration and Development ofIndustrial Cooperatives.

Administration: The General Manager is the head of the District Industries Centre. The post of GeneralManager is of Joint / Deputy Director Level. The General Manager is assisted by the Project Manager,Manager (Credit), Manager (Economic Investigation)/ Manger (Village Administration) and an officeSuperintendent.

Monitoring of DICs: The functioning of DICs and their achievement is monitored by the PrincipalSecretary/ Industries Commissioner & Director Of Industries & Commerce. The Review of the GeneralManagers is organized frequently to evaluate the performance and also help in resolving difficulties inimplementation of different schemes. To resolve the problems of industries/industrialists, there are two

types of committee at the district level viz.

SIDCO - SMALL INDUSTRIES DEVELOPMENT CORPORATION:

Need for Small Industries Development Corporation (SIDCO): In many state governments,for the promotion of small scale industries, a separate corporation has been set up which is known asSmall Industries DEVELOPMENT Corporation. They undertake all kinds of activities for the promotion ofsmall scale industries. Right from the stage of installation, to the stage of commencing production, theseCorporations help small scale industries (SSI) in many ways. In short, they provide infrastructurefacilities to small scale industries. Due to the assistance provided by SIDCO, many backward areas inmost of the states have been developed. So, SIDCO has also been responsible in spreading the industrialactivity throughout several states.

Objectives of SIDCO: The following are themain objectives of SIDCO

1. The main objective of SIDCO is to stimulate the growth of industries in the small scale sector

2. To provide infrastructure facilities like roads, drainage, electricity, water supply, etc is one of theprimary objectives of SIDCO.

3. To promote industrial estates which will provide industrial sheds of different sizes with all basicinfrastructure facilities.

4. To provide technical assistance through training facilities to the entrepreneurs.

5. To promote skilled labor through the setting up of industrial training institutes.

Small Industries Development Corporation, Tamilnadu: In Tamilnadu, India, Small IndustriesDevelopment Corporation (SIDCO) was set up in 1971. The prime function of SIDCO was to identifypotential growth centres in various parts of Tamilnadu. There is a network of 76 industrial estates in theState which are maintained by SIDCO. 32 of these were formed by the government initially andsubsequently handed over to SIDCO. The remaining 44 estates were set up by SIDCO itself. Source

It has set up these estates in rural and most backward areas to ensure balanced industrial development.

Functions of SIDCO

SIDCO supplies scarce raw materials: Some of the scarce raw materials are procured bythe corporation either from the domestic market or from abroad and are provided to theneedy small scale industries. For this purpose, SIDCO has a number of raw material

depots and these depots are procuring various scarce raw materials, as per the requirementsof small scale industries in the state.

SIDCO provides marketing assistance: In order to provide an efficient marketing supportto small scale industries, the corporation has taken up various schemes. In fact, thecorporation participates in the tenders floated by the state government departments and alsowith the DGS & D (Director General of Supplies and Disposal). SIDCO makes advancepayments for obtaining orders and distribute them among the various small scale units.SIDCO also arranges for buyer — seller meets frequently.

SIDCO assists in Bills discounting: When small scale units supply goods to governmentdepartments, there is a delay in receiving payments. In such a situation, the bills drawn ongovernment departments will be discounted by SIDCO and up to 80% of the bill value isgiven to the supplier. This helps the SSI units in solving their working capital crisis.

SIDCO provides Export marketing assistance: To promote export marketing among the

small scale industries, SIDCO has developed websites because of which it is able to displaythe products of the small scale industries in foreign markets and obtain export orders. Oncean export order is obtained, the Common export manager of SIDCO will makearrangements for extending various services for export of the product. SIDCO also helps inthe small scale units taking part in the international trade fair at New Delhi, Pragati Maidanso that the products of small scale industries of Tamilnadu are displayed.

SIDCO set up Captive power plants: In order to provide uninterrupted and good qualitypower supply, SIDCO has taken up a plan to set up captive power plants in major industrialestates. It is now planning to set up these plants in 10 industrial estates.

SIDCO promotes skill development centres: In an effort to supply skilled laborers tovarious small scale industries, skill development centers are being set up in variousindustrial estates which will be training workers in varied industrial activities and they willbe trained in modern skill.

SIDBI - SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA:

Small Industries Development Bank of India is an independent financial institution aimed to aidthe growth and development of micro, small and medium-scale enterprises (MSME) in India. Set upon April 2, 1990 through an act of parliament, it was incorporated initially as a wholly owned subsidiaryof Industrial Development Bank of India. Currently the ownership is held by 33 Government of Indiaowned / controlled institutions. Beginning as a refinancing agency to banks and state level financialinstitutions for their credit to small industries, it has expanded its activities, including direct credit to theSME through 100 branches in all major industrial clusters in India. Besides, it has been playing thedevelopment role in several ways such as support to micro-finance institutions for capacity building andon lending.

SIDBI among Top 30 Development Banks of the World: SIDBI retained its position in the top30 Development Banks of the World in the ranking of The Banker, London. As per the May 2001 issue ofThe Banker, London, SIDBI ranked 25th both in terms of Capital and Assets.

In its endeavour towards holistic development of the MSME sector, SIDBI adopts a

‗Credit Plus‘ approach wherein, besides credit, the Bank also provides grant support for thePromotion and Development (P&D) of the sector to make it strong, vibrant and competitive. The P&Dactivities of the bank include Micro Enterprise Promotion, Entrepreneurship Development, ClusterDevelopment, Capacity Building of the MSME Sector, promoting Responsible Finance among MicroFinance Institutions, Sustainable Finance to MSMEs including Energy Efficiency, EnvironmentProtection, etc.

Cumulative disbursements as at end March 2014 have crossed ` 3260 trillion (€ 40.75 trillion)benefiting more than 32 million persons in the MSME sector. The total outstanding portfolio as at endMarch 2014 aggregated ` 612.71 billion (€7.66 billion).

SIDBI also functions as a Nodal/ Implementing Agency to various ministries of Government ofIndia viz., Ministry of MSME, Ministry of Textiles, Ministry of Commerce and Industry, Ministry ofFood Processing and Industry, etc.

What are the objectives of SIDBI? In the setting up of SIDBI, the main purpose of the governmentwas to ensure larger flow of assistance to the small-scale units. To meet this objective, the immediatethrust of the SIDBI was on the following measures:

(i) Initiating steps for technological up gradation and modernisation of existing units;(ii)Expanding the channels for marketing the products of the small scale sector; and

(iii) Promotion of employment-oriented industries, especially in semi- urban areas to createmore employment opportunities and thereby checking migration of population to urban areas.

What are the functions of SIDBI? SIDBI provides assistance to the small-scale industries sector inthe country through the existing banking and other financial institutions, such as, State FinancialCorporations, State Industrial Development Corporations, commercial banks, cooperativebanks and RRBs. etc. The major functions of SIDBI are given below:

(i) It refinances loans and advances provided by the existing lending institutions to the small- scale units.

(ii) It discounts and rediscounts bills arising from sale of machinery to and manufactured by small-scaleindustrial units.

(iii) It extends seed capital/soft loan assistance under National Equity Fund, Mahila Udyam Nidhi andMahila Vikas Nidhi and seed capital schemes.

(iv) It grants direct assistance and refinance loans extended by primary lending institutions for financingexports of products manufactured by small-scale units.

(v) It provides services like factoring, leasing, etc. to small units.

(vi) It extends financial support to State Small Industries Corporations for providing scarce raw materialsto and marketing the products of the small-scale units.

(vii) It provides financial support to National Small Industries Corporation for providing; leasing, hirepurchase and marketing help to the small-scale units.

Small industries service institutes (SISI’s)

The small industries service institutes (SISI’s) are set-up one in each state to provide consultancy andtraining to small and prospective entrepreneurs. The activities of SISs are co-ordinate by the industrialmanagement training division of the DC, SSI office (New Delhi). In all there are 28 SISI’s and 30 BranchSISI’s set up in state capitals and other places all over the country.

SISI has wide spectrum of technological, management and administrative tasks to perform.

Functions of SISI

1. To assist existing and prospective entrepreneurs through technical and managerial counseling such ashelp in selecting the appropriate machinery and equipment, adoption of recognized standards of testing,quality performance etc;

2. Conducting EDPs all over the country;

3. To advise the Central and State governments on policy matters relating to small industry development;

4. To assist in testing of raw materials and products of SSIs, their inspection and quality control;

5. To provide market information to the SISI’s;

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6. To recommend SSI’s for financial assistance from financial institutions;

7. To enlist entrepreneurs for partition in Government stores purchase programme;

8. Conduct economic and technical surveys and prepare techno-economic feasible reports for selectedareas and industries.

Khadi and Village Industries Commission (KVIC)

Khadi and Village Industries Commission (KVIC) plans, promotes, organizes and implementsprograms for the development of Khadi and other village industries in rural areas nationwide. KVIC alsohelps in building up reserve of raw materials for supply to producers. The commission focuses in creationof common service facilities for processing of raw materials, such as semi-finished goods. KVIC has alsohelped in creation of employment in Khadi industry.

Functions of KVIC:

Building up of a reserve of raw materials and implementation for supply to producers

Formation of common service facilities for processing of raw materials that include semi-finishedgoods

Promoting the sale and marketing of Khadi and Village Industries products, as well as handicrafts

Promoting research in the village industries sector related production techniques and equipment

Providing financial assistance to individuals and institutions for the development and operation ofKhadi and Village industries

Objectives of KVIC:

To promote Khadi in rural areas

To provide employment

To produce saleable articles

To create self-reliance amongst the poor

To build up strong rural community

Features of KVIC:

Interest Rate: Depends on applicant’s profile and business requirements

Loans offered are directed and governed by PMEGP under which is below mentioned criteria forspecific MSMEs:

° Loan Amount for Manufacturing Sector: Maximum Rs. 25 lakh° Loan Amount for Business and Service Sector: Maximum Rs. 10 lakh

Funding Pattern: Mentioned below in PMEGP Scheme

Repayment Tenure: From 3 years – 7 years, including 6 months of moratorium period

Income Capping: No criteria

Margin: Lock-in for 3 years in separate account later adjusted with KVIC loan

Eligibility Criteria for Khadi and Village Industries Commission (KVIC)

KVIC loan can be availed by the following entities:

Individuals of minimum 18 years of age with 8th class pass certificate

Self Help Groups

Registered and Co-operative Societies

Charitable Trusts

The Industrial Development Bank Of India (IDBI)

The industrial bank of India (IDBI) was established on 1 July, 1964 under the industrialdevelopment back of India act, as a wholly owned subsidiary of the reserve bank of India. In terms of thepublic financial institutions laws (Amendment) Act, 1975, the ownership of the lDBI has been transferredto the central government with effect from 16 the February 1976. The most distinguishing feature of thelDBI is that It has been assigned the role of the principal financial institution for co-ordinating, inconformity with national priorities, the activities of the institutions engaged in financing, promotion ordeveloping industry. The IDBI has been assigned a special role to play in regard to industrialdevelopment.

Objectives and Functions

To serve as an apex institution for term finance for industry, to co-ordinate the working ofinstitutions engaged in financing, promoting or developing industries and to assist in thedevelopment of these institutions.

To plan, promote and develop industries to fill gaps in the industrial structure in the country.

To provide technical and administrative assistance for promotion, manage- ment orexpansion of industry.

To undertake market and investment research and surveys as also technical and economicsstudies in connection with development of industry.

To act as lender of last resort and to finance all types of industrial concerns which areengaged, or which propose to be engaged, in the manufacture, processing or preservation ofgoods, or in mining, shipping, transport, hotel industries, or in the generation distribution ofpower, in fishing or in providing shore’ fishing, or in the maintenance, repairs, testing orservicing of machinery or vehicles, vessels, etc., or for the setting-up of industrial estates.The Bank may also assist industrial concerns engaged in the research and development ofany process or product or in providing special or technical knowledge or other services forthe promotion of industrial growth. Besides, it provides finance or the export of engineeringgoods and service on deferred payment basis.

The IDBI has been playing a significant role in the promotion of small-scale industries. Itsassistance has been channeled through its scheme for the refinance of industrial loans, and to a limitedextent, through the Bills Rediscounting Scheme. Since its inception, the lost has been playing asignificant role in the promotion of small scale industries.

Its assistance has been channeled through its scheme for the refinance of industrial loans, and to alimited extent, through the Bills Rediscounting Scheme Since its inception, the IDBI has been operating aspecial scheme of concessional assistance to the small-scale sector. The procedure in respect of loans tothe small-scale sector has been put on a semi automatic basis under the liberalised refinance scheme(LRS). As a result of the progressive liberalisation and simplification of its refinance operations, itsassistance to the small-scale sector has increased substantially since 1971-72. Its assistance to the smalland medium industrial units flows through 18 SFCs and 28 SIDCs, commercial banks and regional ruralbanks.

IDBI Schemes

IDBI is having the following schemes for the benefit of enterprise and entrepreneurs in the small andmedium scale sector;

Direct Assistance

Project finance scheme (loans, underwriting, direct subscription and guarantees); Project Finance Scheme(loans, underwriting, direct subscription and guarantees)

• Modernization Assistance Scheme for all industries;

• Textile Modernization Fund Scheme;

• Technical Development Fund Scheme;

• Venture Capital Fund Scheme;

• Energy Audit’ Subsidy’ Scheme;

• Equipment Finance for Energy Conservation Scheme;

• Equipment Finance Scheme;

• Foreign Currency Assistance Scheme.

Indirect Assistance

Refinance Scheme for Industrial Loans for Small and Medium Industries;

Refinance Schemes for Modernization and Rehabilitation of Small and Medium Industries;

Equipment Refinance Scheme;

Bills. Discounting/Rediscounting Scheme;

Seed Capital Scheme;

Scheme for Concessional Assistance for Development of No-Industry Districts and OtherBackward Areas;

Scheme for Concessional Assistance for Manufacture & Industrialisation of

Renewable Energy Systems;

Scheme for Investment Shares and Bonds of Other Financial Institutions.

Sources of Funds

Capital Contribution from Government;

Loan Capital from Government;

Loan Capital from RBI out of National Industrial Credit (Long Term Operation) Fundcreated out of its annual profits;

Borrowings by way of Government - guaranteed bonds from domestic market;

Borrowings in foreign currency from international capital market;

Deposits under Investment Deposit Account Scheme in lieu of investment allowance underSection 32-AB of Income-tax Act;

1. Industrial Finance Corporation of India (IFCI)Incorporation and Purpose

The Industrial Finance Corporation of India (IFCI) was established in 1948 under an Act ofParliament with the object of providing medium and long-term credit to industrial concerns in India. IFCItransformed into a corporation from 21st May, 1993 to, provide greater flexibility to’ respond to the needsof the rapidly changing financial system.

Management

The Board of Directors consists of a whole-time Chairman and twelve directors.

The Chairman is appointed by the Central Government after consultation with the lDBI. Twodirectors are nominated by the Central Government and four by the lDBI. Six Directors are elected byshareholders other than the IDBI.

Financial assistance provided by the IFCI can be in one or more of the following forms:

•Rupee and foreign currency term loans

•Underwriting of share and debenture issues

•Direct subscription to equity

•Guarantees

•Soft loans

•Equipment financing

Projects costing up to Rs. 300 lakh are financed by the State Financial Corporations, State’Industrial Development Corporations and Commercial- banks under the refinance scheme of the: IDBI.Only projects costing in excess of Rs. 300 lakh are considered for: assistance by the JFCI..

Forms of Assistance

Section 23 of the IFCI Act outlines the types of activities, which the Corporation is authorised, toundertake. These are indicated below with the year in which it was authorised to undertake each type ofactivity shown within the brackets.

1) Granting loans on subscribing to debentures repayable within a period not exceeding 25 years.(1948)

2) Underwriting the issue of stock, shares, bonds or debentures by industrial concerns providedthat it does not retain any shares, etc., which it may have had to take up in fulfillment of itsunderwriting liabilities beyond a period of 7 years except with the permission of the centralGovernment (now the IDBI).

3) Guaranteeing loans ——

a. raised by industrial concerns, which are repayable within a period not exceeding 25 yearsand are floated in the market. (1948)

b. raised by industrial concerns from scheduled banks or state cooperative banks (1960)

4) Guaranteeing deferred payments due from any industrial concern

a. In connection with the import of capital goods from outside India

b. In connection with the purchase of capital goods within India

5) Guaranteeing loans (with the prior approval of the Central Government) raised from, or creditmanagements made with, any bank or financial institution in any country outside India byIndustrial concerns in foreign currency (1960)

6) Acting as agent for the Central Government or, with its approval, for the International Bank forReconstruction and Development (lBRD) in respect of loans granted or debentures subscribedby either of them (1952)

7) Subscribing to the stock or shares of any industrial concern (1960)

Functions and Lending Policies

Any limited company or co-operative society incorporated and registered in India which isengaged, or proposes to engage itself, in the manufacture, preservation or processing of goods, or in theshipping, mining or hotel industry, or in the generation or distribution of electricity or any other form ofpower, is eligible for financial assistance from the Cooperation on the same basis as industrial projects inthe’ private and joint sectors.

Public sector projects are also eligible for financial assistance from the Corporations on the. samebasis as industrial projects in the private and joint sectors.

The assistance may take the form of long-term loans” both in rupees and foreign currencies, theunderwriting of equity, preference and debenture issues; subscribing to equity, preference and debenturecapital; guaranteeing of deferred payments in respect of machinery imported form abroad of purchased inIndia. And guaranteeing of loans raided in foreign currency from foreign financial institutions. Financialprojects and for the expansion, diversification, renovation or modernization of existing ones.

Financial assistance on concessional terms is available for the setting-up of new industrialprojects in industrially less developed districts in the States/Union Territories notified by the CentralGovernment.

Unit Trust of India

UTI was first Set up in 1st February 1964 under the Unit Trust of India Act, 1963. It is a statutorypublic sector investment institution having the main objective to encourage and mobilize the savings ofthe community and canalize them into productive corporate investment.

UTI – Unit Trust of India

A unit trust is an investment plan in which the funds are pooled together and then invested. Thefund which is pooled is then unitized and the investor who is one party to the unit trust is called aunitholder, holding a certain number of units.

A second party i.e the manager is responsible for the day-to-day running of the trust and forinvesting the funds.The trustee, governed by the Trust Companies Act 1967, is the third party, and theirrole is to monitor the manager’s performance against the trust’s deed.

The deed outlines the objectives and vital information about the trust. Also, the assets of the trustare held in the name of the trustee and then they are held “in trust” for the unitholders. Learn moreabout Money and Credit here in detail

Objectives of Unit Trust of India (UTI)

Unit Trust of India Provides to the investor a safe return of the investment whenever they requirefunds. UTI provides daily price record and advertises it in the newspapers.

Thus, two prices are quoted on a daily basis, the purchase price and the sale price of the units.This price may fluctuate daily, but the fluctuations are nominal on a monthly basis.The price variesbetween the month of July and the month of June. The purchase price of the various units is the lowest inthe month of July.

An investor who wants to make an investment may purchase his units at this time of the year andreceive the lowest offer price for the units.The basic objective of the UTI is to offer both small and largeinvestors the means of acquiring shares in the properties resulting from the steady, industrial growth ofthe country.

Primary Objectives of UTI

to promote and pool the small savings from the lower and middle-income persons who cannothave direct access to the stock exchange, and

to provide them with an opportunity to share the benefits of prosperity resulting from rapidindustrialization in India.

Functions of UTI

Mobilize the saving of the relatively small investors.

Channelize these small savings into productive investments.

Distribute the large scale economies among small income groups.

Encourage savings of lower and middle-class people.

Sell nits to investors in different parts of the country.

Convert the small savings into industrial finance.

To give investors an opportunity to share the benefits and fruits of industrialization in the country.

Provide liquidity to units.

Accept discount, purchase or sell bills of exchange, warehouse receipt, documents of title togoods etc.,

To grant loans and advances to investors.

To provide merchant banking and investment advisory service to investors.

Provide leasing and hire purchase business.

To extend portfolio management service to persons residing in other countries.

To buy or sell or deal in foreign currency.

Formulate a unit scheme or insurance plan in association with GIC.

Invest in any security floated by the RBI or foreign bank.

The advantages of Unit Trust are:

The investment is safe and divides the risk over a wide range of securities.

The investors will be getting a regular and good income, as it distributes 90 percent of its income.

Dividends up to Rs. 1,000 received by the individual investors are exempt from income-tax.

There is a high degree of liquidity of investment as one can sell the units back to the trust at anytime at a specific price.

You have experts who are doing the hard work for you.

There are various unit trusts to choose from.

Investor’s resources are pooled with other investors, allowing you to make investmentsimpossible as an individual investor.

It also helps Investor’s to easily diversify your investments.

An investor gets the benefits of greater economies of scale, such as reduced transaction costs.

Life Insurance Corporation of India

The Life Insurance Corporation of India. (LIC) was set up under the LIC Act in 1956, as a

wholly-owned Corporation of the Government of India, on nationalization of the life insurancebusiness in the country. LIC took over the life insurance business from private companies to carryon the business and deploy the funds in accordance with thePlan priorities. UC operates a variety ofschemes so as to extend social security to various segments of society and for the benefit ofindividuals and groups from the urban -and rural areas. The Committee on Reforms in the InsuranceSector set up by the Government has recommended privatization and restructuring of UC withGovernment -retaining 50% stake. The Committee has also suggested that foreign companies be’allowed to conduct life insurance business in the country through joint ventures with India partners.

According to the investment policy of LIC, out of the accretion to its Controlled Fund, not lessthan 75% has to be invested in Central and State Government securities including Government-guaranteed marketable securities in the form of shares, bonds and debentures. UC extends loans forthe development of socially-oriented sectors and infrastructure, facilities like housing, ruralelectrification, water supply, sewerage and provides financial assistance to the corporate sector byway of term loans and underwriting/direct- subscription to shares and debentures. UC also extendsresource support to other financial institutions by way of subscription to their shares and bonds andalso by way of term loans.

General Insurance Corporation of India

The General Insurance Corporation of India (GIC) was established in January 1973 onnationalization of general insurance companies in the country. GIC has four subsidiaries, viz.,National Insurance Co. Ltd., New India Assurance Co. Ltd., Oriental Fire & General Insurance Co.Ltd. and United India Insurance Co. Ltd. GIC and its subsidiaries operate a number of insuranceschemes to meet the diverse and emerging needs of various segments of society. In the recent past,GIC and its subsidiaries devised several need-based covers to keep pace with the new liberalizedeconomic environment. The investment policies of GIC and its subsidiaries have been evolvedwithin the ambit of the provision 27(B) of the Insurance Act 1938 and guidelines issued by theGovernment from time to time. According to Government guidelines, 70% of the annual accretionsto their investible funds are required to be invested in socially oriented sectors of the economy.Since April 1976, GIC has been participating with other financial institutions in extending termloans to industrial undertakings and providing facilities for underwriting/direct subscription to theirshares and debentures.

State Financial Corporations (SFC)

The Industrial Finance Corporation of India was set up to offer financial assistance to onlylarge and medium – sized undertakings. Accordingly, the State Financial Corporation Act waspassed by parliament on September 28, 1951, as an enabling measure, under which State FinancialCorporation’s (SFCs) could be set up. The first SFC was set up in Punjab in 1953.

Function and Types of AssistanceThe SFCs have been set up to extend long – term finance to small and medium – scale

industrial undertakings organized as public and private companies, cooperatives, partnerships orproprietary concerns. The SFCs render assistance in the following forms:

1. Grant of loans and advances to industrial concerns for periods not exceeding 20 years;

2. Subscription to debentures repayable within a periods of 20 years;

3. Guarantee of loans raised in the market or from scheduled or cooperative banks by theindustrial concerns and repayable within 20 years;

4. Guarantee of deferred payments for purchases of plant, machinery, etc. within India;

5. Undertaking the issue of stocks, shares, bonds and debentures by industrial undertakings.

As far as SFC bonds and debentures are concerned, they are mostly subscribed by commercialbanks, the Life Insurance Corporation of India and other financial institutions. They are presently animportant source of the SFCs and account for about 30 percent of them.

The SFCs also borrow from the reserve bank, the state governments and the IDBI. Theborrowings of the SFCs including the bond issues at any time should not exceed 10 times of theirpaid up capital and reserves. During recent year, refinance from IDBI has become the mostimportant source of funds for the SFCs.

Industrial Investment Bank of India

The Industrial Investment Bank of India (IIBI) was established in 1985 under the IRBI Act,1984 on reconstitution of the erstwhile Industrial Reconstruction Corporation of India as theprincipal credit and reconstruction agency to, undertake reconstruction and rehabilitation of sick andclosed industrial units in the country. IRBI was converted into a full-fledged all-purposedevelopment institution as IIBI on 17.03.97. The scope of IIBIs financing activities has widenedwith the withdrawal of the Government stipulation that 60% of its portfolio should consist of ‘ sickcompanies; IIBI now finances all industrial projects like any other financial institution.

IIBI extends loans and advances to industrial concerns, underwrites stocks, shares, bonds, anddebentures and provides guarantees, for loans/deferred payments. It provides finance foracquisition of equipment and makes available machinery and other equipment on lease or hirepurchase basis. It also provides infrastructure facilities, consultancy, managerial and merchantbanking services. During 1993-94, as a part of its merchant banking services, IRSI ventured intoissue management activities for the first time. It also took several steps to re-orient its businessstrategy in response to the emerging environment and ongoing changes in the financial sector byintroducing newer products for financing. IIBI has envisaged the setting up of a Special Fund, viz.,Reconstruction Assistance Fund to meet special financial needs of ‘ assisted medium and large-scale units for their revival and rehabilitation which cannot be met from banks and’ financialinstitutions under normal conditions.

UNIT-III Business Idea Generation Techniques – Identification of Business Opportunities – MarketFeasibility.

IDEA GENERATION TECHNIQUES

1. SCAMPER

SCAMPER is an idea generation technique that utilizes action verbs as stimuli. It is a well-known kind ofchecklist developed by Bob Eberie that assists the person in coming up with ideas either for modificationsthat can be made on an existing product or for making a new product. SCAMPER is an acronym witheach letter standing for an action verb which in turn stands for a prompt for creative ideas.

S – Substitute

C – Combine

A – Adapt

M – Modify

P – Put to another use

E – Eliminate

R – Reverse

2. Brainstorming

This process involves engendering a huge number of solutions for a specific problem (idea) withemphasis being on the number of ideas. In the course of brainstorming, there is no assessment of ideas. So,people can speak out their ideas freely without fear of criticism. Even bizarre/strange ideas are acceptedwith open hands. In fact, the crazier the idea, the better. Taming down is easier than thinking up.

Frequently, ideas are blended to create one good idea as indicated by the slogan “1+1=3.” Brainstormingcan be done both individually and in groups. The typical brainstorming group comprises six to ten people.

3. Mindmapping

Mindmapping is a graphical technique for imagining connections between various pieces of informationor ideas. Each fact or idea is written down and then connected by curves or lines to its minor or major(previous or following) fact or idea, thus building a web of relationships. It was Tony Buzan, a UKresearcher, who developed the technique “mind mapping” discussed in his book ‘Use your Head’ (1972).Mind mapping is utilized in brainstorming, project planning, problem solving and note taking. As is thecase with other mapping methods, the intention behind brain mapping too is to capture attention and togain and frame information to enable sharing of concepts and ideas.

To get started with mindmapping, the participant just has to write a key phrase or word in the middle ofthe page. Then, he must write anything else that comes to his mind on the very same page. After that, hemust try to make connections as mentioned in the previous paragraph.

4. Synectics

Synectics is a creative idea generation and problem solving technique that arouses thought processes thatthe subject may not be aware of. It is a manner of approaching problem-solving and creativity in arational manner. The credit for coming up with the technique which had its beginning in the Arthur D.Little Invention Design Unit, goes to William J.J. Gordon and George M. Prince.

The Synectics study endeavored to investigate the creative process while it is in progress. According to J.JGordon, three key assumptions are associated with Synectics research.

It is possible to describe and teach the creative process

Invention processes in sciences and the arts are analogous and triggered by the very same“psychic” processes

Group and individual creativity are analogous

5. Storyboarding

Storyboarding has to do with developing a visual story to explain or explore. Storyboards can helpcreative people represent information they gained during research. Pictures, quotes from the user, andother pertinent information are fixed on cork board, or any comparable surface, to stand for a scenario andto assist with comprehending the relationships between various ideas.

6. Role playing

In the role playing technique, each participant can take on a personality or role different from his own. Asthe technique is fun, it can help people reduce their inhibitions and come out with unexpected ideas.

7. Attribute listing

Attribute listing is an analytical approach to recognize new forms of a system or product byidentifying/recognizing areas of improvement. To figure out how to enhance a particular product, it isbroken into parts, physical features of each component are noted, and all functions of each component areexplained and studied to see whether any change or recombination would damage or improve the product.

8. Visualization and visual prompts

Visualization is about thinking of challenges visually so as to better comprehend the issue. It is a processof incubation and illumination where the participant takes a break from the problem at hand andconcentrates on something wholly different while his mind subconsciously continues to work on the idea.This grows into a phase of illumination where the participant suddenly gets a diversity of solutions and herapidly writes them down, thereby creating fresh parallel lines of thought.

Picture prompts help a lot when it comes to enabling one’s brain to establish connections. These promptscan help to surface emotions, feelings and intuitions. This makes them particularly useful forbrainstorming solutions to innovative challenges involving people, and issues with a deep psychologicalor emotional root cause.

To get started with using picture prompts, the facilitator distributes a set of pre-selected images – eachparticipant gets one. He also asks the participants to write down whatever ideas come to their mind whenthey look at the image in their possession. According to Bryan Mattimore (presently co-founder of TheGrowth Engine Company), the images should be visually interesting, portraying a multiplicity of subjectmatter and must depict people in lots of varied kinds of relationships and interactions with other people.

After this, participants pair off and use additional time, sharing and talking about the ideas they havecome up with and brainstorming more solutions to the existing problem/challenge. Lastly, the variouspairs present their ideas to the rest of the group.

Mattimore suggests tailoring the visuals to the character of the challenge the participants have to solve. So,if the challenge pertains to the manufacturing industry, you could consider having images of an industrialnature. However, you should definitely include some irrelevant or random images as well because it maybe these kinds of images that trigger the most innovative solutions.

9. Morphological analysis

Morphological analysis has to do with recognizing the structural aspects of a problem and studying therelationships among them. For example: Imagine the problem is transporting an object from one place toanother by way of a powered vehicle. The significant dimensions are: the kind of vehicle (cart, sling, bed,chair); the power source (internal-combustion engine, pressed air, electric motor); and the medium (air,hard surface, rails, rollers, oil, water). Thus, a cart-kind of vehicle moving over rough services with aninternal-combustion engine to power it is the automobile. The expectation is that it would be possible todetermine some novel combinations.

10. Forced relationships

It is an easy technique involving the joining of totally different ideas to come up with a fresh idea.Though the solution may not be strictly unique, it frequently results in an assortment of combinations thatare often useful. A lot of products we see today are the output of forced relationships (such as a digitalwatch that also has a calculator, musical birthday cards and Swiss army knife). Most of these ideas maynot be revolutionary discoveries but they are still advantageous products and usually have a prospectivemarket in society. Robert Olson provided an example for forced analogy in his book ‘The Art of CreativeThinking.’ He compares different aspects of a corporate organization structure to the structure of amatchbox.

11. Daydreaming

Though mostly not met with approval, daydreaming is truly one of the most fundamental ways to triggergreat ideas. The word “daydream” itself involuntarily triggers an uninhibited and playful thought process,incorporating the participant’s creativity and resourcefulness to play around with the present problem. Itenables a person to establish an emotional connection with the problem, which is beneficial in terms ofcoming up with a wonderful idea. The focus of productive daydreaming is a particular goal irrespective ofwhether it seems to be an impractical task. Plenty of famous inventors have engaged in daydreaming inthe past, thereby setting off ideas that contributed to life altering inventions. The airplane is the mostnotable example for this. If the Wright brothers had not let their imagination run wild thinking aboutflight, we would probably still be traveling by ferry.

12. Reverse thinking

As the term ‘reverse thinking’ itself suggests, instead of adopting the logical, normal manner of looking ata challenge, you reverse it and think about opposite ideas. For example: ‘how can I double my fan base?’can change into ‘how do I make sure I have no fans at all?’ You may notice that the majority ofparticipants would find it easier to produce ideas for the ‘negative challenge’ simply because it is muchmore fun. However, don’t spend too much time on the reverse idea-generation – about 10 to 15 wrongideas is fine. After one session is over, you can either continue in the reverse idea atmosphere with a newchallenge or else do the reversal once more to make it stronger. An example for the latter is “I am nevergoing to update any of my social networks” changing into “I am going to always update all of my socialnetworks.”

13. Questioning assumptions

The majority of industries have an orthodoxy – unspoken but deeply-held beliefs that everyone stands byfor getting things done. Sadly, they fail to realize that by questioning assumptions at every step of serviceor product development, they can actually enable the birth of fresh possibilities and ideas.

Here’s how Mattimore suggests one go about questioning assumptions: The participants should start bysettling on the framework for the creative challenge. After this, they should produce 20 to 30 assumptions(irrespective of whether they are true or false). The next step is to select several assumptions from themany generated, and utilize them as idea triggers and thought starters to engender fresh ideas.

14. Accidental genius

Accidental genius is a relatively new technique that utilizes writing to trigger the best ideas, content andinsight.

15. Brainwriting

Brainwriting is easy. Instead of asking the participants to shout out ideas, they are told to pen down theirideas pertaining to a specific problem or question on sheets of paper, for a small number of minutes. Afterthat, each participant can pass their ideas over to someone else. This someone else reads the ideas on thepaper and adds some new ones. Following another few minutes, the individual participants are againmade to pass their papers to someone else and so the process continues. After about 15 minutes, you orsomeone else can collect the sheets from them and post them for instant discussion.

16. Wishing

This technique can be begun by asking for the unattainable and then brainstorming ideas to make it or atleast an approximation of it, a reality. Start by making the wishes tangible. There should be collaborationamong the members of the team to produce 20 to 30 wishes pertaining to your business. Everyone’simagination should be encouraged to run wild – the more bizarre the idea, the better. There should be norestrictions on thinking.

The next step is concentrating on a number of these unattainable wishes and utilizing them as creativestimuli to trigger ideas that are new but more practical. Mattimore suggests getting the team to challenge

the problem from diverse perspectives (imagine how a person from another planet or from anotherindustry or profession would view it) or reflect on it. This type of role playing assists with moving awayfrom conventional thinking patterns to see fresh possibilities.

17. Socializing

If employees only hang around with colleagues and friends, they could find themselves in a thinking rut.Let them utilize all those LinkedIn connections to begin some fantastic conversations. Refreshingperspectives will assist with bringing out new thinking and probably, one or two lightning bolts.Socializing in the context of ideation can also be about talking to others on topics that have nothingwhatsoever to do with the present problem.

18. Collaboration

As the term indicates, collaboration is about two or more people joining hands in working for a commongoal. Designers frequently work in groups and engage in collaborative creation in the course of the wholecreative process.

Identify more business opportunities

To be successful entrepreneurs, we need to be continually innovating and looking for opportunities togrow our startups.

But how do you find new opportunities to take your startup to new markets and growth levels? Here arefour ways to identify more business opportunities.

1. Listen to your potential clients and past leads

When you’re targeting potential customers listen to their needs, wants, challenges and frustrations withyour industry. Have they used similar products and services before? What did they like and dislike? Whydid they come to you? What are their objections to your products or services?

2. Listen to your customers

When you’re talking to your customers listen to what they saying about your industry, products andservices. What are their frequently asked questions? Experiences? Frustrations? Feedback and complaints?

3. Look at your competitors

Do a little competitive analysis (don’t let it lead to competitive paralysis though) to see what otherstartups are doing, and more importantly, not doing? Where are they falling down? What are they doingright? What makes customers go to them over you?

4. Look at industry trends and insights

Subscribe to industry publications, join relevant associations, set Google alerts for key industry terms andnews and follow other industry experts on social media.

Market Feasibility Analysis

A market analysis enables you to define competitors and quantify target customers and/or users in themarket within your chosen industry by analyzing the overall interest in the product or service within theindustry by its target market . You can define a market in terms of size, structure, growth prospects, trends,and sales potential. This information allows you to better position your company in competing for marketshare. After you’ve determined the overall size of the market, you can define your target market, whichleads to a total available market (TAM), that is, the number of potential users within your business’ssphere of influence. This market can be segmented by geography, customer attributes, or product-orientedsegments. From the TAM, you can further distill the portion of that target market that will be attracted toyour business. This market segment is known as a serviceable available market (SAM).

Figure 11.14 An analysis of market feasibility examines the overall market and focuses on the anticipatedshare of the target market. (attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license)

Projecting market share can be a subjective estimate, based not only on an analysis of the market but alsoon pricing, promotional, and distribution strategies. As is the case for revenue, you will have a number ofdifferent forecasts and tools available at your disposal. Other items you may include in a market analysisare a complete competitive review, historical market performance, changes to supply and demand, andprojected growth in demand over time.

Applying Feasibility Outcomes

After conducting a feasibility analysis, you must determine whether to proceed with the venture. Onetechnique that is commonly used in project management is known as a go-or-no-go decision. This toolallows a team to decide if criteria have been met to move forward on a project. Criteria on which to base adecision are established and tracked over time. You can develop criteria for each section of the feasibilityanalysis to determine whether to proceed and evaluate those criteria as either “go” or “no go,” using thatassessment to make a final determination of the overall concept feasibility. Determine whether you arecomfortable proceeding with the present management team, whether you can “go” forward with existingnonfinancial resources, whether the projected financial outlook is worth proceeding, and make adetermination on the market and industry. If satisfied that enough “go” criteria are met, you would likelythen proceed to developing your strategy in the form of a business plan.

UNIT-IV Financial and Economic Feasibility – Technical and Locational Feasibility – Manager andLegal Feasibilities – Project Appraisal – Project Report.

FEASIBILITY STUDY

Feasibility study refers to a structured and systematic analysis of the various aspects of aproposed entrepreneurial venture designed to determine its workability. A well-prepared feasibility studycan be an effective evaluation tool to determine whether an entrepreneurial idea is a potentially successfulone. It can also serve as a basis for the all-important business plan.

Feasibility study is the first stage in the project formulation process. It is the appraisal of a projectwithin the limitations of internal and external constraints. This is conducted to determine the desirabilityof making an investment. The study may give us three alternatives as given in Fig. They are explained asbelow.

ALTERNATIVES OF FEASIBILITY STUDY

Rejection of the idea

Accepting the idea

Inadequate Date to take Decision

1. Rejection of the Idea: The feasibility analysis may result in the rejection of the project idea. Undersuch a circumstance as the idea is not feasible, no further investigation is found desirable.

2. Accepting the Idea: The project idea is accepted when it is positive and feasible. In such a case, theproject idea deserves further studies and analysis from various angles. Enough to take a decision. Insuch a case the final decision is deferred for more information.

Phases of Feasibility Study: Project feasibility investigation is divided into three phases namely,

1. Pre-feasibility Study.

2. Feasibility Study.

3. Project Report Study.

Of the above said phases, the first two are discussed here under and the third one is discussed in asubsequent chapter.

1. Pre–feasibility Study: Pre-feasibility study is conducted before one starts conducting feasibilitystudy. Here actually only the groundwork is carried on. It is conducted to analyse whether-

1. The investment is worth making.

2. The project idea requires a detailed study such as market surveys, tests and pilot plant testetc., and

3. The project idea is a viable proposition or not.

Pre-feasibility study covers the following factors also:

1. The market for the product.

2. The plant capacity.

3. The necessary inputs.

4. The technology and project engineering.

5. The overheads.

6. The manpower and staff needed.

7. Profitability.

These factors are broadly analyzed and in-depth study is made at a later date.

2. Feasibility Study: Feasibility study includes the most important elements of theentrepreneurial venture and entrepreneur‘s analysis of the viability of these elements. Theseelements include the following:

1. Marketing Considerations.

2. Financial Considerations.

3. Economic Considerations.

4. Technical Considerations.

5. Legal Considerations.

6. Managerial Considerations.

7. Locational Considerations.

8. Organisational Considerations.

Of these angles, marketing considerations are discussed in this chapter elaborately and all theother angles are elaborated in subsequent chapters.

Financial Feasibility Studies

Prospectus’ research and writing team is recognized as a world leader in financial feasibility studypreparation. Consisting of lifelong entrepreneurs, our team is dedicated to the success of our clients’ goal.We have assisted hundreds of companies in writing their finance and economic feasibility reports andprepared vital studies for a business’s initial launch. From real estate to high tech to economicdevelopment to refineries of all kinds, there is not an aspect of the feasibility study process that our staffis not intimately knowledgeable about. The financial aspect of such studies is one of our strengths.

A financial feasibility study, or FFS, should assess the viability of a project based on major pivotalcomponent: will the project or business have enough cash to complete the project (and generate a profit).One of the bottom lines of any business is whether a company can sustain itself, pay its employees and ofcourse make a profit. A financial study can help in this assessment. Components to considers include:

1. Company Expenses

2. Revenues.

3. Assets

4. Liabilities

5. Cash flow (money in, and money out).

An economic or finance feasibility study is developed for companies that seek to understand the amountof capital they need to procure to successfully start and complete any given project. While a business planmay have a section called the “CBA” or cost-benefit-analysis, in an economic feasibility study it will begreater in detail and have more statistics and numbers in the financials.

Importance of a Financial Feasibility Study

There are many important factors that any feasibility study should address, and in the financial oreconomic studies this is equally true. A financial feasibility study can concentrate on a variety of projectsor developments or can focus one specific area or study. In any finance study, particularly if one isseeking to raise capital from a bank or private backers, the basic minimum of any financial report (andbusiness plan as well) should be to cover the following:

How much capital ones needs to begin the business;

How much capital ones needs to operate the business;

ROI or return on investment, i.e. when will investors see their money back with a return.

WhyWrite a Financial Feasibility Study?

Writing a financial feasibility study is good business practice, especially for companies that are planningon raising many millions of dollars and want to have the knowledge readily available to make an educateddecision about a project’s viability. It is hard to image a bank or investor infusing capital in a companyraising tens of millions of dollars that does not have such a report. By creating such a real estate financialstudy or for any product study, for example, you will be able to navigate potential pitfalls duringdevelopment and save needed capital in the process, as well as possibly discover new opportunities in themarket.

Benefits of Writing a Feasibility Study:

Prepares the companies for up to date information regarding statistical information on any project,i.e. market for products, real estate development, demographics, income streams, etc.

Creates a knowledge of how much capital, if any, is needed for the project’s launch and success.Again, this can be for any business, high tech, real estate, oil, energy etc.

Helps with strategies. Since the financing needs are known this can help with strategizing nextmoves or first mover advantage for new areas.

Identifies areas for growth.

Inspires confidence in the management team since obtaining the numbers can strengthen abusiness and its leadership belief in the company’s success.

Feasibility studies provide intelligence, statistics for the management team.

A feasibility study is essentially written prior to a project’s undertaking for a simple reason: Directors ofcompanies and their investors want to ensure that any given project they plan on developing is actually“feasible”, and preparing a study showing this feasibility is the main point of writing such a report (whichof course will help save needed capital and time in the long run). A feasibility study includes such vitalinformation and data as the funding needs to complete the project, the market opportunity, governmentregulations, risk factors, strength and weaknesses, the management team and the financials of thecompany. While a feasibility study somewhat sounds like a business plan, such reports tend to be manytimes longer with more details on the market and financials.

Prospectus.com’s team is respected for its keen insights into any given market, and our straightforwardassessment regarding a projects viability. We work one-on-one with our clients to ensure that each projectis specifically tailored to the company’s needs.

What We Do

Our team at Prospectus.com has worldwide experience in writing feasibility studies. Here is a partial listof our process. We have used a real estate project as an example. But this can be utilized for productlaunch, not just for the real estate industry. Some features are missing but the general idea can beconveyed as follows:

Review

Initial analysis of your project

Recommendation on next course of action

Undertake the project

Information assessment and collection

Initial analysis of the proposed development area, including the initial demographics

Conduct product view or for real estate, land or site review

Proposed product costs, or for real estate, construction and development costs

Market analysis

Demographic analysis of proposed product or area

Product and neighborhood analysis

Demographic comparison

Municipal incentives

National market overview

Analysis of similar products or developments

Regional market analysis

Competitive market analysis

Competitive advantages of project or location

Disadvantages of project or location

Projected overall market

Pricing analysis

Purchases or occupancy

Interviews if needed

Financial analysis

Management summary

Principals

Advisors

Third party team, i.e. law firm, accountant etc.

Financial Statements and Projections

Pro forma

Balance sheet

Income statement

Profit and loss

Recommendations

We will make recommendations based on our analysis and conclusions

Appendixes and Addendum

Once complete we will then send the draft version of the feasibility study for review andcomments.

Start to Finish

We work on the project from inception to completion.

All Encompassing Feasibility Consulting Firm

Prospectus.com is a one-stop, all-encompassing company for all your feasibility study, prospectus,business plan or offering document needs. Our team has been involved in literally thousands ofprojects. We have set the bar high for feasibility study performance, taking into consideration timeconstraints and budgets. We pride ourselves on offering superior service – not just on a local or nationallevel but on a global scale – at a fraction of the cost of our competitors and usually twice as fast. We giveour clients the tools they need to make an educated decision about the business opportunity at hand byproducing a market driven, financially conscience feasibility study. The success of our clients is thenumber goal of our company.

ECONOMIC FEASIBILITY

Once the technical feasibility and market studies are complete, it is time to determine BusinessFeasibility. The first purpose of this effort is to financially model the venture opportunity and achieve abreak-even analysis. In other words, based upon the costs of goods sold, capital costs, and managementand administration, how much revenue generated from units sold is required to break-even and over whatperiod of time.

Once a break-even analysis is developed, the entrepreneurs can develop realistic financial projections forbest case and worst case scenarios. These scenarios will be critical in strategic planning, milestonedevelopment and venture valuation analysis. The simple objective is to determine what level of revenue isrequired to satisfy the return on investment demanded by the founder and/or the investors.

Definition: The economic feasibility step of business development is that period during which a break-even financial model of the business venture is developed based on all costs associated with taking theproduct from idea to market and achieving sales sufficient to satisfy debt or investment requirements.

Objective: The objective of the economic feasibility is to develop a financial model of the businessventure.

Product: The product of this step is a complete integration of the technical product information and themarket study into one or more break-even financial models.

Business Activities

The business activities common to this step are those necessary to develop a conceptual plan for abusiness venture based upon one or more financial scenarios.

During the economic feasibility step, the following activities must be completed:

Develop a financial analysis that identifies break-even scenarios based upon unit prices, volumeof sales, and costs

Determine whether the business opportunity presents sufficient profit margins to justify abusiness venture

Assess the merits of licensing the opportunity compared to venturing

Milestones: A financial model accurately representing the business opportunity

Funding Sources: Personal finances, Friends and family

Business Information: Completion of the economic feasibility step will usually result in a go/no-godecision concerning the business venture, and if the decision is positive, identification of sources and usesof seed capital for the development phase.

TECHNICAL FEASIBILITIES

INTRODUTION:

After having studied the financial and economic feasibilities of a project and satisfied as to theirfeasibilities, the next step is to ascertain its technical feasibilities.

TECHNICAL FEASIBILITY:

Technical feasibility is conducted to find out whether a business is feasible from the angle oftechnical aspects. It ascertains whether the idea can be converted into a product. The assessment oftechnical feasibility requires a thorough examination as to the requirements of the actual productionprocess and the choice of technology. The assessment of production process includes a detailed estimateof the goods and services needed for the project such as land, machineries, manpower, materials,transportation, fuel, power, water etc. The success of the project should be given recognition in relevanceto technical feasibility. Suppose these resource factors are to be imported from a foreign country,conditions in the foreign market and the Government policy at home are to be reviewed. Anotherimportant feature of technical feasibility relates to the types of technology to be adopted for the project. Ifnew technical processes are adopted from abroad attention is to be paid to the differences in conditions.

TECHNOLOGY ANALYSIS:

The term technology refers to the science of the industrial art. It is an applied science and an aidto convert basic science and research into performance i.e. production. Same product may be produced bydifferent methods. Each method may require different set of machines and tools. Therefore productionmethods differ from one another. Hence one must have information about the type, size and capacity ofmachines needed. Further, entrepreneurs should have information as to how the machines are to be usedefficiently. He should train his works to use the machines effectively. He must have the rough knowledgeabout the method of production, sequence of activities, importance of activities etc. Technology gives anentrepreneur all sorts of information.

It provides information in detail about the production process, the proportion of the inputs, thequalities of the inputs, the temperature and pressure at which the mixing is to be done etc.

Technology tells us what type of machines is required in the production process. It tells what isthe optimum size of th machine, taking into consideration the total annual requirements. The informationon the machines necessary for maintaining the temperature, pressure etc. To suit the method of productionalso comes under this head.

It also gives information as to how the machines are to be operated. Further the entrepreneur mustknow the dos and don‘ts for maintaining the machinery intact.

Technology includes training the personnel to use the machines efficiently. The entrepreneur isnot the person operating the machine. The workers operate the machines and therefore the workers mustbe trained properly to use the machines. Imparting practical training to employees as to how to operate themachines efficiently is part of what we call technology. Why a machine is used in a specific manner alsomust be made known to them.

`Technology and its environment play a predominant role in entrepreneurial development. Itaffects the business environment in variety of ways and, therefore, due consideration is to be given totechnology dimension while establishing and running an enterprise. Especially, its impact is more onsmall scale units, which is affected greatly by the technological change that occurs continuously. Smallenterprises confront competition in each sphere due to technological change. It implies the up-to-dateknowledge also helps the entrepreneur to produce qualitative products or to deliver qualitative services.

The impact of technological environment on entrepreneurial activities is discusses below:

1. Choice of Technology: Selection of proper technology is a critical element for success of thebusiness. The quality, price etc. of a product depends very much upon the choice of the technology.

2. Managerial Aspects: Management of certain aspects such as human resources, plant and materials,capacity of the operation system, volume and quality of goods depends much upon the technology.

3. Competitors: Technology also influences competitors in the market.4. Increase of Profit: Technology advancement upgradation, and the use of advanced technology may

lead to higher productivity and reduction of costs, which ultimately result in increase of profit.

Our Union Government has created a number of industrial promotion organisations and launcheddifferent schemes of modernization and upgradation of technology to encourage entrepreneurs to copeup with the changing needs of the time, to produce good quality products with competitive edge. Hencean entrepreneur should consider entire technological environment while choosing the technology.Technological feasibility is a critical input for the success of any kind of enterprise.

FEASIBILITY STUDIES FOR LOCATIONThe feasibility study is perhaps most misunderstood aspect of developing a location-based

entertainment facility. Yet, it is the most important step, as mistakes at this early stage can permanentlyhandicap the project's performance, perhaps fatally. A good feasibility study is more than just a set offinancial projections that is incorporated into the overall business plan. Done properly, it becomes themarket-driven strategic plan that is the road map for all subsequent decisions. As much as answering thequestion "Is a project feasible?", a good market and financial feasibility study also addresses the questionof what is most feasible and what should all its attributes be to assure maximum success.

Based on over two decades of entertainment industry feasibility experience, the WhiteHutchinson Leisure & Learning Group has developed a market and financial feasibility work program tomeet the needs of the location-based entertainment industry. The feasibility program uses a proven andthorough methodology of site inspection, field work, competition analysis and geo-demographic and geo-socioeconomic-lifestyle analysis combined with our project experience, knowledge and research and theperformance of existing family, bowling and other entertainment centers. For international studies,demographic and socioeconomic data is often not available in many countries to the extent available inthe USA. In these situations, WHLLG has been successful in developing analytical methodologies toestablish adequate demographic data required for market feasibility.

ENTREPRENEURSHIP DEVELOPMENT PROGRAMME

Entrepreneurship development programme is a programme meant to develop entrepreneurialabilities among the people. The concept of entrepreneurship development programme involves equippinga person with the required skills and knowledge needed for starting and running the enterprise. EDP is aneffective way to develop entrepreneurs which can help in accelerating the pace of socio-economicdevelopment, balanced regional growth, and exploitation of locally available resources. It takes care of allthe constraints and therefore it is proved to be one of the most effective tools for developing newentrepreneurs.

Entrepreneurship Development Programme: Meaning, Objectives, Features, Role, Evaluation,Factors and Models

EDP – Introduction to Entrepreneurship Development Programme

Entrepreneurship Development Programme is primarily meant for developing those firstgeneration entrepreneurs who on their own cannot become successful entrepreneurs. It covers three major

variables- location, target group and enterprise. Any of these can become the focus or starting point forinitiating and implementing an EDP.

Entrepreneurship development programme is a programme meant to develop entrepreneurialabilities among the people. The concept of entrepreneurship development programme involves equippinga person with the required skills and knowledge needed for starting and running the enterprise.

EDP is an effective way to develop entrepreneurs which can help in accelerating the pace ofsocio-economic development, balanced regional growth, and exploitation of locally available resources. Ittakes care of all the constraints and therefore it is proved to be one of the most effective tools fordeveloping new entrepreneurs.

The remaining two then will follow by making proper synthesis with the first. For example, if theobjective is to promote women entrepreneurs, suitable location and proper entrepreneurial activities mustmatch or if the objective, is to develop North East region. Methodology for selection of the prospectiveentrepreneurs as well as support services after the training have a significant impact on the success -of theentrepreneur development programme.

These programmes broadly envisage a three tiered approach, developing achievement motivationand sharpening of entrepreneurial traits and behaviour, project planning and development and guidanceon industrial opportunities, incentives and facilities and rules and regulations, and developing managerialand operational capabilities. Various techniques and approaches have been developed and adopted toachieve these objectives keeping in view the target groups and or to target areas.

Past experience has shown that industrial promotion by provision of facilities, technicalassistance, management training, consultancy, industrial information and other services alone are notsufficient to develop entrepreneur. Hence the EDP package was launched over the years; the EDPs havebecome a vital strategy for harnessing the vast untapped human skills, to channelize them intoaccelerating industrialisation in general and growth of the small scale sector in particular.

In line with the national programme for the promotion and development of small and mediumindustries in the countryside, the Industrial Service Institute (ISI) under the Department of IndustrialPromotion (DIP) launched the EDP to give substance to the government’s policies of stimulation ofeconomic growth, dispersing industries to rural areas and promoting the processing of local raw materials.The EDP was considered a part of the industrial development policy which was articulated in the Fiveyear national economic and social development plan.

Entrepreneurship Development Programme – Meaning

Entrepreneurial Development Programme (EDP) may be defined as a programme designed tohelp a person in strengthening his entrepreneurial motives and in acquiring skills and capabilitiesnecessary for playing his entrepreneurial role effectively and efficiently. It is therefore necessary topromote his understanding of motives, motivation pattern, impact on behaviour and entrepreneurial values.

A programme that seeks to do this is called an EDP This point is to be stressed here because thereare several programmes which aim at providing information or managerial inputs or focus on preparationof a project. Of course a new entrepreneur requires all these inputs but programme which does not touchentrepreneurial motivation and behaviour cannot be regarded as an EDP.

Entrepreneurship is vital for an economy. The spirit of entrepreneurship can be generated withinan economy by infusing the urge, motivation and providing training to the aspiring entrepreneurs or thepeople with the potential. Entrepreneurial development programme (EDP) is a way to achieve theaforesaid goal.

EDPs are planned programmes developed to identify, inculcate, cultivate, develop, and polish thecapabilities and skills as the prerequisites of a person to become an entrepreneur. The EDPs focus on

training, education, reorientation and creation of conducive and healthy environment for the growth ofentrepreneurship.

EDP can be conceived as a tool for enhancing human resource. It is a programme meant todevelop entrepreneurial abilities among the people. The EDP is basically designed to instill and infuseentrepreneurial motive and spirit among people and cultivating and nurturing the skills and capabilitiesnecessary for playing successfully his/her role as an entrepreneur. An EDP involves inculcation,development, and polishing of entrepreneurial skills, knowledge in the participants which are required bythem to establish and successfully run their enterprises.

An entrepreneur is a creator or a designer who design new ideas and business processes accordingto the market requirements and his/her own passion. Entrepreneurship is the art of starting a business,basically a startup company offering creative product, process or service. We can say that it is an activityfull of creativity.

Entrepreneurship development is the process of improving the skills and knowledge ofentrepreneurs through various training and classroom programs. Entrepreneurship development isconcerned with the study of entrepreneurial behaviour, the dynamics of business set-up, development andexpansion of the enterprise.

The whole point of entrepreneurship development is to increase the number of entrepreneurs.This accelerates employment generation and economic development. Entrepreneurship is promoted tohelp lessen the unemployment problem, to overcome the problem of stagnation and to increase thecompetitiveness and growth of business and industries.

Entrepreneurship development concentrates more on growth potential and innovation.Entrepreneurship Development has gaining increasing significance in developing an economy. It is anorganised and systematic development. It is a tool of industrialization and a solution to unemploymentproblem for any country.

Entrepreneurship Development Programme – Evolution of EDP

Earlier, Government and other agencies were responsible for supporting potential entrepreneursto set up their units specially in backward and tribal areas. In this context, Small Industries ServiceInstitute and SIET Institute in the sixties tried to fill the information gap which existed and were relevantfor small entrepreneurs.

“The entrepreneurs required a lot of information for setting up a business and in that context thecontribution of these programmes was essentially in the area of disseminating knowledge on financial,technical and managerial aspects. To that extent, these programmes were not basically programmestowards entrepreneurship development, but were in the nature of supportive programmes for the existingand the new entrepreneurs.”

However, it was visualised that creation of industrial development corporations and other externalfacilities has failed to develop, an effective and sufficient condition for entrepreneurship development.

There must be an effective framework to develop the qualities of the individual who respond tothe external opportunities i.e. availability of funds, financial incentives etc. Similarly, efforts should alsobe made so that social and organisational factors help potential entrepreneurs to perceive the opportunitiesand learn to respond to them.

At present, existing entrepreneurs basically emerged out of the natural growth of entrepreneurialtalent of certain communities like Marwaris, Gujaratis, Parsi’s and South Indian Brahmins. This type ofentrepreneurs is a highly motivated group but problem is that they be often interested in quick profits orhigh profits, opportunities which are normally concentrated in the already well-developed areas.

So, it would be more important to have a broad-based entrepreneurial source to command thetempo of economic growth. In this context, entrepreneurial training can make a lot of difference inperformance of the entrepreneurs. By motivating non-entrepreneurial participants to start a viableenterprise, we can easily develop a valid substitute for natural institutions like business families orexisting entrepreneurs.

Entrepreneurship Development Programme – Objectives

Entrepreneurship Development Programme (EDP) in India has many objectives.

The expert group constituted by the NIESBUD accepted that it must be able to helpselected entrepreneurs to:

(1) Develop and strengthen their entrepreneurial quality/motivation;

(2) Analyse environment related to small industry and small business;

(3) Select project/product;

(4) Formulate projects;

(5) Understand the process and procedure of setting up of small enterprise;

(6) Know and influence the source of help/support needed for launching the enterprise;

(7) Acquire the basic management skills;

(8) Know the pros and cons of being an entrepreneur; and

(9) Acquaint and appreciate the needed social responsibility/entrepreneurial disciplines.

Further some of the other important objectives of entrepreneurial training are:

(i) To let the entrepreneur set or reset the objectives of his business and work individually and along withhis group for their realisation.

(ii) To prepare him for accepting totally unforeseen risks of business after such training.

(iii) To enable him to take strategic decisions

(iv) To enable him to build an integrated team to fulfill the demands of tomorrow.

(v) To communicate fast, clearly and effectively

(vi) To develop a broad vision to see the business as a whole and to integrate his function with it.

(vii) To enable him to relate his product and industry to the total environment, to find what is significantin it and to take it into account in his decisions and actions.

(viii) To enable him to cope with and coordinate all relevant paper work, most of which is statutorilyobligatory.

(ix) To make him accept industrial democracy, that is, accepting workers as partners in enterprise; and

(x) To strengthen his integrity, honesty, and compliance with law, the key to success in the long run.

Entrepreneurship Development Programme – Features

The basic features of Entrepreneurship Development Programme have gone throughseveral modifications overtime as:

(a) Identification and careful selection of entrepreneurs for training;

(b) Developing the entrepreneurial capabilities of the trainee;

(c) Equipping the trainee with the basic managerial understanding and strategies;

(d) Ensuring a viable industrial project for each potential entrepreneur;

(e) Helping him to secure the necessary financial, infrastructural and related assistance; and

(f) Training cost is highly subsidised and only token fee is charged. A deposit is, however, taken to ensurecommitment of participants.

Entrepreneurship Development Programme – Course Contents and Curriculum of EDPs

The course contents of an EDP should be formulated as per the objectives of the EDPs.

It should consist of the following:

1. General Approach to Entrepreneurship:

The participants should be given exposure about the conceptual framework of entrepreneurshiprole, expectation, Entrepreneurial environment etc. Innovative behaviour related issues should be focusedto enlighten the entrepreneurs about their future challenges and prospects. Besides, development agenciesshould try to design appropriate strategies enabling the potential entrepreneur to tackle different riskinherent in an innovation activity.

These risks are as follows:

(i) Technical risks – the risk of not knowing enough about the technical processes, materials etc.

(ii) Economic Risks – the risk of market fluctuations and changes in relation to raw materials etc.

(iii) Social Risks – the risk inherent in the development of new relationship.

(iv) Environmental Risks – risk which result from environmental changes in the manager’s work as anoutcome of the new activity.

Moreover, prospective entrepreneurs should be given a detailed information with regard tofacilities generally provided by the government and other agencies involved in promotion ofentrepreneurship.

2. Motivational Training:

Motivational training inputs are meant for developing the motivation of potential entrepreneursand their enterprise building skills. Besides, motivational inputs also include psychological games, tests,goal setting exercises, role play etc.

The motivational inputs will be aimed at increasing the participants, understanding of theentrepreneurial personality and entrepreneurial behaviour and bring about through self-study, changes inself-concept, value, skills thereby leading to positive entrepreneurial behaviour.

The major motivational inputs may be given in the beginning of the training programme on fulltime basis though the learning effected through them will be reinforced and used throughout the trainingprogramme. The understanding of the entrepreneurial personality and behaviour will be supplementedthrough interface with one or two successful as well as not so successful entrepreneurs.

3. Developing Management Skills:

Prospective entrepreneurs should be given exposure in different types of management problems.It would sharpen their management skills. The management problems take different forms and themanagement patterns are peculiar to the situation. So, training for exposing managerial skills will bearranged in keeping the situational requirements. However, managerial aspects should include productionplanning, labour laws, cost analysis, financial accounting, selling arrangements, taxation laws etc.

4. Training for Project Management:

Project inputs are required to help the potential entrepreneurs to develop their project ideas intobankable projects. They should be given acquaintance with the industrial opportunities in the area andalso necessary guidance on product selection. Necessary knowledge about project feasibility, viability andimplementation should also be given to the potential entrepreneurs.

Under project preparation, technical feasibility includes selection of technology, availability ofraw materials, selection of location and site, availability of plant and machinery, infrastructure facilities,roads, transport, power, manpower/personnel requirement.

Similarly, market analysis, level of competition, capital cost, working capital requirement,estimated cost of production, projected sales volume, profitability estimates, expected rate of return,projected cash flows and break even analysis are different aspects that have to be incorporated inassessing the commercial viability of the project.

Sufficient exposure is necessary with regard to financing of the project. Financing arrangementgenerally includes sources of financing, promoter’s contribution, level of institutional financing, seedcapital, investment subsidy etc. Prospective entrepreneurs should be instructed about the importance oftimely implementation of project. They should be given proper training about scheduling of variousactivities, provision for effective supervision and need for avoiding delay and consequent cost escalation.

5. Structural Arrangement:

Training inputs also aim at familiarising the participants about the proposed structuralarrangement for the business or industrial unit. They should be given adequate familiarisation aboutgovernment policy regarding development of industries, especially with regard to small scale industries,registration and licensing procedures, forms of organisation like proprietary, partnership, private companyand Joint Stock Company, institutional setup etc.

6. Support System:

In most of the cases, participants are generally first generation entrepreneurs and they do notknow about the government and institutional support system. Support system may also be used asmotivational inputs to encourage the participants about their future prospects. They should be familiarisedwith the incentives/concessions available, tax-incentives, tax holiday, backward/zero industries districtsconcessions, soft loan scheme, special schemes for technicians etc.

This should be followed by acquainting them with procedure for approaching governmentdepartments and agencies, applying for and obtaining these concessions from them.

7. Factory Visits/In-Plant Training:

Practical exposure is also necessary. Depending upon their products the potential entrepreneursmay feel the need to gain more knowledge about the production process etc. by visiting some of thesimilar units in production. For this purpose, factory visits may have to be arranged.

Similarly, entrepreneurs who select relatively sophisticated products will be expected to have agood idea of the product and the process facilities should be arranged for in-plant training or prototypedevelopment on exceptional basis.

Entrepreneurship Development Programme – Need

Entrepreneurship Development Programme is very much essential for the first generationentrepreneurs because proper training and guidance will help them to get success. It is promoted to helpalleviate the unemployment problem, to overcome the problem of stagnation and to increase thecompetitiveness and growth of business and industries.

The thrust of entrepreneurship development programme is to motivate people to acceptentrepreneurship as a career. Training and successful entrepreneurs becomes ideal for other.

Following are the various needs for EDPs:

(i) Eliminates Poverty and Unemployment:

One of the important problems of any developing country is unemployment. The problem ofpoverty is severe and of longstanding duration in India, and is at its most acute in rural areas. In recentyears central and state governments have started a number of schemes aimed at reducing rural poverty butthey cannot solve the problem completely because of their shortcomings and inadequacies.

India needs to return to the syndrome of high growth rate quickly and sustain it for at least eightyears to eradicate poverty, illiteracy, unemployment and backwardness. Entrepreneurship developmentprogrammes help people towards self-employment and provide entrepreneurship as a career.

Government of India has introduced various programmes to eliminate the poverty and solve theunemployment problem through National Rural Employment Programme (NREP), Integrated RuralDevelopment Programme (IRDP) etc.

(ii) Balanced Regional Development and Growth:

One of the objectives of setting up of public enterprises is to promote balanced regionaldevelopment. It can be possible through the expansion of the employment opportunities in backwardregions.

The pace of economic development of different States and Regions in the country has not beenuniform over the years owing to historic reasons and a number of other factors. Industrialisation plays animportant role in correcting the regional imbalances and accelerating the industrial growth.

In order to remove regional inequalities and encourage balanced industrial growth of differentstates/regions, subsidies to industries set up in backward districts. Successful EDPs help in fasterindustrialisation and reduce the concentration of economic power. It is because the small scale industriescan be set up in remote areas with little financial resources which help in achieving balanced regionaldevelopment.

(iii) Prevents Industrial Slums:

The Indian economy, which has over the last six decades passed through various phases ofgrowth, is now all set to enter an altogether different orbit marked by a high rate of expansion, combinedwith ‘inclusive growth.’ Slums are an outcome of imbalanced urban growth resulting from over-concentration of economic activities. As per the census 2001, 42.6 million of India’s population lives inslums.

This constitutes about 15% of the total urban population of the country. The urban cities arehighly congested and leading to industrial slums. Decentralisation of industries is very much require forlocating the industries. EDPs help in removal of industrial slums as the entrepreneurs are provided withvarious schemes, incentives, subsidies and infrastructural facilities to set up their own enterprises in allthe regions.

(iv) Harnessing Locally Available Resources:

Human beings have inhabited the earth; they have used the earth’s resources and havecontinuously transformed it. Each landscape is the upshot not only of natural processes but of the actionsthroughout history of human beings whose responsibility is to organize, protect and manage theenvironment they share.

People use many of the earth’s natural resources. All of the products we use have a naturalresource base. Minerals, forest products, water, and soil are just a few of the natural resources humans useto produce energy and make things people use.

Since abundant resources are available locally, proper use of these resources will help to carveout a healthy base for sound economic and rapid industrialisation. The EDPs can help in harnessing theseresources by training and educating the entrepreneurs.

(v) Defuses Social Tension:

Self-employment and entrepreneurship become increasingly important in our modern economies.Many people have an ambition to “run their own business”, and these days more people than ever arestarting up their own businesses. With redundancies on the increase in the recession, many people willtake the chance of “working for themselves” and will relish the opportunity of being their own boss andnot being answerable to anybody else.

It is, of course, admirable, but they could be digging a hole for themselves. Every young personfeels frustrated if he does not get employment after completing his education. The talent of the youth mustbe diverted towards self-employment careers to help the country in defusing social tension and unrestamong youth is possible by EDPs.

(vi) Capital Formation:

It is one of the most critical activities in getting a business started. Business creation has moved alot from the days of Marco Polo and Schumpeter. The biggest hurdle the entrepreneurs face is in raisingthe initial capital needed for the new venture.

Getting equity from family and friends has many advantages over other types of financing.Entrepreneurship development programmes helps an individual to raise capital to start a business or togrow an existing business.

(vii) Improvement in per Capita Income:

Entrepreneurs play a vital role in achieving a higher rate of economic growth. Entrepreneurs areable to produce goods at lower cost and supply quality goods at lower price to the community accordingto their requirements. When the price of the commodities decreases, consumer gets the power to buy moregoods for their satisfaction. All this are possible through entrepreneurship development programmes.

(viii) Facilitating Overall Development:

Entrepreneurship development programmes are great and successful in India. If everything goesin proper channel with proper judgment, it will flourish to fill up the sky. Entrepreneurship developmentprogrammes inspires innovations, creative ideas and provide new solution to the problems.

Entrepreneurship Development Programme – Role of EDPs

EDPs comprise a number of programmes which provide the prospective entrepreneurs withinformation regarding the scope of new business, the process of starting new ventures, the mode ofpreparation of project reports, and the sources of finance. They aim at developing human resources andinducing motivation and competence in the prospective entrepreneurs. They cause proper utilization oflocal resources, more employment generation, promotion of small enterprises and the overalldevelopment of an area.

1. Capital Formation – An entrepreneur mobilises idle savings of the public and puts them to productiveuse. Thus, he helps in capital formation. This is very essential for the industrial and economicdevelopment of a country.

2. Employment Opportunities – EDPs enable prospective entrepreneurs in the setting up of their ownenterprises. This enables them to get self-employment. By setting up more and more enterprises by theentrepreneurs, both on small and large scale, many job opportunities are created for others.

3. Local Resources – The proper use of local resources promote the progress and development of the areaat lower cost. EDPs help in the proper use of local resources by providing guidance, assistance, educationand training to the prospective entrepreneurs.

4. Balanced Regional Development – EDPs help in accelerating the pace of industrialisation in remoteand backward areas. Thus, they reduce the concentration of economic power in the hands of a few. Thisresults in the development of backward areas and balanced regional development.

5. Improved Per Capita Income – EDPs promote the setting up of more enterprises. This will help in thegeneration of more employment and income.

6. Improved Standard of Living – Entrepreneurs now make efficient use of the resources and producebetter quality products at lower costs. The consumers get better quality products at lower prices. Thisleads to improved standard of living of the society.

7. Economic Independence – Entrepreneurs can produce wide variety of better quality goods and servicesat competitive prices. They enable a country to earn foreign exchange by selling these products in theforeign market. This helps in promoting economic independence of the country.

8. Preventing Industrial Slums – EDPs can help in preventing spread of industrial slums. They cansupport entrepreneurs for setting up their enterprises in industrially backward areas. This will help inreducing pollution.

9. Social Tension – EDPs can help the unemployed youth for setting up enterprises by providing properguidance, training and assistance. This results in self-employment and prevention of social tension andunrest.

10. Overall Development – EDPs promote setting up of various types of enterprises which mutuallyrequire the outputs of other. This leads to the overall development of an area.

ROLE OF ENTREPRENEUR IN ECONOMIC GROWTH

Economists’ View The position of the entrepreneur in modern production is like that of thedirector of a play. Modern economic development is closely linked with production. Modern productionis highly complex. The entrepreneur directs production and he must do whatever is necessary for itssuccess. His role in modem economic development has at least three aspects:

(a) The entrepreneur co-ordinates the other factors of production. This involves not onlyassembling the factors, but also to see that the best combination of factors is made available for theproduction process. Co-ordination involves selection of the right type of factors, employment of eachfactor in the right quantity, use of the best technical devices, division of labour, reduction of waste etc.

(b) The entrepreneur takes risks. In Hawtrey’s view this is the most important function of theentrepreneur and the quantum of profit he receives is directly proportionate to the risks he takes. Risks aregenerally based on the anticipation of demand. Prof. B.R. Knight has gone one step forward. In hisopinion risks are of two types - insurable and non-insurable. He calls non-insurable risks by the term“uncertainty”. In his view uncertainty bearing is the primary function of an entrepreneur which enableshim to get profit. This function has assumed great importance with the increasing complexities of modernproduction.

(c) Finally, the entrepreneur innovates. Innovation is different from invention. Invention is thework of the scientists. Innovation implies the commercial application of an invention. As an innovator theentrepreneur assumes the role of a pioneer and an industrial leader. Joseph Schumpeter and his followersbelieve that the entrepreneur is one who innovates and innovation makes the entrepreneur the hero in thedrama of economic development.

Modem economists tend to agree with the view expressed by Schumpeter. Since the process ofeconomic development is characterized by the presence of discontinuous disturbance, economists tend to

agree to the view that this disturbance comes in the form of innovation. The entrepreneur can undertakeanyone type of the following five categories of innovation:

(a) The introduction of a new good or a new quality of a good.

(b) The introduction of a new method of production.

(c) The opening of a new market

(d) The conquest of a new source of supply of raw materials.

(e) The carrying out of a new organisation of any industry.

The innovational activity raises the productive efficiency of the economy resulting in greateroutput and income. Schumpeter finds in rising productivity the secret of economic development asdistinguished from economic growth. Economic growth occurs when more resources are available in theeconomy. But economic development is an entirely different phenomenon. It occurs when outputincreases as a result of entrepreneurial activity. Schumpeter, therefore, defines development as “thecarrying out of new combinations.”

The entrepreneur is the central figure in the process of development. He introduces newcombination of factors thereby channelising the economy’s resources along productive lines. He is not aproducer, for the latter chooses anyone of the available methods, the entrepreneur is constantly engaged inintroducing newer and newer methods of production. The entrepreneur is not a capitalist. The capitalistprovides the funds for production; the entrepreneur divests the funds to new production.

The entrepreneur is thus always on the look out of making the economic system at its dynamicbest. Thus, entrepreneurial activity stimulates progress and forms the mainspring of economicdevelopment. Importance of Entrepreneur in Economic Development Every country tries to achievemaximum economic development. The economic development of a country to a large extent depends onhuman resources. But human resources alone will not produce economic development - there must bedynamic entrepreneurs.

A country may be rich in natural resources but if it lacks entrepreneurship it may not be able toutilize the resources and it may lag behind in economic development. This is true of many developingcountries. Many developing countries have realized the importance of entrepreneurs and earnest attemptsare now being made to motivate industrial entrepreneurs. Entrepreneurs are action-oriented, highlymotivated individual who take risks to achieve goals. An entrepreneur is one who looks for opportunities,identifies opportunities and seizes opportunities mainly for economic gain (profit). Economicdevelopment of a country depends primarily on its entrepreneurs.

Entrepreneurs seizing opportunities set-up business undertakings and industries, thereby bringeconomic transformation. They are therefore aptly called agents of change. By their actions, people havea better standard of living, get improved products and comforts and the wide disparity in income levels isgradually reduced. Besides, an economically advanced country will have more power and a confidentself-image. History provides ample evidence to entrepreneurs’ ability and innovations.

Many of the scientific inventions and technological developments that took place in England inthe 18th century and in other countries produced economic goods useful to man because of the efforts ofentrepreneurs. In their absence, many scientific discoveries would have remained as they were. It shouldbe remembered that innovation is key to entrepreneurship. Entrepreneurs have contributed manyinnovations in developing new products and in the existing products and services. All these have resultedin economic development by providing more employment, more income, export of products and services,and making available better products and services to the people.

It is very often said that “India is a rich country inhabited by the poor”. India is endowed withplenty of natural resources and good climate. But the country has not made much economic progress as it

should have been. Natural resources themselves will not produce economic development. There must bepeople with vision, initiative and drive to make use of the natural resources. In India, what we require is“entrepreneurship” in an individual to productively integrate resources and enhance economic growth.

Entrepreneurs perform vital functions in economic development. They have been referred to asthe human agents needed to “mobilize capital, to exploit natural resources, to create markets and to carryon trade”. It might well be said that the entrepreneurial input spells the difference between prosperity andpoverty among nations. Japan is a place where entrepreneurs have achieved success by hard works as wellas imagination and ability. The economic progress of the USA and Western Europe also highlight thesignificance of entrepreneurship. In the newly industrializing countries, small enterprises became thefocus of various approaches to entrepreneurial development since they function as “seed beds ofentrepreneurial and managerial talent”. The inadequacy of entrepreneurship is an inhibiting factor toaccelerate the process of industrialization. In general, contemporary economists agree that entrepreneur isa business leader who has a pivotal role in fostering economic growth and development. Entrepreneurshipis one of the most important input in the economic development of a country or a region.

The number and competence of entrepreneurs affect the economic growth of a region. It is notwrong to consider entrepreneurship as a panacea of the economic evils in a developing country. In fact,entrepreneurship is the dynamic need of a developing nation and sustains the process of economicdevelopment in the following ways:

1. Employment Generation

Growing unemployment particularly educated unemployment is an acute problem of the nation.The available employment opportunities can cater to only 5 to 10 per cent of the unemployed. As 16discussed, wage employment is a self-saturating. When government creates, say a hundred jobs in variousdepartments, 100 persons get employed and the vacancies are filled for thirty years or so, till these peopleretire and the vacancies re-emerge. If a hundred persons become entrepreneurs they not only create ahundred jobs for themselves but also provide employment to many more. As the time passes theseenterprise grow providing direct and indirect employment to many more. Thus, entrepreneurship is thebest way to fight the evil of unemployment. 2. National Income National Income consists of goods andservices produced in the country and those imported. The goods and services produced are forconsumption within the country as well as to meet the demand of exports. The domestic demand increaseswith ever increasing population and standard of living. The export demand also increases to meet theneeds of growing import due to various reasons. An increasing number of entrepreneurs are required tomeet this increasing demand for goods and services. Thus, entrepreneurship increases the national income.

3. Dispersal of Economic Power

The world affairs have been dominated by power. There have always been two types of power i.e.,muscle power and economic power. In the modem age, the muscle power has lost its relevance and theworld is ruled by the economic power Economic power is the natural outcome of industrial and businessactivity. Industrial development normally can lead to concentration of economic power in few hands.

This concentration of power in few hands has its own evils in the form of monopolies.Developing a large number of entrepreneurs helps in dispersing the economic power amongst thepopulation. This in turn causes hindrance to the growth of monopolies, which exist partly because of lackof sufficient number of entrepreneurs. Setting up of a large number of enterprises for the goods helps inweakening the harmful effects of monopoly. When a society produces a small number of entrepreneurs,the enterprises due to lack of competition grow into a few big business houses. This results inconcentration of wealth in a few families. This can have a serious social and national implication. Whenthe number of enterprises increases, a large amount of national wealth is also shared by a large number ofentrepreneurs, thus, dispersing wealth. This dispersal of wealth promotes the real socialism and makes theeconomy healthy.

4. Balanced Regional Development

The growth of industry and business leads to a large number of public benefits like road transport,health, education, entertainment etc. When the industries are concentrated in selected cities, thedevelopment gets limited to these cities. Till late sixties, 50 per cent of industrial enterprises were locatedin only six cities of India. A rapid development of entrepreneurship ensures a balanced regionaldevelopment. When the new entrepreneurs grow at a faster pace, in view of the increasing competition inand around the cities, they are forced to set up their enterprises in the smaller towns away from big cities.This helps in the development of the backward regions.

If a region does not throw up a sufficient number of entrepreneurs, the needs of the localpopulation for the goods and services remain unsatisfied. The entrepreneurs from other places step in andset up enterprises to fulfil the pent up demand of the local people. These alien entrepreneurs do not investthe major part of the profits in the areas in which the unit is located. Usually, the profit is invested at aplace where the entrepreneurs come from. Such entrepreneurs invest their profits in constructing theirhouses etc., at the place of their origin. Thus, the backward areas do not get benefits of business orindustrial profits. This drainage of wealth results in further deterioration of the area. The practice ofsiphoning the profits earned through entrepreneurial activities based on local resources by alienentrepreneurs has been compared with the blood sucking process practised by leeches, and termed as‘leech effect’ by Dr. M.M.P. Akhori.

5. Harnessing Locally

Available Resources and Entrepreneurship India is considered to be very rich in natural resources.In spite of more than four decades of planned development a large number of states have remainedeconomically quite backward. A few large scale industries started by entrepreneurs from outside the statein economically backward areas may help as models of pioneering efforts, but ultimately the real strengthof industrialization in backward areas depends upon the involvement of local entrepreneurship in suchactivities. Increased activities of local entrepreneurs will also result in making use of abundantly availablelocal resources.

6. Reducing Unrest and Social Tension

Amongst youth Many problems associated with youth unrest and social tension are rightlyconsidered to be due to youth not being engaged in productive work. In the changing environment wherewe are faced with the problem of recession in wage employment opportunities, alternative to wage careeris the only viable option. The country is required to divert the youth with latent entrepreneurial traits fromwage career to self-employment career. Such alternate path through entrepreneurship could help thecountry in defusing social tension and unrest amongst youth.

7. Innovations in Enterprises

Business enterprises need to be innovative for their survival and better performance. It is believedthat smaller firms have relatively higher necessity and capability to innovate. The smaller firms do notface the constraints imposed by large investment in existing technology and thus they are both free andcompelled to innovate. The National Science Foundation, an organization in USA found that smallcompanies produce four time more innovations per research dollar than do bigger companies.Entrepreneurship development programmes are aimed at accelerating the pace of small firms’ growth inIndia. Increased number of small firms is expected to result in more innovations and make the Indianindustry compete in international market.

8. Improvement in Living Standards

Entrepreneurs set up industries which remove scarcity of essential commodities and introducenew products. Production of goods on mass scale and manufacture of handicrafts, etc., in the small scale

sector help to improve the standard of life of a common man. These offer goods at lower costs andincrease variety in consumption.

9. Economic Independence

Entrepreneurship is essential for national self reliance. Industrialists help to manufactureindigenous substitutes of hitherto imported products, thereby reducing dependence on foreign countries.Businessman also exports goods and services on a large scale and thereby earn the scarce foreignexchange for the country. Such import substitution and export promotion help to ensure the economicindependence of the country without which political independence has little meaning.

SMALL SCALE ENTREPRENEUR

A business which functions on a small scale level involves less capital investment, less number of labourand fewer machines to operate is known as a small business.

Small scale Industries or small business are the type of industries that produces goods and services on asmall scale. These industries play an important role in the economic development of a country. The ownerinvests once on machinery, industries, and plants, or take is a lease or hire purchase. These industries donot invest more than one crore. Few examples of small-scale industries are paper, toothpick, pen, bakeries,candles, local chocolate, etc., industries and are mostly settled in an urban area as a separate unit.

Characteristics of Small Scale Industries

Ownership: They have a single owner. So it is also known as a sole proprietorship.

Management: All the management works are controlled by the owner.

Limited Reach: They have restricted area of operation. So they may be a local shop or anindustry located in one area.

Labor Intensive: Their dependency on technology is very little because they are dependent onlabours and manpower.

Flexibility: Because they are small, they are open and flexible to sudden changes, unlike largeindustries.

Resources: They utilize local and immediately available resources. They do better utilization ofnatural resources and limited wastage.

Categories of Small Business

On the basis of capital invested, small business units can be divided into the following categories:

(1) Small Scale Industry (Before 2006)

They invest in fixed assets of machinery and plant, which does not surpass than one crore.

For export improvement and modernization, expenditure ceiling in machinery and plant is fivecrores.

(2) Ancillary Small Industrial Unit

This industry can hold the status of an ancillary small industry if it supplies a minimum 50 percent of its product to another business, i.e. the parent unit.

They can produce machine parts, components, tools or standard products for the parent unit.

(3) Export Oriented Units

This industry can possess the status of an export-oriented unit if it exports exceeds 50 per cent ofits manufactures.

It can opt for the compensations like export bonuses and other grants awarded by the governmentfor exporting units.

(4) Small Scale Industries Owned by Women

An enterprise operated by women entrepreneurs in which they alone or combined share capitalminimum of 51 per cent.

Such units can opt for the special grants from the government, with low-interest rates on loans,etc.

(5) Tiny Industrial Units

It is an Industrial or a company whose expenditure on machinery and plant does not exceed Rs.25 lakhs.

(6) Small Scale Service and Business

It is a fixed asset investment on machinery and plant excluding land and building should notsurplus Rs. 10 lakhs

(7) Micro Business Enterprises

It is a tiny and small business sector.

The investment in machinery and plant should not exceed Rs.1 lakh.

(8) Village Industries

The industries which are located in rural areas and manufacture any product performs anyservice with or without the utilization of power is called village industries.

They have fixed investments on capital as per head, workers, and artisan, which does not exceed Rs.50,000.

(9) Cottage Industries

It is also known traditional or rural industries.

These industries are not covered by the capital investment criterion.

Cottage industries are characterized by the following features :

1. These are organized by a single, with private resources.

2. Use family labour and local talent.

3. Simple instruments are used.

4. Small capital investment is involved.

5. Simple products are made.

6. Indigenous technology is utilised.

COTTAGE ENTREPRENEUR

Cottage industries have existed for centuries, as weavers and knitters produced handmade items fromtheir home workshops. By definition, cottage industries operate out of workers' homes and are run by afew people, mostly family members. Historically, most cottage businesses have been-textile related, both

in the U.S. and around the world. In 2011, however, many state legislatures passed bills allowing homebakers to enter the cottage industry to the benefit of both the workers and their communities.

Work From Home

A major benefit of cottage industries is that they allow people to work from their homes. Women havebenefited the most because they can work from home while still tending to their families. Many cottagebusinesses include the entire family in their operations, however, including husbands and children. Somebusinesses start as cottage industries and then become too large, necessitating a move out of the home intoa business environment, but at that point they likely have the financial means to make the move.

Save Operating Costs

By operating the business from home, cottage businesses save money by not having to rent a commercialkitchen, office space or plant, and the associated utilities and other costs. Cottage industries also areexempt from many of the licensing and registration fees businesses often have to pay. This allowsentrepreneurs to start their business without investing major capital or taking out loans. Cottagebusinesses may need local licenses to operate, but these are usually not as expensive nor as difficult toobtain as the licenses normal business operations require.

Buy Local and Fresh

Consumers benefit from cottage industries because they are able to buy local products and, in the case offood products, items they know are fresh. They know where the products were made and that they likelywere made with fresh, local ingredients as well. They are able to enjoy items of higher quality than thosethat are mass-produced, with the added benefit of knowing who created the items.

Help Local Economy

While consumers appreciate having access to locally produced products, the local economy benefits fromdollars spent nearby. Ingredients and supplies purchased locally help the local economy as well. Moststates' cottage food industry laws also allow goods to be sold at local farmer's markets and roadside stands,which helps these local business enterprises to prosper. Neighbors get to know their neighbors and deriveadditional satisfaction from knowing they are helping a local family by purchasing their products.