ESB Full Notes

A
Brief Study Material of Subject
Entrepreneurship & Small Business
For
B.Com. (IIIrd Year)
Page 1
Dr. Raj Kumar Singh,
Professor & Chairperson,
Centre For Entrepreneurship, Innovation & Skill Development (CEISD)
School of Management Sciences, Varanasi
Units-I
Entrepreneurship: Concept, Characteristics, Need, functions, Risk and Types of Risk. Entrepreneur;
Characteristics, Qualities, Functions, Types, Emergence of Entrepreneurial class. Difference between
Entrepreneurship & Entrepreneur. Difference between Entrepreneur & Manager. Theories of
Entrepreneurship, Entrepreneurship & Environment.
Concept of Entrepreneurship :
Entrepreneurship is the process that involves all actions an entrepreneur undertakes to establish an
enterprise to give reality to his business idea. Its a creative and innovative response to the
environment.
Entrepreneurship is a composite skill, the resultant of a mix of many qualities and traits. These
includes imagination readiness to take risks, ability to bring together and put to user other factors of
production, capital, labour , land , as also intangible factors such as the ability to mobilize scientific
and technological advances.
Following theoretical approaches are used to explain the concept of Entrepreneurship :
Economic Approach Theory:
This view point gives emphasis that Entrepreneurship is basically concerned with the different
economic activities and meant for the economic enrichment and growth where the economic
conditions are most favourable. Here the Economic Incentives are the main drive for the
entrepreneurial activities.
Entrepreneurship is the process of initiating a new venture , organizing the resources it requires and
assuming the risks it entails. Thus the word Entrepreneurship is derived from the 17 th century French
word Entreprendre which refers to the individuals who were undertook the risk of new enterprise.
(A) Richard Cantillon (1755) : Entrepreneur is a person who pays a certain price for a product
resources while consequently assuming the risk of enterprise.
(B) Adam Smith (1776) : Entrepreneur is an individual who undertook the formation of an
organization for commercial purpose with unusual foresight who could recognize potential
demand for goods and services reacting to economic change , becoming the economic agents
who transformed demand into supply.
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(C) J. B. Say (1803) : Entrepreneur is one who possessed certain arts and skills of creating new
economic enterprises, yet a person who had exceptional insight into societys need and was
able to fulfil them. Entrepreneur is the co-ordinator and organizer of resources to design a
business enterprise.
(D) Carl Menger (1871) : Entrepreneur is the change agent who transforms resources who
transforms resources into useful goods and services often creating the circumstances that
leads to industrial growth .
(E) Joseph Schumpeter (1934) : Entrepreneurs is a force of creative destruction whereby
established ways to get the things done. It is a process and entrepreneurs as innovators who
use the process to shatter the status quo through the new combinations of resources and new
methods of commerce.
(F) Peter F. Drucker (1985) : Entrepreneurship occurs when resources are redirected to
progressive opportunities not used to ensure administrative efficiency .The redirection of
resources distinguishes the entrepreneurial role from that of the traditional management
role.
Sociological Approach Theory :
Sociologists consider the entrepreneurship as a process of role performance . Entrepreneurs are

expected to be governed by the wishes of the society , customs, ethics, values etc.
Entrepreneurship is inhibited by the social system , which denies opportunities for the creative
facilities . The forces of customs , values, the rigidity of status, distinctness of new ideas and of the
exercise of intellectual curiosity , combine to create an atmosphere inimical to experiment and
innovation.
Sociologists argue that entrepreneurship is most likely to emerge under a specific social culture.
According to them social sanctions, cultural values and role expectations are responsible for the
emergence of entrepreneurship . Socio - Cultural value channel economic action that gives birth to
entrepreneurship. As per the Sociological Theory the concept of innovation and its corollary
development embraces five functions:
1. Introduction of a new good

2. Introduction of a new method of production
3. Opening of New Market
4. Conquest of new source of supply of raw materials and
5. Carrying out of a new organization of any industry
(A) Thomas Cocharan (1965) : Entrepreneurs represents societys model personality. Their
performance depends upon their own attitude towards their occupations , the role
expectations of sanctioning groups and the occupational requirements of the job. Societys
values are the most important determinant of the attitude and role expectations.
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(B) Peter Marris (1967) : Entrepreneurship requires to assemble or reassemble from what is
available very concrete kind of imagination to see what others have missed , sensitivity to
business and social environment rest in industrial development and entrepreneurial courage .
These are the important factors that make an entrepreneur .
Psychological Approach Theory :
According to the Psychologists, entrepreneurship is most likely to emerge when a society has
sufficient supply of individuals possessing particular psychological characteristics. The main
characteristics which motivate and drive people towards entrepreneurial activities :
1. An urge to do something
2. To fulfill a dream
3. An institutional capacity to see things in a new way (Vision)
4. Energy of will and mind to overcome fixed habits of thoughts
5. The capacity to withstand social opposition
6. The high need for achievement
(A) David C McClelland (1961) : It is the high need for achievement which drives people towards
entrepreneurial activities . Achievement motive is basically measured through the child
rearing practices which stresses standards of excellence , material warmth, self reliance
,training and low father dominance . Individuals with high achievement motive tend to take
keen interest in situations of high risk , desire for responsibility and desire for a concrete
measure of task performance.
(B) E. E. Hagen ( 1964) : Withdrawal of the status respect as the trigger mechanism for changes in
personality formation . Status withdrawal is the perception on the part of members of some
social group in the society whom they respect and whose esteem they value.
Anthropological Theory :
This theory says that entrepreneurship has essentially to do with connecting two spheres in
the society between which there exists a difference in value, something which is cheap in one
sphere, may be expensive in another sphere. Entrepreneurship a bridge which tries to
integrate diversified values and minimize the huge discrepancy in value.
Libensteins X-Efficiency Theory :
X-Efficiency is basically the degree of inefficiency in the use of the resources within the firm ; it
measures the extent to which the firm fails to realize its productive potential.
Dynamic Entrepreneurship Innovation Theory :
As per this theory the Entrepreneurs are the catalysts that disrupts the stationary circular
flow of the economy and thereby initiates and sustains the process of development.
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Harward School Theory :
Entrepreneurship comprises any purposeful activity that intimate, maintain or develop a

profit oriented business in interaction with the internal situation of the business or with the
economic, political and social circumstances surrounding the business.
Theory of High Achievement
Entrepreneurship is doing things in a new and better way and decision making under
uncertainty with stress on the need for achievement or achievement orientation as the most
directly relevant factor for explaining economic behavior.
Max Webers
Entrepreneurial energies are generated by the adoption of exogenously suppliedreligious

belief.
Theory of Cultural Value
On the process of economic development, entrepreneurs are not seen as being deviant or
super normal individuals but rather as representing societys modal personality molded by the
inherent culture.
Definitions of Entrepreneurship :
(A) Higgins B. : Entrepreneurship is meant to the function of seeking investment and production
opportunity , organizing and enterprise to undertake a new production process, raising capital
. hiring labour , arranging the supply of raw materials , finding site, introducing a new
technique and commodities , discovering new sources of raw materials and selecting top
mangers of day to day operations of the enterprise .
This definition deals with the functions of an entrepreneur .These functions included handling
economic activity, undertaking risk, creating some thing new and organizing and coordinating
resources.
(B) John Kaso and Howard Stavenson : Entrepreneurship is an attempt to create value through
the recognition of business opportunity, the management of risk taking appropriate to the
opportunity and through the communicative and managerial skills to mobilize human ,
financial and material resources necessary to bring a project to complete.
In this definition , entrepreneurship is treated as a dynamic and risky process. It incorporates
the capital , technology and human talent . Entrepreneurial process itself is the result of art
and science.
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( C ) Schumpeter Joseph .A. : Entrepreneurship as defined essentially consists in doing things that
are not generally done in the ordinary course of business routine.
In this definition , Schmpeter emphasized on the innovation process to be undertaken by the

Entrepreneur. Entrepreneur is required to gather resources , organize talent and provide leadership
to make the business a commercial success.
( D ) Ronstadt. Robert : Entrepreneurship is the dynamic process of creating incremental wealth.

This wealth is created by individuals who assume the major risk in terms of equity, time and or
career commitment of providing value for some product or service. The product or service itself
may or may not be new or unique but value must somehow be infused by the entrepreneur by
securing and allocating the necessary skills and resources.
This definition identifies the creation of value creation is a risky process but entrepreneurs has to
reduce the risks intern of equity and time.
(E) Drucker, Peter, F. : Entrepreneurship is a systematic innovation which consists of the

purposeful and organized search for changes and in a systematic analysis of the opportunities
such changes might offer for economic and social innovation.
Entrepreneurship occurs when resources are redirected to progressive opportunities not used to
ensure administrative efficiency. Entrepreneurship is not natural , It is not creative, It is a work.
Entrepreneurship requires Entrepreneurial Management. Specifically, entrepreneurial
management requires policies and practices in four major areas.
In this definition emphasis is on the management orientation to entrepreneurship
Types of Entrepreneurship :
(A) Opportunity Based Entrepreneurship :

An entrepreneur perceives a business opportunity and chooses to pursue this as an active
career choice.
(B) Necessity based Entrepreneurship:
An entrepreneur is left with no other viable option to earn a living, It is not the choice but
compulsion , which makes him/her choose entrepreneurship as a career.
Phases of Entrepreneurship :
(A) Initial Phase : creation of awareness about the entrepreneurial opportunities based on survey
(B) Development of Phase : Implementation of training programmes to develop motivation and
management skills.
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(C) Support Phase : Infrastructure support of counseling and assisting to establish a new
enterprise and to develop existing units.
Nature & Characteristics of Entrepreneurship :
Entrepreneurship is expected to identify the environmental changes as an opportunity

and uses the factors of production to produce new goods and services. They are motivated
to
(i) Initiative and Promotion of New Establishment
(ii) Perceiving opportunities for profitable investment
(iii) Risk bearing
(iv) Decision Maker
(v) Introduction of Innovation
(vi) Provision of Capital
(vii) Coordination of different factors of production
(viii) The desire to found a private commercial kingdom
(ix) The will to conquer and prove his superiority and
(x) The joy of creating, getting things done or simply of exercising ones energy and
ingenuity
(xi) Industry oriented effort
(xii) Performing social function
(xiii) Evolving out of coordination of various matters.
(xiv) Accelerating of economic development
(xv) Re-direction of resources to progressive opportunity
(xvi) Dynamism & Rapid Changes
(xvii) Continuity
(xviii) Individuality
(xix) Recognized as pioneer of economic development activity
(xx) Purposeful Activity
(xxi) Creative Response to environment
(xxii) Gap Filling Function
(xxiii) Optimum use of resources
(xxiv) Information technology and communication
(xxv) R& D Technology
(xxvi) Function of achievement
(xxvii) Group leadership and managerial skills
(xxviii) Organisation skills
(xxix) Function of Economical, Social and Political Structure
(xxx) Function of High Achievement
(xxxi) Organisation Building Function
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(xxxii) Function of Managerial Skills And Leadership
(xxxiii) Function of Status Withdrawal
(xxxiv) Function of Social, Political And Economic Structure
Need of Entrepreneurship :
To raises productivity through commercialization of new technical and other forms of innovations,
inventions and products.
To promote Capital Formation
To create Employment Opportunities through establishment of new enterprises
To do Balance Regional Development
To reduce the concentration of economic power
To do the equitable redistribution of wealth, income and even political power
To do the effective resource mobilization and utilization of capital and skill
To do the crucial role in the restructuring and transforming economy
To do the backward and forward linkages for the economic development
To Promote the Export & Import
To Facilitates the transfer of technologies
To Facilitates the proper utilization of resources
To Improves the standards of living
To Facilitates a balanced economic development
To bring dynamism in industries by launching innovative products and services
To create new market and facilitates expansion into international markets.
Function of Entrepreneurship :
Economic Growth Driver

Balance Regional Development
Employment Creation
Capital Generation
Export & Important Promotion
Promotion of Secondary Entrepreneurship
Skill Development
Intrapreneurship Development
Gives platform to the Innovation, Invention , New Product / Service Development
Distribution of Wealth
Human Resource Development
Natural Resource Management
Value Creation
Foreign Exchange Generation
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Technological development and transfer
National Integrity and Stability
Social Harmony
Risk :
The risk is the condition of not knowing the outcome of an activity or decision. Nevertheless, risk is
capable of being evaluated for relative probabilities. It is variability of outcomes (or returns). If there
is no risk, return is certain. A business organization is working under risk free environment would
continue to expand forever, because a negative outcome could not occur. Therefore , risk is a limit to
ever expanding entrepreneurship. That is why entrepreneur needs risk bearing capabilities. Risk
bearing means provision for capital in order to enable the entrepreneurs to establish and operate the
business.
A businessman may have to bear many types of risks such as :
(a) Loss of business assets

(b) Loss of income
(c) Liability towards the third parties
B.O Wheeler :
Risk is the chance of loss.It is the possibility of some adverse occurrence
There is always a possibility of loss in business even though the businessman exposed to it may nor
beware of it. The possibility of loss need not be measurable, but it must exist.
The following important points should be noted with regard to risk :
(1) There is existence of possibility of loss , even though the individual or group of individuals
exposed to the possibility of loss may not be aware of it.
(2) The possibility of loss need not to be measurable , but it must exists.
Some of the important forms of risks which creates problems for the entrepreneurs are as
follows
(i) Production Risk :
Breakdown of Machinery, Poor Weather, Inefficient Labour, Use of Faulty Material,
Faulty Tools, Improper Quality Control
(ii) Market Risk :
Misjudge the want of consumer , loss due to bad debt, ineffective advertisement, loss
due to improper trade channel.
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(iii) Financial Risks :
Reduce Sale, Cash Flow, Repayment of Debt, Bankruptcy , Working Capital ,
International Price of Dollar & Rupee
(iv) Destruction of Property :
By Fire, Windstorm,
(V) Social Risk
Strike, Riots, Civil Commotion, Political Unrest
(v) Change in Technology and Production
Nature of Business Risks :
(1) Uncertainty is the main cause of risk

(2) Risk is an essential part of business
(3) Profit is the reward for undertaking risks
(4) Degree of risk depends upon the nature of business
(5) Degree of risk varies according to time
Causes of Business Risks :
(1) Natural Causes

(2) Human Causes
(3) Economic Causes
(4) Physical Causes
(5) Macroeconomic Causes
Types of Risks :
(1) Financial and Non-financial Risks

(2) Static and Dynamic Risks
(3) Pure and Speculative Risks
(4) Insurable and Non Insurable Risks
Risk Management
(1) Identification of Risks

(2) Evaluation of Risks
(3) Decision about risk handling devices
(4) Executing the decisions
(5) Aftermath and evaluation
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Entrepreneur :
Derived from French Word Enterprendre means To Undertake

It was applied to leaders of military expeditions in the early 16th Century
In 1790 AD it was used in the context of other types like Architecture and Contractors of public
work
Oxford English Dictionary in 1887 states that entrepreneur simply is the director or manager
of a public musical institutions, one who puts entertainments especially musical performance
In 1933, the word entrepreneur had a place in the business and would mean one who takes
an enterprise especially a contractor acting as intermediary between capital and labour
Then the concept was further upgraded as Entrepreneurship is an undertaking of enterprise
and one who coordinates capital and labour for the purpose of production is an entrepreneur.
Emergence of this becomes the Entrepreneurial Class
Enterprise :
Entrepreneurial activity, especially when accompanied by initiative and resourcefulness

through an organization or economic system where goods and services are exchanged for one
another or for money.Every business requires some form of investment and enough
customers to whom its output can be sold on a consistent basis in order to make a profit.
Enterprise can be privately owned, not-for-profit or state-owned.
The term enterprise has two common meanings.
Firstly, an enterprise is simply another name for a business.
Secondly, and perhaps more importantly, the word enterprise describes the actions of
someone who shows some initiative by taking a risk by setting up, investing in and
running a business.
Look again at two key words above initiative and risk.
A person who takes the initiative is someone who makes things happen. He
or she tends to be decisive. A business opportunity is identified and the
person does something about it. Showing initiative is about taking decisions
and being bold not everyone is like that!
Risk-taking is slightly different. In business there is no such thing as a sure fire bet.
All business investments carry an element of risk which is the chance or probability
that things will go wrong. At the worst, the risk of an enterprise might mean the
person making the investment loses all his/her money or becomes personally liable
for the debts of the business.
The trick is to take calculated risks, and to ensure that the likely returns from taking a
risk are enough to make the gamble worthwhile.
Someone who shows enterprise is an entrepreneur.
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Journey of Term Entrepreneur
Period Connotations & Meaning

Indus Valley Civilisation No Connotation
Ancient India No Connotation
Early 16th Century Referred To Persons
Engaged In Military
Expeditions
th
Early 17 Century Extended To Persons
engaged In
Engineering Activities
such as Construction
and Fortifications
th
18 Century Persons Engaged In The
Economic Aspects of
Human Activity
th
In Early 18 Century The Term Entrepreneur was given by Richard Cantillon of
France
Definitions of Entrepreneurs :
F.H.Knight :
Entrepreneur are a specialized group of person who bear risks and deals with uncertainty.
J.S. Mill :
Organizer who was paid for his non-manual type of work
Leon Walrus :
Entrepreneur is the coordinator of basic factors of production and act as fourth factor of
production who combines other factors such as land, labour and capital.
Joseph Schumpeter :
The entrepreneurs in an advanced economy is an individual who introduces something in the

economy-a method of production not yet tested by experience in the branch of manufacturer
concerned , a product with which consumers are not yet familiar, a new source of raw
material or of new markets .
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Peter F. Drucker :
One who always searches for the changes , respond to it and exploit it as an opportunity.
Innovation is the specific tools of entrepreneurs, the means by which they exploit changes as
an opportunity for a different business or a different service.
Walker:
Entrepreneur is one who is endowed with more than average capacities in the taks of
organizing and coordinating the various other factors of production
Robert D. Hisrich :
The person who is going to establish a successful new business venture must also be a
visionary leader a person who dreams great dreams
Encyclopedia Americana :
An entrepreneur is a businessman who assumes the risk of bringing together the means of
production including capital, labour and material and receives his reward in profit from the
market value of his product.
International Labour Organisation :
Entrepreneur are people who have the ability to see and evaluate business opportunities
together with the necessary resources to take advantage of them and to intimate appropriate
action to ensure success.
Cantillon :
Entrepreneur is the agent who buys means of production at certain prices in order to combine
them into a product that he is going to sell at prices that are uncertain at the moment at
which he commits himself to his costs. The entrepreneur function is of risk taking and
uncertainty bearing and who act as a dealer who purchases the means of production for
combining them into marketable products.
J.B. Say :
The entrepreneur is the economic agent who unites all means of production, the labour force
of the one and the capital or the land of the others and who finds in the value of products his
results from their employment reconstitution of the entire capital that he utilizes and value of
the wages, the interest and the rent which he pays as well as profits belonging to himself.
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Characteristics of Entrepreneurs :
Visionary
Change Agent
Self Confidence
Energy Level
Calculated Risk Taker
Need for Achievement
Risk for Ambiguity
Locus of Control
Desire to create ones own Destiny
Desire to make a difference
Desire to reach ones full potential
Desire to contribute to society
To do what ones enjoy
Organizational Ability
Out of Box Thinker
Creativity
Innovator
Independence
Team Builder
Integrity and Reliability
Initiative and Responsibility
Tolerance for Failure
Qualities of Entrepreneurs :
Visionary
Dare To Dream
Hard & Efficient Worker
Highly Optimistic
Never Let Success Go To Head
Independence
Foresight
Intelligent
Emotional Stability
Good Organiser
Creative
Innovative
Sound Knowledge
Preservance through Continuous Effort
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Team Spirit
Passionate
Conceptually Strong
Set Clear Goals
Curiosity For Learning
Information Seeker
Strive For Excellence
Build Self Confidence
Looking For Opportunity
Futuristic Planner
Willingness to Change
Quality Conscious
Problem Solving Approach
Persuasiveness
Effective Monitoring
Employee Welfare Orientation
Effective Strategists
Assertive Behaviour
Human Relation Ability
Motivator
Initiator
Risk Taker
Spirit of Accepting The Challenge
Sense of Conviction
Resourcefulness
Ability to Manage Failure
Build Core Competencies & Excellence
Work Ethics
Building Strong Organisational DNA
Professional Integrity
Professional Honesty
Flexible Approach
Professional Maturity
Be a Role Model
Administrative Ability
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Functions of an Entrepreneur :
Innovation
Risk Taking
Organisation and Management
Business Decisions
Perception and Forecasting of market opportunities
Gaining command over scarce resources
Purchasing inputs
Marketing the products
Dealing with the officials
Managing human resource
Managing Customers and Suppliers relations
Managing Finance
Managing Production
Acquiring and overseeing the assembly of the factory
Industrial Engineering
Upgrading Process and Product
Introducing new production techniques and products
Leadership
Managerial Function :
1. Planning
2. Organizing
3. Staffing
4. Directing
5. Controlling
6. Strategic Management
7. An Eye on Competitors
Promotional Function :
1. Identification and Selection of Business Idea

2. Preparation of Business Plan or Project Report
3. Arrangement for Finance
Commercial Functions :
1. Production/Manufacturing
2. Marketing
3. Accounting
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4. Management of Raw Material and Machines
Types of Entrepreneurs :
1. Innovative Entrepreneur :
They are characterized by effective assemblage of information and the analysis of results
originated from different sets of combinations. They raise money to launch a new innovative
enterprise , assemble the various innovative factors, select top executives and set the
organization operational in an innovative manner.
2. Imitating Entrepreneur :
These entrepreneurs are those entrepreneurs who are unable to innovate the changes
themselves but they are capable enough to imitate the techniques and technology innovated
by the innovating entrepreneurs.
3. Fabian Entrepreneur :
These entrepreneurs are shy and lazy in their working. Their dealings are guided by the
customs, religion, tradition and past practices. Fabian Entrepreneurs are always conscious in
their dealings and believe in skepticism in initiating any change.
4. Drone Entrepreneurs :
These entrepreneurs are those who are due to their rigid approach not inclined to bring
changes in their production system as demanded by the change in consumer preferences ,
technological innovations, economic and social behavior of the prospective customers.
Market always provided opportunities to the entrepreneurs but this type of entrepreneurs
generally fail to use these opportunities in profitable ways.
Classification of Entrepreneurs :
(1) According to type of Business :
Trading Entrepreneurs
Industrial Entrepreneurs
Corporate Entrepreneurs
Agricultural Entrepreneurs
Retail Entrepreneurs
Service Entrepreneurs
Re-engineering Entrepreneurs
Service Entrepreneurs
Healthcare Entrepreneurs
(2) According to use of Technology
Technical Entrepreneurs
Non-Technical Entrepreneurs
High-Tech Entrepreneurs
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Low-Tech Entrepreneurs
BPO
KPO
LPO
IT Entrepreneurs
E-Entrepreneurs
(3) According to Motivation

Spontaneous Entrepreneurs
Induced Entrepreneurs
Motivated Entrepreneurs
Forced Entrepreneurs
Accidental Entrepreneurs
(4) According to the growth
Growth Entrepreneur
Super-growth Entrepreneur
Aspiring Entrepreneur
Lifestyle Entrepreneur
Serial Entrepreneurs
(5) According to stage of development
First Generation
Second Generation
Third Generation
Modern Entrepreneurs
Inherited Entrepreneurs
Classical Entrepreneurs
(6) According to Area
Urban
Rural
Global
National
Regional
Local
(7) According to Sector

Engineering
Agriculture
Handicraft
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Khadi
Handloom
Services
Automobile
Pharmaceutical
FMCG
Capital Goods
Telecommunication
IT & ITES
Education
Healthcare
Hospitality
Banking
Microfinance
Logistic
Social Entrepreneurs
Export etc.
(8) According to Organisation
Sole Proprietary
Partnership
Limited Liability Partnership
Private Limited
Public Limited
NGOs
Non-Profit Organisation
Government Organisation
Public
Public Sector Organisation
Joint Entrepreneurs
Intrapreneurs
(9) According to Age and Gender

Man
Women
Young
Old
Middle Aged
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(10) According to size of Enterprise
Cottage Entrepreneurs
Micro Entrepreneurs
Small Scale Entrepreneur
Medium Entrepreneurs
Large Entrepreneurs
Emergence of Entrepreneurial Class

Difference between Entrepreneurship & Entrepreneur
Entrepreneur Entrepreneurship
Refer To A Person Refer To A Process

Entrepreneur is an administrator Entrepreneurship is an administration
Risk Bearer Risk bearing activity
Innovator Process of Innovation
He combines factors of production Process of use of factors of production
Initiator Process of taking initiative
Leader Action of Leadership
Planner Planning
Programmer Action
Motivator Motivation
Risk Taker Risk Taking
Communicator Communication
Creator Creation
Visualiser Vision
Technocrat Technology
Decision Maker Decision
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Difference between Entrepreneur & Manager
Bases of Difference Entrepreneurs Professional Managers
(1) Motive Start a venture by setting up an Render Services in already

Enterprise for his personal gratification established enterprise
(2) Status Owner of the Enterprise Employee of the Enterprise
(3) Risk Bearing Bear All Risk & Uncertainty Does Not Bear Any Risk
(4) Rewards In form of profit which is uncertain In form of salary which is certain
& fixed
(5) Innovations Act as a Change Agent Execute The Plan & Translate
Ideas into Practices
(6) Qualifications Not Specifically Needed Specifically Needed
(7) Time Orientation Long Horizon Short Term Basis
(8) Action Full Responsibility Delegate Actions
(9) Attention On Technology & Market On Inside of The Organisation
(10) Failure & Mistakes Treat as Learning Experience Try To Avoid Mistakes
(11) Decision Free To Take Decision Depends On Owners
(12) Who They Serves Self & Customers Others
(13) Attitude Towards May Change The System Protect & Nurture The System
Systems
(14) Relations With Transaction & Deal Making Through Hierarchy
Others
Entrepreneurship & Environment
Micro Environment
Macro Environment
SWOT
PESTEL
(1) Political Environment
Political Philosophy
Political Atmosphere
Quality of Leadership
(2) Economic Environment
Economic Resources
Economic Condition
Economic Policies
Labour Policies
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Trade Policies
Tariff Policies
Incentives
Subsidies
(3) Social Environment
Social Structure
Social Values & Conventions
Consumers Opinion
Labour Motives
(4) Technological Environment
Better utilization of production resources
Increase in Competitiveness
Risk Efficiency
Improvement in Productivity
Improvement in Profitability
(5) Environmental Issues
Pollution
Fuel Efficiency
Sustainability
Water Conservation
Forestry
(6) Legal Environment
Determining Areas and Licensing
Regulation of Entrepreneurial Function
Industrial Relations
Labour Laws
Litigations Solving Mechanism
International Environment
Cultural Environment
Role of Entrepreneurship in Economic Development
Promote Capital Formation

Employment
Balance Regional Development
Reduce the concentration of economic power
Equitable redistribution of wealth, income and even political power
Effective resource mobilization and utilization of capital and skill
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Backward and forward linkages for the economic development
Promote Export & Import.
Factors affecting Entrepreneurship
(1) Economic Factors

Capital
Labour
Raw Material
Market
(2) Non- Economic Factors
(A) Social Conditions
Social Legitimacy of Entrepreneurship
Social Mobility
Marginality
Security
(B) Psychological Factors
Need Achievements
Withdrawal of Status Respect
- It gives rise to four possible reactions and create four different personality
types
(i) Retreatist : He who continuous to work in a society but remains
different to his work and position.
(ii) Ritualist : He who adopts a kind of defensive behavior and acts in the
way accepted and approved in his society but no hopes for improving
his position.
(iii) Reformist :
He is a person who are initiator of a rebellion attitude and attempts to
establish a new society.
(iv) He is a creative individual and is likely to be an Entrepreneur
( C ) Government Factors : Government through its Action or Failure also does influence both the
Economic & Non- Economic factors for Entrepreneurship
Problems of Entrepreneurship
Raw Material
Finance
Inadequate availability of credit facility
Marketing
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Lack of Brand Support
Lack of organized market channel
Imperfect knowledge of Market Condtion
Unorganised nature of operation
Human Resource
Deficient in managerial and technical skill
Under utilization of capacity
Technological upgradation
Govt. Policy
Beaurocracy
Improper flow of knowledge
Constraints of infrastructure facility
Power Crisis
Stiff Competition from big player and absence of level playing field
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Units-II
EDP Meaning Need, Objective, steps, outline, achievements and training programme, Institutions
Established by the Government, Government Assistance and incentives. Women Entrepreneurship:
Meanings, Characteristics, Qualities, Problems, Steps taken to help women entrepreneur.
Entrepreneurship Development Programme
Meaning of EDP :
EDP is meant to develop Entrepreneurial abilities among the people. In other words, it refers to
inculcation, development and polishing of entrepreneurial skills into person needed to establish and
successfully run their enterprises.
EDP is designed to identify with the entrepreneurial abilities and help a person by training them in
strengthening and fulfilling their entrepreneurial motive and in acquiring skills and capabilities
necessary for playing his entrepreneurial role effectively In order to set up a new enterprise .It is
necessary to promote his understanding of motives, motivation pattern, their impact on behavior and
entrepreneurial value.
Definition :
National Institute of Small Industry Extension Training (NISIET), Hyderabad
EDP is an attempt to develop a person as entrepreneur through structural training . The main
purpose of such EDP is to widen the base of entrepreneurship by development achievement
motivation and entrepreneurial skills among the less privileged sections of the society.
Significance of EDP :
Creation of Employment Opportunities
Improvement in Per Capita Income
Capital Formation
Use of Local Resources
Improvement in the Standard of Living
Facilitating Overall Development
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Balanced Regional Development
Economic Independence
Preventing Industrial Slums By Dispersal of Industries
Reducing Social Tensions
Helpful Information of Project
Development of Entrepreneurial Qualities
Helpful in Selection of Project and Products
To Provide Information
Helpful in the formation of an Enterprise
Economic Freedom
Rationale of EDP :
EDP is meant for developing those first generation entrepreneurs who on their own can not
become successful owners of enterprise .
The effective entrepreneurial class is necessary to speed up the process of activating the
factors of production to ensure higher rate of economic growth.
EDP ensures potential entrepreneurs of backward and tribal areas to set up their enterprise
with the help of government and institutional support system.
EDP helps in dispersal of economic activities in different regions by providing training and
other support to local people.
EDP develops the person who are interested to work as job providers by establishing
enterprises , not to those who are job seekers. Thus it helps in creation of employment opportunities.
EDP improve the standard of living of the weaker sections of society and involvement of all
sections in the process of economic growth
EDP develops motivation and competence necessary for successful launching , management
and growth of the enterprise.
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Need of EDP :
To fulfill the need for achievement
To provide necessary motivation for Entrepreneurship
To provide necessary competence
Meant for developing those first generation entrepreneurs who on their own can not become
successful owners of enterprises.
The effective entrepreneurial class is necessary to speed up the process of activating the
factors of production to ensure higher rate of economic growth.
To ensures the potential entrepreneurs of backward and tribal areas to set up their
enterprises with the help of government and institutional support system.
To help in the dispersal of economic activities in different regions by providing training and
other support to local people.
To develop the person who are interested to work as a job providers by establishing
enterprises instead of being a job seekers. Thus, in creation of the employment opportunities.
To improve the standard of living of the weaker sections of the society and involvement of all
the sections in the process of economic growth.
To develop motivation and competence necessary for successful launching, management and
growth of the enterprise.
Objectives of EDP :
Accelerate , Develop & Strengthen the Entrepreneurial Quality and competencies to enter
into the business for the for those who are coming from the business family or belongs to first
generation entrepreneurs.
Analyse environmental set up relating to small industry and small business
To help in the identification and formulation of the proposal of the viable projects.
To select appropriate Product or Services
To understand and arrange the process and procedure involved in setting up a small
enterprises.
To know the sources of help and support available for starting a small scale industry.
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To acquire the necessary managerial skills required to run a small scale industry
To know the pros and cons in becoming any entrepreneur
Associate the needed entrepreneurial discipline.
Let the entrepreneurial themselves set or set objectives for their realization
Prepare the entrepreneur to accept the uncertainty in running a business
Enable to take decisions
Enable to communicate clearly and efficiently
Develop a broad vision about the business
Make him subscribe to the industrial democracy
Develop a passion for the integrity and honesty
Develop the ability to learn compliance with law.
To provide post-training assistance and monitoring facilities.
Steps of EDP :
Pre Training Phases
During Training Phases
Post Training Phases
(1) Pre Training Phase :
(A) Designing of Course Curriculum ,General Introduction & Approach to Entrepreneurship
(B) Motivation Training
(C) Management Skill
(D) Risk Analysis
(i) Technical Risk
(ii) Economic Risk
(iii) Social Risk
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(iv) Environmental Risk
(E) Support System and Procedure
(F) Fundamentals of Project Management And Project Feasibility Study
(G) Plant Visit
Selection of Faculty or Resource Persons
Insertion of Advertisements
Selection of Potential Entrepreneur
(a) Analysis of Application
(b) Psychological tests like Thematic Appreciation Tests (TAT) , risk taking , personal efficiency
(c) Finding out the social-economic /educational background of the candidates, and
(d) Personal Interview
(e) Entrepreneurs Dimensions To Be Assessed :
Achievement Motivation
Risk Propensity
Personal Efficiency
Leadership Quality
Commitment to Task
Team Spirit
Planning & Organising Ability
Decision Making Ability
Education, Training and Previous Experience
Social Participation
Knowledge , Interest and Involvement in the Proposed Enterprise
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Arrangement of Infrastructure
Arrangement for the inauguration of the programme
Selection of necessary tools and techniques to select the suitable and potential entrepreneurs
Formation of selection committee for selecting trainee
Arrangement of publicity, media management and awareness campaign for the programme.
Development of application form
Finalisation of Training Syllabus
Pre Potential survey of opportunities available in the given environmental conditions
(2) During Training Phase :
To observe following behavioural changes in the behavior of the trainees to develop the need for
achievement i.e. Motivation among the trainees.
Change in the attitude to towards his proposed project idea.
Trainees motivation to plunge into entrepreneurial traits the trainees lack the most.
Their behavior like an entrepreneur to take risk and initiate for a new venture.
Lack of Entrepreneurial Traits observed in the trainee
Level of knowledge of technology, resources and other knowledge related to the

entrepreneurship development possessed by the entrepreneur.
Level of possessing of various skills required in selecting of the viable project and mobilizing of
the required resources at the right time.
(3) Post Training Phase ( Follow Up)
Assessment to judge how far the objectives of the programme has been achieved.
Review the Pre Training Work
Review The Process of Training Programme
Review Past Training Approach
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Evaluation of EDP :
As per EDI ---- The Effectiveness of EDP is around 26%
Criteria to access the effectiveness of EDP in motivating the entrepreneur
Activity Level of Respondent
New Enterprise Established
Total Investment Made
Number of People Employed
Number of Jobs Created
Increase in Profit
Increase in Sales
Quality of Product/Services improved
Quicker Repayment of Loans
The entrepreneurial behavior during the EDP is measured on following four dimensions
Planning Orientation
Achievement Orientation
Expansion Orientation
Management Orientation
Effectiveness of the Sample EDPs at a Glance :
(A) Sample of the Study :
1. EDPs covered
2. EDP Trainees covered in Sample EDPs
3. Sample Trainees Interviewed
4. Sample Trainee Not Available and Non-Traceable
(B) Macro Performance of EDPs
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1. Number of Units set-up by EDP Trainees
2. Trainees Activity Under Process
3. Potential Start-ups
4. Trainees Blocked under Process
5. Trainees who gave up
6. Non-Traceable Trainees
7. Trainees Not Available for Interview at the Time of Field Survey
(i) Start-ups among non-available
(ii) Non-Start-ups among non-available
8. Actual Start-ups
9. Expected Final Start-ups Rate
Effectiveness Criteria of EDPs :
Activity level of the respondents
New enterprise established
Total investment made
Investment in fixed assets made
Number of people employed
Number of job created
Increase in profit
Increase in sales
Quality of product/service improved
Quicker repayment of loans
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Impact Of EDP On Entrepreneurial Behaviour Measured On Following Dimensions :
1. Planning Orientation
2. Achievement Orientation
3. Expansion Orientation
4. Management Orientation
Problems In Conducting of EDP
Trainers motivation not found up to the mark in motivating the trainees to start their own
enterprises
Lack of commitment and sincerity in conducting the EDPs. In some cases EDPs are used as
means to generate surplus income for the EDP conducting organization.
Non-conducive environment and constraints make the trainer-motivators role ineffective.
The anticipate attitude of the supporting agencies like banks and financial institutions serves
as stumbling block in the success of EDPs.
No Policy at the National Level
Problem at the Pre-training Phase
Over estimation of Trainees
Duration of EDPs
Non availability of Infrastructural Facilities
Improper Methodology
Mode of Selection
Poor Response of Financial Institutions
Lack of Government Facilities and Incentives
Bureaucratism and Redtapism in the System
Impractical Training
Defective Selection process of Applicants and Faculties
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Lack of knowledge of Objects of EDPs
Lack of Coordination among the various institutions
Causes of Slow Development of Entrepreneurship In India :
Traditional Social Concept
Lack of Materialistic Culture
Social Environment
Lack of Capital Formation
Lack of Technical Education
Beaurocracy and Redtapism
Lack of Training
Lack of Entrepreneurship Aptitude
Lack of Basic Facilities
Fear of Monopoly and Competition
Suggestions for Improving EDPs in India :
Detection and removal of problems in going on programmes
Programme organizing institutions should be recognized
Provision of better training facilities
Education system should be entrepreneurship oriented
Provision of training for present entrepreneurs
New entrepreneurs should be informed regarding facilities provided by the government
Working culture of central co-ordination institutes should be improved to organize various

programmes in a better ways
Restrctions should be imposed on self-benefit oriented orgnaisations
Only significant projects should be taken into consideration
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Candidates having interest in business should be selected
Only up-to date trainers should be involved
Period of programmes should be increased for substantial period
Part time programme should be organized
Beaurocracy and Redtapism should be eliminated
Basic Infrastructure should be developed
Established of training centres in Village Areas
Tax system should be entrepreneurs friendly
Long term Industrial and Financial Policies should be developed
Government Institutions/ Organisaions Developed For EDPs :
(1) National Institute For Entrepreneurship and Small Business Development (NIESBUD)
(2) Entrepreneurship Development Institute of India (EDII)
(3) Small Industries Development Organisation (SIDO)
(4) Indian Investment Centre (IIC)
(5) National Institute For Small Industry Extension and Training (NISIET), Hyderabad
(6) Small Industries Development Bank of India (SIDBI)
(7) National Alliance of Young Entrepreneurs (NAYE)
(8) Centre For Entrepreneurial Development (CED) , Ahmedabad
(9) Institute for Entrepreneurial Development
(10) Technical Consultancy Organisation (TCOs)
(11) Public Sector Bank
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Role of Government in Promoting Entrepreneurship
Development of Basic facilities , Infrastructure, Utility and Services
Development of Industrial Estate
Development of Export Promotion Zone
Development of Special Economic Zone
Incentives & Concessions
Industrial Estate Development
Cluster Development
Training Programmes
Marketing Aids
Labour Reform
Legal Regulations & Procedures
Basic Utilities & Services
Human Resource Management
MSME Policy in India
MSME Development Act2006
Manufacturing Enterprises :-
(A) Micro Enterprises - Investment up to Rs. 25 Lakhs
(B) Small Enterprises - Investment above Rs. 25 Lakhs & up to Rs. 5 Crore
(C) Medium Enterprises - Investment above Rs. 5 Crore & up to Rs. 10 Crore
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Service Enterprises :-
Salient Features of MSME Development Act2006
(A) Promotion , Development and Enhancement of competitiveness of these enterprises.
(B) Legal framework for recognition, classification and integration of each category.
(C) Establishment of specific funds for the promotion , development and enhancing the
competitiveness
(D) Notifications of various schemes / programmes of government
(E) Progressive Credit Policies and Practices
(F) Preferences in Government Procurement to provides and services of the micro and small
enterprises
(G) Providing Credit Linked Capital Subsidy Scheme for Technology Upgradation
(H) Credit Support as RBI has issued guidelines the public sector banks to ensure 20 Percent year
on year growth in credit to MSME
(I) Scale up of operation of SIDBI to its credit operations for MSME
(J) Excise Exemption Limit
(K) Micro and Small Enterprises Cluster Development Programme
(L) Technologies and Quality Upgradation Support
(M) Marketing Promotion Support
(N) Entrepreneurial and Managerial Support
(O) Empowerment of Women Entrepreneurs
(P) Strengthening of Prime Minister Rozgar Yojna
(Q) Strengthening of Data Base for MSME Sector
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Number of Units
Employment
Rate of Growth
Share in GDP
Value of Production
Extent of Sickness/Closure
Women Entrepreneurs
Export of Product/Services
Agencies For Policy Formulations and Implementations
District Industry Center (DIC) :
DIC are envisaged as single window interacting agency with the entrepreneur at the district level to
provide integrated administrative framework for promotion of small-scale industries in rural areas by
implementation of various schemes and progress of the central and state government.
Functions of DIC :
1. To conduct industrial potential surveys.
2. To prepare Techno-Economic Survey
3. To prepare an action plan to efficiently implement the schemes identified.
4. To guide entrepreneurs in matters relating to selecting the most appropriate machinery and
equipment , sources of its supply and procedures for processing for procuring imported machinery , if
needed, assessing requirement for raw material etc.
5. To appraise the worthiness of the various proposals received from the entrepreneurs.
6. To assist the entrepreneurs in marketing of their products.
7. To conduct artisans training programmes
8. To facilitate as the technical arms in administrating IRDP and TRYSEM programmes
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Small Industries Service Institute (SISI)
SISI are set up to provide consultancy and training to small entrepreneur , both existing as well as the
prospective one. The activities of SISI are coordinated by the Industrial Management Training Division.
Main function of SISI are :
1. To serve as interface between Central and State Governments.
2. To render technical support services
3. To conduct EDP
4. To initiate Promotional Programmes
5. Assistance in Economic Consultancy, Information and EDP Consultancy
6. Project Profile
7. District / State Industrial Potential Surveys
8. Workshops Facilities
9. Training in various Traders/Activities
Entrepreneurship Development Institute of India
The Entrepreneurship Development Institute of India (EDI), an autonomous body and not-for-profit
institution, set up in 1983, is sponsored by apex financial institutions, namely the IDBI Bank Ltd, IFCI
Ltd. ICICI Ltd and State Bank of India (SBI). The Institute is registered under the Societies Registration
Act 1860 and the Public Trust Act 1950.
Mission Statement
To become a catalyst in facilitating emergence of competent first generation entrepreneurs and

transition of existing SMEs into growth-oriented enterprises through entrepreneurship education,
training, research & institution building
EDI has been spearheading entrepreneurship movement throughout the nation with a belief that
entrepreneurs need not necessarily be born, but can be developed through well-conceived and well-
directed activities :
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EDI Objective
Creating a multiplier effect on opportunities for self-employment,
Augmenting the supply of competent entrepreneurs through training,
Augmenting the supply of entrepreneur trainer-motivators,
Participating in institution building efforts,
Inculcating the spirit of 'Entrepreneurship' in youth,
Promoting micro enterprises at rural level,
Developing and disseminating new knowledge and insights in entrepreneurial theory and
practice through research,
Facilitating corporate excellence through creating intrapreneurs (entrepreneurial managers),
Improving managerial capabilities of small scale industries,
Sensitising the support system to facilitate potential and existing entrepreneurs establish and
manage their enterprises,
Collaborating with similar organisations in India and other developing countries to accomplish
the above objectives.
NIESBUD (The National Institute of Entrepreneurship & Small Business Development)
NIESBUD is an apex body under the Ministry of Micro, Small & Medium Enterprises , Government of
India for coordinating and overseeing the activities of various institutions/agencies engaged in
entrepreneurship development particularly in the area of small industry and small business. The
Institute which is registered as a Society under Societies Registration Act, 1860 (XXI of 1860), started
functioning from 6th July, 1983.
The policy, direction and guidance to the Institute is provided by its Governing Council whose
Chairman is the Minister of MSME.The Executive Committee consisting of Secretary (Micro, Small &
Medium Enterprises) as its Chairman and Director General of the Institute as its Member-Secretary,
executes the policies and decisions of the Governing Council through its whole-time Director General
The Institute has conducted a total of 9,039 different Training Programmes covering 2,35,773
participants which includes 161 International training programmes with 2,524 participants from more
than 125 countries till 31st January 2014.
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NIESBUD Objectives are as follows:-
To evolve standardised materials and processes for selection, training, support and
sustenance of entrepreneurs, potential and existing.
To help/support and affiliate institutions/organisations in carrying out training and other

entrepreneurship development related activities.
To serve as an apex national level resource institute for accelerating the process of
entrepreneurship development ensuring its impact across the country and among all strata of the
society.
To provide vital information and support to trainers, promoters and entrepreneurs by

organising research and documentation activities relevant to entrepreneurship development
To train trainers, promoters and consultants in various areas of entrepreneurship

development
To offer consultancy nationally/internationally for promotion of entrepreneurship and small

business development.
To provide national/international forums for interaction and exchange of experiences helpful

for policy formulation and modification at various levels.
To share international experience and expertise in entrepreneurship development.
To share experience and expertise in entrepreneurship development across national frontiers.
National Entrepreneurship Development Board
Objective :
Encouraging self employment in small scale industries and small business.
Salient Features :
To identify and remove entry barriers for the potential entrepreneurs and study on the
entrepreneurship development.
To focus on existing entrepreneurs in micro, tiny and small sector and identify and remove
constraints to survivals, growth and continuously improve performance.
To facilitate the consolidation, growth and diversification of existing entrepreneurial venture

in all possible ways.
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To support skill upgradation and renewal of learning processes among practicing
entrepreneurs and managers of micro, tiny, small and medium enterprises.
To sensitise to support agencies in the area of entrepreneurship about the current

requirement of growth.
To act as catalyst to institutionalise entrepreneurship development by supporting and

strengthening state level institutions for entrepreneurship related activities takes place at the grass
root level and removing various constraints to their effective functioning.
Setting up of incubations by entrepreneurship development institutions and other

organizations devoted to the promotion of entrepreneurship development.
Government Assistance and Incentives :
MSME SCHEMES Introduction In India like other developing nations, the business climate is more
informal in nature. The entrepreneurs are not interested to register their businesses, the society is
conservative and never doing business had been seen with a great value, though culturally we had
been rich for several hundred years with many intellectual capabilities. We always preferred doing
jobs over businesses, India is burgeoning as the neo youth power which needs lots of job
opportunities. By 2020 the median of the age of India would be 27, hence young India needs enough
jobs to feed this aspiring youth to maintain their living as well as a healthy family life. To take the
advantage of the age dividend, India needs to promote a better business climate. However, presently
India ranks 137 as per World Bank to do businesses whereas, New Zealand stood third and China
stood 37 in the ranking in 2014. To evolve the businesses as part of culture, Indian Government
already has taken many steps, including giving many incentives and subsidies to encourage youth to
opt for business as another career option which would be a better/stable career option compared to
doing jobs for others. Several schemes, assistance and many benefits are being provided to
entrepreneurs through different ministries, this is a pioneering effort to consolidate all the MSME
related schemes under one umbrella, thus conceptualised. Objectives Entrepreneurs are to be given
information that would facilitate to take best advantage of the schemes. This would give them
encouragement, enhancement and handholding resulting in improving productivity of the enterprises.
Development of enterprises in terms of establishment, expansion, modernisation, acquisitions and
mergers can take place. Organisation structure in terms of proprietary, partnership, cooperatives,
corporations, etc., can be planned. Issues like state development, infrastructure, fiscal issues, export
prospects, etc., paves way for economic prospects. Methodology Both primary and secondary sources
of information are obtained. The pointers are in respect to each ministry with the focus in terms of
purpose, nature of assistance, etc.
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(i)MINISTRY OF MICRO, SMALL AND MEDIUM ENTERPRISES
SME Division Scheme
Providing financial assistance on International Cooperation
Assistance to Training Institutions Scheme (ATI Scheme)
Marketing Assistance Scheme
Development Commissioner (DC-MSME)
Credit Guarantee Scheme
Credit Linked Capital Subsidy Scheme for Technology Upgradation
ISO 9000/ISO 14001 Certification Reimbursement Scheme
Micro & Small Enterprises Cluster Development Programme
Micro Finance Programme
MSME Market Development Assistance (MDA)
National Awards (for individual MSEs)
National Manufacturing Competitiveness Programme (NMCP)
(i) Marketing Support/Assistance to MSMEs (Bar Code)
(ii) Support for Entrepreneurial and Managerial Development of SMEs through incubators
(iii) Enabling Manufacturing Sector: Be competitive through QMS & QTT
(iv) Building Awareness on Intellectual Property Rights(IPR)
(v) Lean Manufacturing Competitiveness Scheme
(vi) Design Clinic Scheme for design expertise to MSMEs manufacturing sector (DESIGN)
(vii) Marketing Assistance & Technology Upgradation Scheme
(viii) Technology and Quality Upgradation Support to MSMEs
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NSIC Schemes
Performance and Credit Rating Scheme
Bank Credit Facilitation Scheme
Raw Material Assistance Scheme
Single Point Registration
Infomediary Services
Marketing Intelligence Services Lease
Bill Discounting Scheme
NSIC Infrastructure
i. NSIC Exhibition Hall Hyderabad
ii. IT Incubator
iii. Exhibition cum Marketing Development Business Park
iv. Software Technology and Business Parks
iv. NSIC Exhibition Grounds, New Delhi
ARI Division Scheme
1. Prime Minister Employment Generation Programme (PMEGP)
2. Janshree Bima Yojana for khadi artisans
3. Market Development Assistance (MDA)
4. Providing financial assistance for R&D activities of Coir Board under Central Sector Plan Scheme of
Science & Technology (S&T) of the Coir Board
5. Rejuvenation, Modernisation and Technology Upgradation of Coir Industry (REMOT)
6. CSS of Export Market Promotion
7. Skill Upgradation & Quality improvement and Mahila Coir Yojana
8. Development of Production Infrastructure (DPI) Scheme
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9. Welfare Measures Scheme (Coir workers)
10.Programme for promotion of Village Industry Cluster - Rural Industry Service Centre(RISC) for Khadi
and Village industry
(ii) MINISTRY OF AGRICULTURE
Enterprise Development (Direct/Indirect)
1. Agricultural Marketing Divisions Scheme (Marketing Research and Information Network)
2.Strengthening of Agmark Grading Facilities
3. Development/Strengthening of Agricultural marketing infrastructure, Grading & Standardisation
4. Gramin Bhandaran Yojana: A Capital Investment Subsidy 40 scheme for Construction/Renovation of

Rural Godowns
5. Small Farmers Agriculture-Business Consortium- Agriculture - Business Development scheme
6. Assistance to NCDC Programmes for Development of Cooperatives 42 of Cooperatives
7. Establishment of Agri-clinics and Agri-Business Centres
8. National Horticulture Board
A. Development of Commercial Horticulture
i. Horticulture in Open Field
ii. Horticulture in Protected Cover
iii. Horticulture for Post harvest management projects
B. Capital investment subsidy scheme for construction/expansion / modernisation of cold storage and
storages for horticulture
i. Cold storage unit - Basic mezzanine structure
ii. Cold storage unit - PEB Structure
iii. Cold storage unit using technology for controlled atmosphere
iv. Cold Chain scheme
v. Refrigerated transport vehicle scheme
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9. Promotion and Strengthening of Agricultural Mechanisation through Training, Testing &
Demonstration
10. Post Harvest Technology and Management
11. Capacity Building to enhance Competitiveness of Indian agriculture and Registration of Organic
Products Abroad
12. Dairy Entrepreneurship Development Scheme
13. Fodder and Feed Development Scheme
III. MINISTRY OF CHEMICALS AND FERTILIZERS
Department of PetroChemicals
1. Centres for Excellence in Petrochemicals Sector
2. Scheme for Setting Up of Plastic Parks
Department of Fertilizers
1. Nutrient Based Subsidy (NBS)
Department of Pharmaceutical (DoP)
1. Cluster Development Programme for Pharma Sector (CDP-PS)
IV. MINISTRY OF COMMERCE & INDUSTRY
Export Credit Guarantee Corporation of India Limited
1. Scheme relating to Exporter Credit Insurance
i. Small Exporters Policy - (SEP)
ii. Small and Medium Exporters Policy
Department of Industrial Policy and Promotion
2. Indian Leather Development Programme
i. Mega Leather Cluster Sub-Scheme
ii. Market Access Initiatives (MAI) Scheme
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TEA Board
3. Scheme for participation in International fairs and exhibitions with Tea Board
4. Promotion Scheme for packaged Teas of Indian origin
SPICES Board
5. Export Development & Promotion of Spices
i. Promotion of Indian Spice Brands Abroad
ii. Spices Processing in North Eastern Region
iii. International Trade Fairs/Meetings
V. MINISTRY OF COMMUNICATION AND INFORMATION TECHNOLOGY
1. R&D Funding scheme
2. Technology Incubation and Development of Entrepreneurs (TIDE)
3. Multiplier Grants scheme (MGS)
4. SIP-EIT, Support International Patent Protection in Electronics and IT
5. e-Governance schemes
i. Common Service Center (CSC)
ii. Capacity Building scheme
iii. State Data Centre scheme
iv. State Wide Area Network
6. Software Technology Parks of India (STPI)
7. Special Economic Zone scheme (SEZ)
8. Electronics Hardware Technology Park (EHTP) scheme
9. Export Promotion Capital Goods (EPCG) scheme
10. Duty Exemption and Remission Schemes
11. Deemed Exports
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12. Manpower development for Export Industry
13. The participation of private institutes under ISEA project
VI. MINISTRY OF CORPORATE AFFAIRS
1. Renewed Scheme for Certified Filing Centres (CFCs) to be operated by Professionally qualified
persons/Bodies to facilitate e-filing of documents under MCA
2. EES Filing scheme & Information
3. Scheme for fast track exit mode
VII. MINISTRY OF CULTURE
1. Scheme For The Award Of Fellowship To Outstanding Persons in the field of culture
2. Scheme for Financial Assistance for Capacity Building and training of Museum Professionals
3. Scheme of Building Grants, Including Studio Theatres
VIII. MINISTRY OF FINANCE
SIDBI Schemes
1. Scheme for Growth Capital and Equity Assistance
2. Scheme for Refinance for Small Road Transport Operators(SRTOS)
3. Scheme for General Refinance Scheme (GRS)
4. Refinance scheme for textile industry under Technology Upgradation Fund 77
5. Scheme for acquisition of ISO series certification by MSE unit
6. Scheme for Composite Loan Scheme
7. Scheme for Single Window Scheme (SWS)
8. Scheme for Rehabilitation of Sick Industrial Units
9. Scheme for development of industrial infrastructure for MSME sector
10. Scheme for Integrated Infrastructural Development (IID)
11. Scheme for Bills Re-Discounting Equipment
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12. Scheme for Bills Rediscounting Equipment(Inland Supply Bills)
NABARD Schemes
1. Scheme for Producers Organisations
2. Scheme for Dairy Venture Capital Fund
3. Scheme for establishing Poultry Estates and mother units for rural backyard poultry
4. Scheme for Establishment/Modernisation of Rural Slaughter Houses
5. Scheme for Commercial Production Units of Organic Inputs
6. Poultry Venture Capital Fund
IX. MINISTRY OF FOOD PROCESSING INDUSTRIES
1. Mega food park
2. Cold chain
3. Modernisation of Abattoirs
4. Research & Development, Quality assurance, Codex, Promotional activities
5. National Mission on Food Processing (NMFP)
X. MINISTRY OF HOUSING & URBAN POVERTY ALLEVIATION
1. RAY (Rajiv Awas Yojana)
2. RRY (Rajiv Rinn Yojana)
3. National Urban Livelihoods Mission
4. JNNURM (Jawaharlal Nehru National Urban Renewal Mission)
XI. MINISTRY OF RURAL DEVELOPMENT
1. Aajeevika
2. Indira Aawas Yojna
3. Pradhan Mantri Gram Sadak Yojana
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4. Prime Ministers Rural Development Fellows Scheme(PMRDFS)
5. Provision of Urban amenities to Rural Areas (PURA)
6. Swarnjayanti Gram Swarozgar Yojan
XII. MINISTRY OF SCIENCE & TECHNOLOGY
1. International S&T Cooperation (ISTC)
2. Science & Engineering Research Council (SERC)
3. State Science & Technology Programme (SSTP)
4. Science And Technology Application For Rural Development(STARD)
5. Science and Technology for Weaker Sections (STAWS)
6. Scheme for Young Scientists (SYS) 95 7. Tribal Sub-Plan (TSP)
8. Critical Technology Programme (CTP)
9. Science and Technology for Women
10. National Science & Technology Entrepreneurship Development Board (NSTEDB)
i. Innovation and Entrepreneurship Development Centre(IEDC)
ii. Entrepreneurship Development Cell(EDC)
iii. Entrepreneurship Development Programme(EDP)
iv. Science & Technology Entrepreneurship Development(STED)
v.Science & Technology Entrepreneurs/Entrepreneurship Park(STEP)
vi. Technology Business Incubators(TBI)
Department of Biotechnology (DBT)
11. Schemes Department of Bio-Technology (DBT)
12. Schemes under Department of Bio-Technology (Phase-1)
13. Schemes under Animal/Agriculture/Marine Biotechnology /Bioresource Programme
14. Biotechnology Industry Partnership Programme (BIPP)
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15. Biotechnology Industry Research Assistance Programme (BIRAP)
16. Biotechnology Ignition Grant Scheme (BIG) 100
XIII. MINISTRY OF SOCIAL JUSTICE
1. Rajiv Gandhi National Fellowship (RGNF)
2. Scheduled Caste welfare schemes
3. NGO working for SC organisations
XIV. MINISTRY OF TEXTILES
1. Additional Grant for Apparel Manufacturing Units under scheme for Integrated Textile Park (SITP)
2. Catalytic Development Programme (CDP) in Project Mode 103
Development Commissioner (Handlooms)
1. Comprehensive Handloom Cluster Development Scheme(CHCDS) Mega Handloom Cluster (12th

Plan) 2. Comprehensive Handlooms Development Scheme (CHDS)
3. Yarn Supply Scheme 107
4. Pashmina Wool Development scheme
Development Commissioner (Handicrafts)
1. Design and Technology Up-gradation
2. Babasaheb Ambedkar Hastshilp Vikas Yojana
3. Human Resource Development (HRD) Scheme
MINISTRY OF TOURISM
1. Timeshare resorts
2. Tented accommodation
i. Motels accommodation
ii. Hotels accommodation
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3. Travel trade
4. Scheme of capacity building for service providers (Institutes)
5. Marketing Development Assistance (MDA)
6. Publicity and Marketing
7. Refresher courses for regional level guides
8. Rahul Sankrityayan Paryatan Puraskar Yojna
9. Stand-alone Restaurants
10. Hunar-Se-Rozgar Tak-Sena Ke Sahyog Se(Creating Employable Skills)
XVI. MINISTRY OF TRIBAL AFFAIRS
National Scheduled Tribes Finance & Development Corporation
1. Adivasi Mahila Sashaktikaran Yojana
2. Tribal Forest Dwellers Empowerment Scheme
3. Micro Credit Scheme (MCS) for Self Help Groups (SHGs)
XVII. MINISTRY OF URBAN DEVELOPMENT
1. National Urban Information System(NUIS)
2. North Eastern Region Urban Development Programme(NERUDP)
3.Pooled Finance Development Fund Scheme
XVIII. MINISTRY OF WOMEN AND CHILD DEVELOPMENT
Women related schemes
1. Gender budgeting scheme
2. Support to Training and Employment Programme for Women (STEP) 126
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Women Entrepreneurship: Meanings, Characteristics, Qualities, Problems, Steps taken to help women
entrepreneur
Women Entrepreneurship :
As per Government of India :
An enterprise owned and controlled by a women having a minimum financial interest of 51 percent of
the capital and giving at least 51 percent of the employment generated in the enterprises to women.
Women entrepreneur is a confident , innovative and creative women capable of achieving self
economic independence individually or in collaboration, generates employment opportunities for
others through initiating, establishing and running the enterprises by keeping pace with her personal
family and social life.
Definition :
Women Entrepreneur is a confident, innovative and creative woman capable of achieving self-
economic independence individually or in collaboration, generates employment opportunities for
others through initiating , establishing and running the enterprise by keeping pace with her personal,
family and social life.
Evolution & Growth of Women Entrepreneurship in India
Women Entrepreneurship begin as an extension of 3 Ps : Pickle, Powder and Papad
Women Entrepreneurship PULL & PUSH factor
Now Women Entrepreneurship based on 3 Es : Engineering , Electronics & Energy
1. Solar Cooker in Gujrat
2. TV Capacitor in Odissa
3. Mini Foundries in Maharashtra
Women Entrepreneurship & Integrated Rural Development Programme
Important Role in Micro & Small Business
Women dominates in 3 Sub Sector
1. Over 80% in Textile, Clothing & Leather Production
2. Over 75% in Food , Beverages & Tobacco Production
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3. Over 60% in Agriculture Product Processing
Major Industries Promoted By The Women Entrepreneurs :
1. Agarbatti Manufacturing
2. Papad Making
3. Special Bedspreading
4. Embroidary
5. Handicrafts
6. Apparel
7. Boutique
8. Catering Services
9. Running Restaurants ,
10. Retail Shops
11. Running Creches
12. Running Coachings
13. Florist Shops
14. Dry Cleaning
15. Pickle Manufacturing
16. Dairy
17. Electrical & Electronic Gadget Maintenance
18. Stationary Manufacturing Unit
19. Packaging Manufacturing Unit
20. Engineering Industry
21. Pathology
22. Chemistry
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23. Bio-Chemistry
24. Travel Agencies
25. Advertising Agencies
26. Photocopier
27. Scanner
28. Typing
29. Photographic Studio
30. Womens Hostel
Reasons for the rise of women entrepreneurs
Need to play an active role
To participate or to exist in their own right
To achieve recognition
To gain independence
Sense of fulfillment
Will to succeed
Personal circumstances
Functions of Women Entrepreneurs :
1. Exploration of the prospects of starting a new business enterprise
2. Undertaking of risks and the handling of economic uncertainties involved in business
3. Introduction of innovations or imitation of innovations
4. Coordination , administration and control
5. Supervision and leadership
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All these entrepreneurial functions can be classified broadly into three categories :
1. Risk-bearing
2. Organisation
3. Innovations
Characteristic Features of Women Entrepreneurship :
Women owned businesses are highly increasing in the economies of almost all the countries
with the growing sensitivity to the role and economic status in the society.
Skill, knowledge and adaptability in business are the main reasons for women to emerge into
business-ventures.
A strong desire to do something positive is an in built quality of entrepreneurial women, who

is capable of contributing values in both family and the social life.
With the advent of media, women are aware of their own traits, rights and also the work
situations.
The glass ceilings are shattered and women are found indulged in every line of business from
pepped to power cables.
The challenges and opportunities provided to the women of digital era are growing rapidly
that the job-seekers are turning into job-creators.
They are flourishing as designers, interior decorators, exporters, publishers, garment

manufacturers and still exploring new avenues of economic participation.
More involvement in Decision Making Process.
Imagination
Attribute to work hard
Ability and desire to take Risk
Important Characteristics of an Entrepreneur
Visionary
Dare To Dream
Hard & Efficient Worker
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Take Care of Yourself
Ambitious Desire for Higher Achievement
Broader Social Vision
Highly Optimistic
Never Let Success Go To Your Head
Independence
Foresight
Intelligent
Emotional Stability
Good Organiser
Creative
Innovative
Sound Knowledge
Preservance through Continuous Effort
Team Spirit
Passionate
Conceptually Strong
Set Clear Goals
Curiosity For Learning
Information Seeker
Strive For Excellence
Build Self Confidence
Looking For Opportunity
Futuristic Planner
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Willingness to Change
Quality Conscious
Problem Solving Approach
Persuasiveness
Effective Monitoring
Employee Welfare Orientation
Effective Strategists
Assertive Behaviour
Human Relation Ability
Motivator
Initiator
Risk Taker
Spirit of Accepting The Challenge
Sense of Conviction
Resourcefulness
Ability to Manage Failure
Build Core Competencies & Excellence
Work Ethics
Building Strong Organisational DNA
Professional Integrity
Professional Honesty
Flexible Approach
Professional Maturity
Be a Role Model
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Administrative Ability
Organizational Ability
Out of Box Thinker
Qualities of a Women Entrepreneurs :
It comprises of various skill of a Women Entrepreneurs
Group Skill :
Ability to Work Together
Ability to Learn Together
Ability To use Task Forces/Project Teams
Ability To Work In Unstructured Situation
Ability To Work With Scarce Resource Base
Technical Skill
To know about the Technology
Ability to Relate Technology With New Product Development
Technical Business Management
Ability to Update Technology
Business Skill
Planning & Goal Setting
Decision Making
Marketing
Finance
Accounting
Management
Control
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Negotiation
Venture Launch
Managing Growth
Innovation Skill
Value Creation Skill
Market Sensing Skill
Organisational Development Skill
Right People Selection Skill
Network & Alliance Development Skill
Human Behavioural Skill
Motivation
Judgement
Resilience
Initiator
Team Working
Self Management
Self Confidence
Improvement Reorientation
Trustworthiness
Communication Skill
Be Flexible
Be Open in Communication
Not To Blow Your Own Trumpet
Pit Intelligence In Words
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Emphasise On The Issues
Effective Communication
1. Self Awareness
2. Empathy
3. Responsiveness
4. Alertness
5. Timeliness
6. Proficiency
7. Clarity
8. Focus
9. Compassion
10. Positive Attitude
11. Presentation
12. Listen Willingly & Actively
Illustrative Communications
Clarity
Good Knowledge of Languages
Self Awareness
Social Awareness
Appreciating Validating Others
Understanding Others Role
Building Positive Relationship With Friends & family
Taking Responsibility & Coping With Stress
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Problems of Women Entrepreneurship :
Problem of Finance
1. Women do not have property as collateral
2. Bank consider women less Creditworthy
3. Financed based mainly on their own savings
4. More Economic Dependence
Scarcity of Raw Material
High Production Cost
Insufficient Working Capital
Stiff Competition
Limited Mobility
Limited Managerial Ability
Regulatory & Commercial Complexities
Less technological Access
Exploitation by Middle Man
Lack of Self Confidence
Family Ties & Conflicts
Lack of Education
Male Dominated Society
Low Risk Bearing Ability
Large Skill Gap
Social Barrier & Insecurity
Less Socio-Psychological Acceptance
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Step To Help Women Entrepreneurship
Right efforts from all areas are required in the development of women entrepreneurs and
their greater participation in the entrepreneurial activities. Entrepreneurship basically implies
being in control of ones life and activities and women entrepreneurs need to be given
confidence, independence, and mobility to come out of their paradoxes. The following
measures are suggested to empower the women to seize various opportunities and face
challenges in business.
Vocational training to be extended to women community that enables them to understand
the production process and production management.
Skill development to be done in women's polytechnics and industrial training institutes. Skills
are put to work in training-cum-production workshops.
Educational institutes should tie up with various government and non-government agencies to
assist in entrepreneurship development mainly to plan business projects.
International, National, Local trade fairs, Industrial exhibitions, seminars and conferences
should be organized to help women to facilitate interaction with other women entrepreneurs.
Women in business should be offered soft loans & subsides for encouraging them into
industrial activities. The financial institutions should provide more working capital assistance
both for small scale venture and large scale ventures.
Making provision of micro credit system and enterprise credit system to the women
entrepreneurs at local level.
Women Entrepreneurs should be treated a separate target group for all Entrepreneurial
Development Programmes
The weaker section could raise funds through various schemes and incentives provided by the
government to develop entrepreneurs in the state. E.g. the Prime ministers Rozgar Yojana,
The Khadi and Rural village industries scheme, etc.
In the initial stages women entrepreneurs may face problems but they must persevere,
believe in themselves and not give up mid way.
Attempts by various NGOs and government organizations to spread information about
policies, plans and strategies on the development of women in the field of industry, trade and
commerce. Women entrepreneurs should utilize the various schemes provided by the
Government.
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Women should try to upgrade themselves in the changing times by adapting the latest
technology benefits. Women must be educated and trained constantly to acquire the skills
and knowledge in all the functional areas of business management. This can facilitate women
to excel in decision making process and develop a good business network
Self help groups of women entrepreneurs to mobilize resources and pooling capital funds, in
order to help the women in the field of industry, trade and commerce can also play a positive
role to solve this problem.
Womens entrepreneurship must be examined both at the individual level (i.e. the choice of
becoming self-employed) and at the firm level (the performance of women owned and
managed firms) in order to fully understand the differences between mens and womens
entrepreneurship.
To establish all India forums to discuss the problems, grievances, issues, and filing complaints
against constraints or shortcomings towards the economic progress path of women
entrepreneurs and giving suitable decisions in the favor of women entrepreneurs and taking
strict stand against the policies or strategies that obstruct the path of economic development
of such group of women entrepreneurs.
Encouragement should be given appropriate technologies, equipment and practice for

reducing their drudgery and increasing their efficiency and productivity.
Government should involve women entrepreneurs in decision making process meant for
entrepreneurship development.
To financial schemes for the promotion of women entrepreneurship are Mahila Udyog Nidhi
of SIDBI and Stree Shakti Package of State Bank of India
MINISTRY OF WOMEN AND CHILD DEVELOPMENT has started Women related schemes
1. Gender budgeting scheme
2. Support to Training and Employment Programme for Women (STEP)
Thus by adopting the following aforesaid measures in letter and spirit the problems associated with
women can be solved. Entrepreneurship is not a bed of roses to women. Women participation in
many kinds of economic activities to complement to their family income, their participation in no way
reduces their family duties. The task of women has become more tedious and full of challenges.
Page 64
Units-III
Promotion of a venture: Concepts of Projects, Project Identification, Formulation and Report, Project
Appraisal. Product Selection and Techniques. Raising of funds: Concept, Need, Types and Sources.
Project :
Project is a ground work with scientifically evolved Work Plan of an Enterprise and an Entrepreneur
for an One Shot, Objective Oriented, Time Tested, Goal Diverted supported with Commitment &
Combination of Human & Non-Human resources pulled together to achieve a specified purpose in a
finite and well defined life span. The Projects are meant for development and economic upliftment
leading to an improvement in the quality of life of the people. Project is a cluster of activities where
resources are invested from its inception to its completion to generate a given result within a
framework of approved time and cost schedule.
Nature of Project :
Project deals with the three dimensions : Innovation, Vision and Risk
According to Gittinger : Project is a whole complex of activities involved in using resources to gain
benefit. A project is a single use plan and aimed at achieving a specific one time goal. Projects
integrate fewer activities and resources and are often developed as sub-units of programme.
Difference Between Programmme & Project :
Programme :-
It is usually large in scope with series of activity orientation and my encompass a number of project
and not necessarily time bound.
Project:
Project is a part of programme narrower in scope, One Shot task oriented major undertaking and its
objective is to meet the programme objective. It is neither a physical objective, nor is it the end
result.
Basic Attribute of a Project:
1. Why ?------Specific Objective
2. Where ?------Place of Action
3. How ?------Course of Action
4. When ?-----Definite Time Perspective
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Contents of Project Objective :
1. Specific
2. Not-Complex
3. Measurable
4. Tangible
5. Verifiable
6. Realistic & Attainable
7. Resource Bound
8. Consistent With Organisational Plan, Policies & Procedures
9. Maximization of Return on Investment
Characteristic Features of Project :
1. Has a Mission or Set of Objective
2. One Single Entity
3. Investment
4. Expected Return
5. Time Limit
6. Location
7. Excellent Team Work
8. Well Defined Life Cycle
9. Unique & Un - similar
10. Customer Specific
11. Complex Set of Things
12. Risk & Uncertainty
13. Well Motivated Organisation
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14. Possess Learning Component
15. Flexible Process
16. Value Addition to Society
17. Development & Community Participation
18. Excellent Orientation towards various Management Functions
Project Classification :
1. Quantifiable & Non- Quantifiable Project
(i) Quantifiable :
Where a plausible quantitative assessment of benefits can be made e.g. Industrial Development,
Power Generation, Infrastructure Development
(ii) Non-Quantifiable :
Where a plausible quantitative assessment of benefits are not possible e.g. Health, Education &
Defense
2. Sectoral Projects :
(i) Agriculture & Allied Sector
(ii) Irrigation & Power Sector
(iii) Industry & Mining Sector
(iv) Transport & Communication Sector
(v) Social Service Sector
3. Techno Economic Project :
(i) Intensity Oriented Classification For capital Intensive or Labour Intensive Factors
(ii) Causation Oriented Classifications as Demand Based or Project Based
(iii) Magnitude of Investment based classification i.e. Large scale, medium Scale or Small Scale.
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Groups of Techno Economic Project :
(1) Agriculture, Forestry, Hunting & Fishing
(2) Mining
(3) Manufacturing
(4) Construction
(5) Electricity
(6) Gas
(7) Water
(8) Sanitary services
(9) Commerce
(10) Logistics
(11) Communication
(12) Services etc.
(4) Financial Institutions Classifications
(i) New Project
(ii) Expansion Project
(iii)Modernization Project
(iv)Diversification Project
(5) Service Project
(i) Welfare Project
(ii) Service Project
(iii)R&D Project
(iv)Educational Project
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Criteria for Selecting a Particular Project :
i. Size of Investment
ii. Location
iii. Technology
iv. Equipment
v. Marketing
Project Management :
Project Management is the process of planning and directing a project from its inception to its
completion in a given time at a given cost to generate a given result.
Components of Project Management :
(1) Project Planning , Monitoring and Control
(2) Pre-Investment Activities Planning
(3) Procurement and Contract Management
(4) Quality Assurance
(5) Cost Engineering & Budgeting
(6) Site Management
Project Life Cycle :
(1) Pre-Investment Stage
(2) Construction Stage
(3) Normalisation Stage
Objectives of Project :
(1) Promotional Objectives for new production unit
(2) Balancing Objectives among different production units
(3) Modernisation Objective
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(4) Replacement /Maintenance Objective
(5) Expansion Objective
(6) Diversification Objective
Issues in Project Management
Suitability of Business Idea
Gestation Period
Cost Control
Technological Updation
Change in Demand
Political Issues
Legal Issues
Sustainable Development
Beaurocratic Set Up
Factors to be considered in Preparation of a Project :
(1) Compatibility with Entrepreneur
(2) Consistence with Government Priorities
(3) Availability of Inputs
(4) Adequacy of Market
(5) Reasonableness of Cost
(6) Acceptability of Risk Level
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Project Identification -
Project Identification is the first step of a new venture in right direction of an entrepreneur to scale
new heights through collection, compilation and analysis of economic data for the eventual purpose
of locating possible opportunities for investment and with the development of such opportunities.
Identification process is concerned with conscious identification of a viable project idea that logically
addresses the opportunity. An opportunity is defined as the identification of a gap in need and the
likelihood that if a product was developed to fill the need it would also be wanted i.e. there would be
effective demand . Thus, the identification of business opportunity is the result of interaction
between the entrepreneur and his environment.
As per Peter Drucker Project Opportunities :
1. Additive
2. Complementary
3. Break Through
(1) Additive :
It enables decision makers to better utilize the existing resources without in any way involving a
change in the character of business where element of risk is greater.
(2) Complementary :
Its the introduction of new ideas and such do lead to a certain amount of changes in the existing
structure.
(3) Breakthrough :
It involves fundamental changes in both the structure and character of business involving the greatest
element of risk.
Sources For Project Identification:
(1) Observation
(2) Trade & Professional Magazines
(3) Research Institutes
(4) Govt. Development Publications
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Project selection Criteria :
(1) Investment Size
(2) Location
(3) Infrastructure Availability
(4) Technology
(5) Equipment
(6) Marketing
Importance of Project Identification :
Catalytic Agent of The Economic Development & Change in Socio-Cultural Development
Initiator of Development, Employment Generation & Income Generation
Provide Future Framework of Activities & Services of an Entrepreneur
Clarity of Financial Framework
Steps in Project Identification Involving The Study of Followings:
(1) Available Raw Material
(2) Available Technology & Skill
(3) Position of substitute available in the market
(4) Information with regard to import of commodities which can be indigeniously manufactured
(5) Inter-Industry relationships
(6) Performance of existing industry in which specific product related project is being planned
(7) Availability of development plans
(8) Position of old project, if any
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Testing Criteria for Project Identification :
At the time of the investment decision , entrepreneur is required to take concerned efforts to assess
the social and economic costs and profitability of the project with the help of Social Cost Benefit
Analysis Technique. It would be better to examine the following issues in detail with regard to project
identification.
i. The organizational structure and nature of project planning capability to be developed by the
entrepreneur
ii. What analysis / studies need to be undertaken at the identification stage
iii. How and what extent the use of social cost benefits analysis should be used at the
identification stage
iv. Whether some guidelines should be provided for undertaking the necessary studies
v. How to ensure the availability of shelf of the project for the concerned objective.
Constraints in Project Identification and Execution :
(A) Internal Constraints :
i. Non-Availability of required project planning
ii. Non Availability of realistic cost estimates and time schedule.
iii. Non-Procurement of equipment/materials in time
iv. Non-Involvement of project management in formulation of project objective and goals .
(B) External Constraints :
i. Rapid change in technology and requirement of required skilled manpower
ii. Delays in delivering from the Indian equipment supplier, shortage of basic materials, power
cuts, lack of sufficient experience and outdated business methodologies etc.
iii. Government Policies and Regulations
iv. Lack of Standardization of the equipments
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Dimensions of Project Environment :
i. Business Environment
ii. Industrial Policy
iii. Regulations of Industrial Development
iv. Regulatory framework for foreign investment
v. Promotional measures for industrial development
vi. Liberalization and new economic policy
Project Formulations -
Project Formulation is a process whereby the Entrepreneur makes an objective and independent
assessment with the assistance of specialists or consultants, of the various aspects of an investment
proposition of a project ides for determining its total impact, benefit and also its liability.
Phase of Project Formulations :
(1) Composition of an Idea
(2) Analysis of Related Aspects
(3) Formulation of a Project
(4) Design of a Project
Steps in Project Formulation :
(1) General Objective
- It merely states in broad terms the achievements expected
(2) Operational Objective
- It specifically mentions the results expected from the implementation of the projects or
schemes . The definition of objective in clear terms help in quantifying Physical, Financial, Human and
other resource requirement.
(3) Feasibility Analysis
(4) Techno-Economic Analysis
(5) Project Design & Network Analysis

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(6) Input Analysis
(7) Financial Analysis
(8) Social Cost Benefit Analysis
(9) Pre Investment Analysis
Project Feasibility :
i. Technical Feasibility Study
ii. Market Feasibility Study
iii. Financial Feasibility Study
iv. Commercial Feasibility Study
v. Social Feasibility Study
Project Feasibility Report :
i. Executive Summary
ii. Project Background and History
iii. Market and Plant Capacity
a. Demand and Market Supply
b. Sales & Marketing
c. Production Programme
d. Plant Capacity
iv. Material Inputs
a. Material and Inputs
b. Supply Programme
v. Location and Site
a. Location
b. Plant site and local conditions
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c. Environment Impact
vi. Project Engineering
a. Layout and physical coverage of the project
b. Technology and equipment
c. Civil Engineering
vii. Plant Organisation and Overhead Cost
a. Plant Organisation
b. Overhead Costs
viii. Manpower
a. Labour (Skilled)
b. Staff ( Administrative & Sales)
ix. Project Implementation
x. Financial and Economic Evaluation
a. Total Investment Outlay
b. Project Financing
c. Production Cost
d. Profitability
e. National Economic Evaluation
Essentials of Conducting Feasibility Studies :
1. Scope of the Project
2. Collection of data for Studies
3. Verification of Alternatives and Assumptions
4. Proposed Cost Structure
5. Scheduling the Operation
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6. Currency Management
7. Contingencies
8. Project Team
9. Expansion of Projects
10. Cost Studies
11. Accuracy of Cost Estimates
12. Agencies involved in conducting such studies
Project Report :
It is a working plan for the implementation of project proposal after investment decision has been
taken by the entrepreneur. It provides all necessary information of the unit proposed to be set up for
the manufacturing of a project or rendering a service. It assesses the demand potential of the
proposed product , works out the cost of capital invested and operational cost along with side by side
expected profitably.
Objectives of Project Report :
1. To plan in advance about the fulfillment of expected performance in the area of Marketing,
Technology, Finance, Personnel, Production, Customer Satisfaction and Social Endorsement.
2. To evaluate the organizational objectives to what extent they are advisable through data
analysis, its interpretation and necessary actions.
3. To make efforts to quantify the objectives as well as enabling them to be measurable ,

tangible, verifiable and attainable.
4. To assess the implications of constraints on resources . These resources include manpower ,

equipment, finance and technology
5. To avail financial support from the financial institutions.
6. To examine the course of action as suggested in the project report.
Process of Project Report Preparation :
1. Break down all project component like time and cost and prepare its estimate.
2. Develop baseline for the cost and time that helps in implementation of the project.
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3. Listing of the resources required to implement the project
Issues involved in Project Report :
1. Critical and routine issues
2. Infrastructural aspects
3. Market potential and feasibility
4. Capacity to fall back
5. Core competency and competitive edge
Format of Project Report :
1. General Information :
Industry and its status in Economy
Present production and demand
Licensed and installed capacity
Government policies
Export potential
Biodata of entrepreneurs
Industry profile
Constitution of organization
Product details
2. Project Description :
Physical infrastructure and other facilities
Location of plant and its advantages
Raw material specifications, quantity required and its availability
Technical know how
Water, power and fuel supply
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Arrangement for effluent treatments
Environmental Clearance
List of plant machinery and equipments
Capacity of the plant
Research & development facility
Communication System
Transport facility
3. Market Potential
Demand and supply position
Brand market trend of the product
Expected priced to be realized
Marketing strategy
After sales service
Impact of seasonality factor
Logistic
4. Capital Cost & Sources of Finance
Land
Building
Plant and machinery
Administrative office
Stores
Services
Other equipments
Preliminary expense
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Contingencies
Cost of spares, repairs and maintenance
Present and probable sources of finance
Owners Equity
Long term loans and deposits
Funds from financial institutions
5. Assessment of working capital
Initial requirement of working capital requirements
Analysis of different components of working capital requirement
Working capital required in the production cycle
Expected cash flows
6. Other financial aspects
Cost of production
Profitability
Cash flow statement
Production capacity
Break-even point
Effect of variation of cost of raw material
Utilisation and price etc.
Decision making analysis like ROI,IRR, Pay Back Period, Debt-Equity Ratio and Economic Cost
Benefit Analysis.
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Guidelines For Preparing A Detailed Project Report
Your company seeking financial assistance for implementation of its business idea is required to
prepare a Project Report covering certain important aspects of the project as detailed below:
Promoters background/experience
Product with capacity to be built up and processes involved
Project location
Cost of the Project and Means of financing thereof
Availability of utilities
Technical arrangements
Market Prospects and Selling arrangements
Environmental aspects
Profitability projections and Cash flows for the entire repayment period of financial assistance
Since the appraisal of the Project involves evaluation of the Project in the following areas, your
company/you would be required to submit certain documents/information in the matter.
Management Evaluation
Memorandum and Articles of Association : Object, authorised and paid-up share capital,
promoter's contribution, borrowing powers, list of directors on the Board, terms of appointment of
directors
Your company as the Promoter : Corporate plan of the Company, projects

promoted/implemented/under implementation, Bankers' report on dealings and repayment of past
loan assistance, details of group companies, operations, balance sheet and profit & loss account of the
promoter company
New Promoters : Educational background, any industrial experience, family background,

sources of income, details of personal properties, banker's reference, income tax/ wealth tax returns.
Management and Organisation set up : Broad composition of the Board, details of full time
directors and their responsibilities, details of Chief executive and functional executives including
qualification, experience, organisation set-up for existing company and during project implementation
for new company.
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Technical Feasibility
Technology and Manufacturing Process : Proven/new technology, basis of selection of

technology, competing technologies, performance data of plants based on the technology, details of
licensor of technology, process flow chart and description
Location of the Project : Locational advantage, availability of raw material and other utilities,
infrastructure facilities, availability of labour, environmental aspects
Plant and Machinery : List of machinery & equipment, details of suppliers, competitive
quotations, technical & commercial evaluation of major equipment
Raw Material, Utilities and Manpower : Details of raw materials and suppliers, electricity and
water supply, basis of manpower estimates, details of manpower eg. managerial, supervisory,
skilled/unskilled, training needs
Contracts : Agreement with contractors detailing on know-how, engineering, procurement,

construction, financial soundness and experience of contractors
Project Monitoring and Implementation : Mode of implementation, details of monitoring

team, detailed schedule of implementation.
Environmental Aspects: Air, Water and Soil Pollution, list of pollutants / Hazardous
substances, their safety, handling and disposal arrangements, compliance with national and
International Standards, Clearances and No objection certificates required and obtained etc.
Commercial Viability
Existing and potential market demand and supply for the proposed product in respect of
volume and pattern
Share of the proposed product of the company in the total market through marketing strategy
Selling price of the product and export potential, if any.
Buy-back arrangements, if any.
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Project Appraisal
Concept of Project Appraisal :
Project appraisal is a Cost & Benefit Analysis whereby a lending financial institutions makes an
independent and objective assessment of various Technical, Financial, Commercial, Economic,
Ecological, Social and Managerial aspects of an investment proposition to arrive at the financing
decision to best project among available alternative projects.
Objective of Project Appraisal :
i. To assess future expected contributions of project alternatives
ii. To undertake analysis of various cost and benefit components of proposed alternatives
iii. To develop a conceptual framework for motivating and evaluating the proposed actions.
Project Appraisal Process :
1. Classification of effects of a project
2. Assessment of effects of a project
Importance of Project Appraisal :
i. It provides specific and predicted results
ii. It tests the desirability of a project
iii. It generates information to determine the success or failure of a project
iv. It develops or uses existing norms to forecast the rate of success or failure of a project
v. It verifies the hypotheses developed for the project
Aspects of Project Appraisal Programme :
i. Gestation period
ii. Location
iii. Life of the project
iv. Choice of technology and technical feasibility
v. Capital cost and norms as well as phasing of capital cost
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vi. Operating cost and norms as well as likely availability of assumed infrastructure facilities in
time and required quantity and volume.
vii. Quantification of economic costs and social benefits etc.
Tools and Method of Project Appraisal :
(1) Economic Appraisal
Under Economic Appraisal , the project aspects highlighted include requirement for
Economic Rate of Return
Break-Even Analysis
Domestic Resource Cost
Effective Rate of Protection
Raw Material
Level of Capacity Utilisation
Anticipated Sales
Anticipated Expenses
Probable Profit
Location of Project
Government Supportings
(2) Financial Appraisal
Finance facilitates an entrepreneur to bring together of one, machine of another and raw material of
yet another to combine them to produce goods. Financial Analysis is done to ensure the Financial
Viability of the Project, the following aspects need to be carefully analysed.
Cost Analysis
Pricing
Financing
Income & Expenditure
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Capital Budgeting
Assessment of Fixed Capital
Assessment of Variable Cost
Assessment of Working Capital
Evaluation of Investment Proposal :
A. Traditional Method
i. Pay Back Period
ii. Accounting Rate of Return
B. Discounted Criteria
i. Net Present Value Method
ii. Internal Rate of Return
iii. Profitability Index
(3) Market Analysis
Anticipation for Possible Market
Anticipation for Possible Buyer
Anticipating for Timing Buying
(4) Demand Estimation
Prospective Customer Survey
Sample Survey
Opinion Poll
Selling Experience
Indirect Approach to Customer
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(5) Technological Appraisal
It means the adequacy of the proposed Plant, Equipment & its know how to produce the product
within the prescribed norms. It should also include following inputs :
The state of existing and available technology (Domestic & Foreign)
Training needs of the personnel for the present and new technology
Availability of Technological Know How
Input base for the technology or its compatibility with the input substitutes
Future progressive integration of the technology for modification or refinements.
Wide product mix and its byproducts
Minimisation of waste loss or scrap in the process or its development
Factor Intensity (labour or capital intensive)
Stability to change and its obsolescence
Other techno-economic considerations (side effects of technology transfer on the labour lay
offs etc.)
Land & Site
Water, Power, Transport & Communication
Machine Shops, Electric Repair Shop
Anti Pollution Equipments
Work Force
Raw Material
Factors Affecting Technological Appraisal :
i. Feasibility of selected technical process
ii. Scale of operations
iii. Location
iv. Plant, equipment and layout
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v. Supply of power, water and fuel etc.
vi. Waste, Effluents and byproducts disposal
vii. Construction schedule
viii. Technical know-how
ix. Cost estimates
(6) Environment Clearance
- Through Environment Clearance procedure like Screening, Scoping & Evaluation
Air Pollution
Water Pollution
Sound Pollution
Soil Pollution
(7) Management Appraisal
(8) Commercial Appraisal
Project Evaluation
(1) Benefit To The Economy
(2) Benefit To Nation
(4) Organisational Impact
(5) Commercial Aspects
(6) Legal Aspects
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Risk & Uncertainty in Investment Decisions
Changes in Price of Inputs and/or Output
Changes in Technology
False Estimation of Rated Capacity
Gestation Period
Changes in PESTEL Framework
Project Constraints
Internal Organisational Constraints
External Constraints from PESTEL Framework
Product Selection and Technique :
Goods are tangible in nature and they can be touched, seen, measured and otherwise physically
evaluated by the customers
Product Development Process :
1. Idea generation Stage :
It is concerned with the visualization process of the model product
2. Incubation Stage :
It is concerned with the formal development of a product or development of prototype for product
concerned.
3. Implementation Stage :
It involves limited manufacturing facility for the proposed product.
4. Commercialization Stage :
When implementation stage has given a green signal to produce that product with or without
expected modification
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Sources of Product Concept :
Experience through the environment
Industrial Journals
Technical Publications
Research & Development Institutions
Regional Research Laboratories
Modern Scientific Research Institutions
Market Survey
Product Design :
It is a systematic process for the development of new goods and services or for the improvement of
existing goods or services. R&D departments are engaged in creating and improving products which
enjoy autonomy in pursuing their design , often with little regard for the problems that those designs
might present during production.
Necessary Precautions Regarding Product Selection :
Production process should not be long and time consuming.
Product process should be smooth and easy going
Demand of the product should be adequate and continuous
Industry of the product should have growth potential
Product should be acceptable in the market and some degree of competition is always better
Plant, machinery and equipment meant for the product should be easily available in the
market
Raw Material should be locally available or easily available from other places in shortest
possible time
Technologists, artisans and workers meant for industry concerned should be available in the
market at reasonable price tag.
Product should have a minimum support base in terms of export potential
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Product Life Cycle :
Product Development Stages
Introduction Stage
Growth Stage
Maturity Stage
Decline Stage
Factors Affecting Product Selection :
Technical Knowledge
Availability of Market
Financial Strength
Position of Competition
Priority of Products
Seasonal Availability
Restrictions on imports
Restrictions of Imports
Supply of Raw Materials
Availability of Incentives and Subsidy
Ancillary Products
Location Advantage
Licensing System & Government Policy
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Raising of funds: Concept, Need, Types and Sources
Concept :
Fund raising is one of the important prerequisite to start an enterprise. In fact, it is the availability of
finance that facilities an entrepreneur to bring together land, labour, machinery and raw material
together to combine them to produce goods.
Need of Raising Funds:
1. On the basis of the extent of permanence :
Fixed Capital
Working Capital
2. On the basis of period of use
Long Term Capital /Finance
Short Term Capital/Finance
Financial Support System
Forms of Financial Support
Short Term Finance
Long Term Finance
Short Term Finance :
Short term finances are normally funds required for about a year or two. These are mainly required
for the changes in the production plan , seasonal demands and consequent shortfall of working capital
requirements. Normally this requirement is taken care from commercial banks, private financiers and
trade credit from the vendors and advances from the dealers and customers.
Long Term Finance :
Long term finance can be for a period of 2 to 10 years repayable on installment basis basis . Such loans
are required for the purchase of machineries , fixed assets , expansion activities, modernization and
establishment of new business.
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Sources of Financial Support :
Short Term Needs :
1. Commercial Banks
2. Trade Credit from Vendors
3. Advances from Customer & Dealers
4. Private Financiers
Long Term Needs :
1. By issues of Shares & Debentures
2. Collecting Public Deposits
3. Utilisation of Profit Surplus
4. Loans from banks and financial institutions
Sources of Finances :
Bank Shares --- 75% to 80%
Entrepreneur Share --- 20% to 25%
Start Ups are having majorly financial risk.
Approach of Tiny and Small Entrepreneurs are to Commercial Banks, Cooperative Banks,
Cooperative Banks and Private Financieries.
Approach of Medium and Large Industries approach various financial institutes for the capital
problems and commercial bank for working capital.
(A) Internal Source of Financial Support :
Owners Capital as Equity
Deposits and Loans given by the owners , the partners and the directors
Personal loans of Entrepreneurs on his Provident Fund, LIC, Building and Investments etc.
Retentions of Profit
Conversion of some Assets into Funds.
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(B) External Sources of Financial Support
Deposits or borrowing from the relatives and friends and others.
Borrowing from the banks for working capital purposes.
Credit facilities from the commercial bank.
Terms Loans from the Financial Institutions
Hire-purchase or leasing facility from the National Small Industries Corporations(NSIC) and
State Small Industries Corporations
Seed /Margin money, subsidies from the Government and financial institutions
Fixed Capital Source For Business Organisation :
ICICI
SFC
NSIC
SSICS
SIDCS
Commercial Banks
Working Capital Source For Business Organisation :
Commercial Banks
Cooperative Banks
Private Finances
State Industrial and Investment Cooperation
Page 93
IDBI (Industrial Development Bank of India)
To provide a dynamic leadership in the task of promoting a widely diffused , diversified and
yet viable process of indutrialisation.
Development of Small Scale Industries
Single window assistance for the grant of term-loans and working capital assistance to new ,
tiny and small scale enterprises.
Now from 1991 onwards direct financing functions and refinancing role has been shifted to
State Financial Corporation and SIDBI
IFCI (Industrial Finance Corporation of India)
Rupee & Foreign Currency Loans
Underwriting/direct subscription to shares/debentures and guarantees
Equipment Procurement
Equipment Finance
Buyers and Suppliers Credit
Equipment Leasing
Finance to Hire & Purchase Companies
Merchant Banking
Interest Subsidy scheme for women entrepreneurs
Consultancy Fee subsidy scheme for providing assistance to SSI
Modernisation of SSI, Tiny and Ancillary Units
Control of Pollution in SSI
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ICICI ( Industrial Credit & Investment Corporation of India) :
It provides assistance by way of rupee and foreign currency loans, underwriting and direct
subscriptions to shares/debentures and guarantees
It offers variety of financial services such as deferred credit , leasing credit, installment sale ,
asset credit and venture capital
It guarantees loans from other private investment sources
Funding for establishment expansion and modernization of enterprises
Direct subscription to various securities.
Industrial Reconstructions Bank of India (IRBI) :
To look after the problems of Sick Units and provide assistance for their speedy
reconstructions and rehabilitation.
Assisting and promoting industrial development
Rehabilitation industrial concerns
Consultancy Services
Merchant Banking
Equipment Leasing
In process of Amalgamation, Merger and Reconstructions
Term loans for modernization, expansion, renovation and diversification activities.
State Financial Corporation (SFC) :
To provide industrial development in the country
To provide assistance in the form of term-loans, underwriting direct subscription to shares /

debentures and guarantees, preparation of feasibility reports, conducting, industrial potential
surveys, Entrepreneurship Development Programmes and developing the industrial estate.
Self employment for professionally qualified men and women entrepreneurs
Financial assistance for expansion, modernization and mechanization
State Industrial Development Corporation :
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To provide assistance in the form of term-loans, underwriting direct subscription to

shares/debentures and guarantees , preparation of feasibility reports , conducting industrial potential
surveys ,entrepreneurship development programmes and developing the industrial estate.
Technical Guidance
Assistance in Plant Locations
Coordination with other agencies
Equipment Leasing
Merchant Banking
Venture Capital
Mutual Fund
Small Industries Development Bank of India (SIDBI)
Financing of export and imports of goods and services both of India and of outside India
Providing finance for joint ventures in foreign countries
Underwriting merchant banking functions of companies engaged in foreign trade
Providing technical and administrative assistance to the parties engaged in export and import
business
Offering buyers credit and lines of credit to the foreign governments and banks
Providing advance information and business advisory services to Indian Export in respect of
multilaterally funded projects overseas
Production Equipment Finance Programmes
Export Marketing Finance
Export Vendor Development Finance
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Unit Trust of India (UTI)
Pooling small savings of individuals by getting units
Investment in shares and debentures of various large industries in privates sectors and public
sectors
Investment in Corporate activities in its expansion, diversification, rehabilitation and

modernization activities.
Venture Capital
Venture Capital is money that is invested by Venture capital Firms in Start Ups and Small
Businesses with exceptional growth potential.
Venture-Capital firms are limited partnerships of money managers who raises money in Funds
to invest in Start Ups and growing firms. The funds or pools of money are raised from the wealthy
individuals, foreign investors and similar sources etc.
Venture Capitalists manage the funds receive an annual management fee in addition to 20-25
Percent of the profit earned by the funds.
Major Functions of VCs
Finance new and rapidly growing companies
Purchase Equity Securities
Assist in development of new products or services
Add value to the company through active participation
Take higher risks with expectation of higher rewards
Have a long term association
Stages of VC Funding
Seed Funding
Start Up Funding
First Stage Funding
Second Stage Funding
Expansion and /or bridge financing
Buyout Funding for acquisition
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Units-IV
Small Business: Process of establishing Small Business, Nature, Objectives and Importance of Small
Business. Role of Financial Institutions in financing of small business, Infrastructural facilities. Latest
Government policy with regard to small business. Legal requirements for establishment of new unit.
Entrepreneurial Consultancy process and methods, Monitoring techniques.
Process of establishing Small Business
1. Scanning of Environment & Market Research
2. Information Collection
3. Information Organisation
4. Acquiring Required Vocational Skill
5. Selection of Product & Development
6. Market Assessment
7. Financial Assessment
8. Selection of Site
9. Preparation of the Project Report
10. Selection of Form of Business Organisation
11. Clearance form Environmental Regulatory Authorieties
12. Registration with State Authorities
13. Provision/arrangement of long term fund
14. Working Capital Finance from banks
15. Statutory licenses and clearances
16. Purchase of Land & Building
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17. Selection of Personnel/Workers
18. Installation of Plant & Machinery
19. Procurement of Raw Materials
20. Power Connection and Water Supply
21. Trial Productions
22. Launching of final production process
23. Marketing of the Product
24. Provision for Crisis
Nature of Small Business :
1. The Factor Price Argument :
It is commonly argued that for various institutional reasons, labour used in large enterprise is priced
well above the levels at which it is used in small scale industries. The small business which uses more
labour and less capital per unit of output will have relatively lower costs as their training and
development costs are quite low.
2. The Distribution of Income :
(i) Small units with a lower capital labour ratio would generally have a larger share of value
added accruing to the workers
(ii) Entrepreneurial income could be expected to be more widely distributed
(iii) The typically large wage differential between the small and large share in total output more of
the income accruing to labour goes to lower wage groups i.e. there is more equitable distribution of
labour earnings.
3. Product Differentiation :
Small firms generally caters to the low income groups and will therefore used to concentrate on
brands which emphasise basic product attributes produce from the successful use of simple
manufacturing technology with the lower capital labour ratios.
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4. Consumers Satisfaction :
Small business concentrate more on the Customer Satisfaction by providing more customized
products and services , since this is important for them for their survival and growth by beating the
competition.
5. More Flexible to adapt changes
6. Contribute more in the Export by having more Export Potential
7. Labour intensive so more employment generation potential for the unskilled and semi skilled
people
8. Managed Personalised Fashion
9. Lesser Gestation Period
10. Scope of Operation Localised or in confined region
11. Based on the indigenous resources
12. Balance Regional Development
13. Direct relationship between employee and employer
14. Government protection and facilities
Objectives of Small Business :
1. To create immediate and permanent employment opportunities to public at large at a

relatively small costs.
2. To meet a major part of the increased demand for consumers goods and simple producers
goods
3. To facilitate the mobilization and exploitation and resources which might otherwise remain
inadequately utilized
4. To bring about an integration of the development of these industries with rural economy and
large scale industries
5. To ensure a more equitable and justifiable distribution of income to society at large
6. To generate large scale employment opportunities and eradicate unemployment
7. To bring backward areas in the main steams of national development
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8. To encourage dispersal of industries all over the country covering small towns, villages and
economically backward region
9. To encourage effective mobilization of countrys untapped resources.
10. To improve the standard of living of people in the country
Importance of Small Business :
1. Create more job opportunities and employment since it is more labour intensive than the
large industries .
2. Elasticity and flexibility in the Technological and Economic aspect is more than the large
industries resulting into better innovation.
3. Better adaptability to variable production and market conditions. They have capacity to adjust
themselves with the changing environment.
4. Quick return on investment due to less gestation period and low investment cost.
5. Sustainable since its essential for combating poverty and unemployment.
6. Ensure balanced regional development since it may be developed in almost all areas including
backward, tribal, hilly and inaccessible.
7. Self Employment
8. Lesser Capital Requirment
9. Mobilisation of Capital
10. Mobilisation of Entrepreneurial Skill
11. Equitable distribution of income
12. Saving and generating foreign exchange
13. Quick Investment
14. Beneficial to large scale industries by developing the raw material and spare parts for them.
15. Application of the local resources
16. Protection and promotion of local traditional craft
17. Enrich rural economy
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Role of Financial Institutions in Financing of Small Business & Infrastructural Facilities :
Commercial Banks :
The scheduled Commercial Banks in the country comprises the State Bank of India and its
associated Banks, Nationalised Banks, Private Sector Banks, Regional Rural Banks, Foreign Banks,
Credit Guarantee Scheme is the main support of Commercial Banks to the Small Business &
Infrastructural facility.
IDBI (Industrial Development Bank of India)
To provide a dynamic leadership in the task of promoting a widely diffused , diversified and
yet viable process of indutrialisation.
Development of Small Scale Industries
Single window assistance for the grant of term-loans and working capital assistance to new ,
tiny and small scale enterprises.
Now from 1991 onwards direct financing functions and refinancing role has been shifted to
State Financial Corporation and SIDBI
IFCI (Industrial Finance Corporation of India)
Rupee & Foreign Currency Loans
Underwriting/direct subscription to shares/debentures and guarantees
Equipment Procurement
Equipment Finance
Buyers and Suppliers Credit
Equipment Leasing
Finance to Hire & Purchase Companies
Merchant Banking
Interest Subsidy scheme for women entrepreneurs
Consultancy Fee subsidy scheme for providing assistance to SSI
Modernisation of SSI, Tiny and Ancillary Units
Control of Pollution in SSI
Page 102
ICICI ( Industrial Credit & Investment Corporation of India)
It provides assistance by way of rupee and foreign currency loans, underwriting and direct
subscriptions to shares/debentures and guarantees
It offers variety of financial services such as deferred credit , leasing credit, installment sale ,
asset credit and venture capital
It guarantees loans from other private investment sources
Funding for establishment expansion and modernization of enterprises
Direct subscription to various securities.
Industrial Reconstructions Bank of India (IRBI)
To look after the problems of Sick Units and provide assistance for their speedy
reconstructions and rehabilitation.
Assisting and promoting industrial development
Rehabilitation industrial concerns
Consultancy Services
Merchant Banking
Equipment Leasing
In process of Amalgamation, Merger and Reconstructions
Term loans for modernization, expansion, renovation and diversification activities.
State Financial Corporation (SFC)
To provide assistance in the form of term-loans, underwriting direct subscription to shares /

debentures and guarantees, preparation of feasibility reports, conducting, industrial potential
surveys, Entrepreneurship Development Programmes and developing the industrial estate.
Self employment for professionally qualified men and women entrepreneurs
Financial assistance for expansion, modernization and mechanization
Page 103
State Industrial Development Corporation
To provide assistance in the form of term-loans, underwriting direct subscription to

shares/debentures and guarantees , preparation of feasibility reports , conducting industrial potential
surveys ,entrepreneurship development programmes and developing the industrial estate.
Technical Guidance
Assistance in Plant Locations
Coordination with other agencies
Equipment Leasing
Merchant Banking
Venture Capital
Mutual Fund
Small Industries Development Bank of India (SIDBI)
Financing of export and imports of goods and services both of India and of outside India
Providing finance for joint ventures in foreign countries
Underwriting merchant banking functions of companies engaged in foreign trade
Providing technical and administrative assistance to the parties engaged in export and import
business
Offering buyers credit and lines of credit to the foreign governments and banks
Providing advance information and business advisory services to Indian Export in respect of
multilaterally funded projects overseas
Production Equipment Finance Programmes
Export Marketing Finance
Export Vendor Development Finance
Page 104
Unit Trust of India (UTI)
Pooling small savings of individuals by getting units
Investment in shares and debentures of various large industries in privates sectors and public
sectors
Investment in Corporate activities in its expansion, diversification, rehabilitation and

modernization activities.
Venture Capital
Venture Capital is money that is invested by Venture capital Firms in Start Ups and Small
Businesses with exceptional growth potential.
Venture-Capital firms are limited partnerships of money managers who raises money in Funds
to invest in Start Ups and growing firms. The funds or pools of money are raised from the wealthy
individuals, foreign investors and similar sources etc.
Venture Capitalists manage the funds receive an annual management fee in addition to 20-25
Percent of the profit earned by the funds.
Major Functions of VCs
Finance new and rapidly growing companies
Purchase Equity Securities
Assist in development of new products or services
Add value to the company through active participation
Take higher risks with expectation of higher rewards
Have a long term association
Stages of VC Funding
Seed Funding
Start Up Funding
First Stage Funding
Page 105
Second Stage Funding
Expansion and /or bridge financing
Buyout Funding for acquisition
Public Private Partnership
The PPP is defined as the transfer to the private sector of investment projects that traditionally have
been executed or financed by the public sector (IMF, 2004). According to Ministry of Finance
Government of India the PPP project means a project based on a contract or concession agreement,
between Government or statutory entity on the one side and a private sector company on the other
side, for delivering infrastructure service on payment of user charges. The PPP model helps
government implement its schemes in partnership with the private sector. Typically these are set up
in a form of a Special Purpose Vehicle and are engaged in financing, operating and maintaining of the
assets and project. Bank Financing Bank credit to the infrastructure sector increased steadily from Rs.
7,243 crore in 19992000 to Rs. 2,69,972 crore in 200809, a compounded annual growth of 43.6 per
cent. However, with bank fundings there is an issue of asset liability mismatch, as infrastructure
requires long term funding and the deposits of banks are short term in nature. Thus the need for
developing the long term debt financing market was felt much and India Infrastructure Finance
Company Limited (IIFCL) was formed.
India Infrastructure Finance Company Limited (IIFCL)
IIFCL an SPV, was incorporated in Jan, 2006, by the Central Government for providing long term loans
for financing infrastructure projects, providing financial assistance up to 20% of the project costs, both
through direct lending to project companies and by refinancing banks and financial institutions. IIFCL
has raised Rs. 20,569 crore and approved 139 projects involving total investment of Rs. 2,00,884 crore
by May 2010.
Infrastructure Finance Companies (IFCs)
RBI in 2010 notified a new category of NBFCs-ND-SI that are engaged predominantly in infrastructure
financing as Infrastructure Finance Companies (IFCs). An IFC is defined as non deposit taking NBFC that
fulfills the criteria mentioned below: i. a minimum of 75 per cent of its total assets should be deployed
in infrastructure loans as defined in Para 2(viii) of the Non Banking Financial (Non Deposit Accepting
or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007; ii. not accept deposits from
public iii. Net owned funds of Rs. 300 crore or above; iv. minimum credit rating 'A' or equivalent of
CRISIL, FITCH, CARE, ICRA or equivalent rating by any other accrediting rating agencies v. CRAR of 15
percent (with a minimum Tier I capital of 10 percent) Infrastructure Finance Companies (IFCs), are
permitted to avail of ECBs, including the outstanding ECBs, up to 50 per cent of their owned funds, for
on-lending to the infrastructure sector as defined under the ECB policy. ECB beyond 50 per cent of the
Page 106
owned funds by financial institutions which are classified as Infrastructure Finance Companies are
considered on a case to case basis.
Foreign Direct Investment
Investment in infrastructure companies in the Securities Market
Foreign investment is permitted in infrastructure companies in Securities Markets, namely, stock

exchanges, depositories and clearing corporations, in compliance with SEBI Regulations and subject to
the following conditions:
i. There is a composite ceiling of 49 per cent for Foreign Investment, with a FDI limit of 26 per
cent and an FII limit of 23 per cent of the paid-up capital;
ii. FDI will be allowed with specific prior approval of FIPB; and
iii. iii. FII can invest only through purchases in the secondary market.
100% FDI is allowed under the Automatic Route in Development of townships, Housing, Built up
infrastructure and Construction Development Projects but does not include real estate business.
These norms are applicable, subject to conditions vide para 5.2.13 of Consolidated FDI policy of
Government of India2 including:
a.Minimum capitalization of US$ 10 million for wholly owned subsidiaries and US$ 5 million for joint
venture. The funds would have to be brought within six months of commencement of business of the
Company.
b. Minimum area to be developed under each project- 10 hectares in case of development of serviced
housing plots; and built-up area of 50,000 sq. mts. in case of construction development project; and
any of the above in case of a combination project
c. Original investment cannot be repatriated before a period of three years from completion of
minimum capitalization. Original investment means the entire amount brought in as FDI. The lock-in
period of three years will be applied from the date of receipt of each installment/tranche of FDI or
from the date of completion of minimum capitalization, whichever is later. However, the investor may
be permitted to exit earlier with prior approval of the Government through the FIPB.
d. At least 50% of the project must be developed within the period of five years from the date of
obtaining all statutory clearances. The investor/ investee company would not be permitted to sell
undeveloped plots. For the purposed of these guidelines, "undeveloped plots" would mean where
roads, water supply, street lighting, drainage, sewerage, and other conveniences, as applicable under
the prescribed regulations, have not been made available. It will be necessary that the investor
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provides this infrastructure and obtains the completion certificate from the local body/ service agency
before he would be allowed to dispose of services housing plots.
e. The project shall conform to the norms and standards, including land use requirements and
provision of community amenities and common facilities, as laid down in the applicable building
control regulations, bye-laws, rules, and other regulations of the State Government/Municipal/Local
Body concerned.
f. The investor/ investee company shall be responsible for obtaining all necessary approvals, including
those of the building/ layout plans, developing internal and peripheral areas and other infrastructure
facilities, payment of development, external development and other charges and complying with all
other requirements as prescribed under applicable rules/ bye-laws/ regulations of the State
Government/ Municipal/ Local Body concerned.
g. The State Government/ Municipal/ Local Body concerned, which approves the building/
development plans, would monitor compliance of the above conditions by the developer.
The above conditions are not applicable for investments by NRIs or investments in SEZs, hotels and
hospitals
Foreign Institutional Investors investment
The planning commission estimates that there is a gap of $100 billion in infrastructure funding that
needs to be bridged from foreign sources. To enhance the flow of funds to the infrastructure sector,
the FII limit for investment in corporate bonds, with residual maturity of over five years issued by
companies in infrastructure sector, is being raised by an additional limit of US$ 20 billion taking the
limit to US$ 25 billion. This will raise the total limit available to the FIIs for investment in corporate
bonds to US$ 40 billion. Since most of the infrastructure companies are organised in the form of SPVs,
FIIs would also be permitted to invest in unlisted bonds with a minimum lock-in period of three years.
However, the FIIs will be allowed to trade amongst themselves during the lock-in period.
Infrastructure Bonds
The infrastructure bonds have a maturity of 10 years but a lock-in period of five years and the investor
has the option to sell the bonds back to the issuer. Alternatively, the bonds can be traded on the stock
exchanges. What makes these bonds lucrative for investors and issuers is a) Section 80CCF, any
individual or Hindu undivided family can invest up to Rs 20,000 in infrastructure bonds and avail of tax
benefits b) these provide fixed returns and are reasonably safe and c) the amount raised by issue of
infrastructure bonds by Infrastructure Finance Companies, u/s 80CCF of the Income Tax Act, 1961,
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shall not be treated as public deposit as provided in the NonBanking Financial Companies
Acceptance of Public Deposits (Reserve Bank) Directions, 1998.
Infrastructure Debt Funds
A concept paper on creation of a Debt fund for Infrastructure PPP projects was presented by Shri
Gajendra Haldea, Adviser to Deputy Chairman in a meeting of experts and stakeholders, held on May
12, 2010 under the chairmanship of Deputy Chairman Planning Commission. The paper suggested the
creation of the India Infrastructure Debt Fund that would raise low-cost long-term resources for re-
financing infrastructure projects that are past the construction stage and associated risks. A Report on
India Infrastructure Debt Fund, under the Chairmanship of Mr. Deepak Parekh made
recommendations on setting up of Infrastructure Debt Funds3 for Rs. 50,000 crore ($ 11 billion) to
meet the needs of long-term debt for infrastructure projects that are set up through Public Private
Partnerships (PPP). Some of the recommendations in the report are: The holders of such long-term
debt would be insurance and pension funds (including provident funds), both Indian as well as
foreign. The Fund would be set up by one or more sponsors (the Sponsor), who will act as the
General Partners of the Fund. The Sponsors would be required to invest at least 10% of the total
investment in the form of subordinated debt. Any infrastructure project which is based on Public
Private Partnership (PPP) where a public authority has provided for a compulsory buy-out of the
project on payment of a pre-determined termination payment shall be eligible to borrow from the
Fund. o The eligibility would be restricted to projects which have completed at least one year from
their entry into commercial service, i.e., their commercial operation
Latest Government policy with regard to Small Business :
MSME POLICY
Launch of Draft Consultation Paper
I. Various stakeholders have been advocating a MSME Policy for India. The sweep of the sector
is so wide, so varied and so differentiated that a single size fit all will not work. The sheer numbers
are staggering. But, they may be recorded to understand the magnitude of the task. As per the fourth
Census of MSMEs the Report for which was published in 2012, the total number of MSMEs in India are
3.6 crores employing over 8 crore people. It is the second largest employer after agriculture. It also
accounts for 45 % of total industrial production, 40% of total exports and contributes very significantly
to the GDP. Manufacturing segment within the MSME contributes to 7.09% of GDP. MSMEs also
contribute to 30.50% of services. The total contribution of MSMEs to the GDP is 37.54%. The MSMEs
of India would be the cradle for the Make in India vision. This would be the nursery where small
existing businesses have the potential to become world beaters tomorrow. The larger players
amongst the MSME space also are in a unique position to become global players attracting partners
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with technology and funds. The Policy framework must encourage this. It will also help creating
employment on a massive scale. Keeping in view the above, a National MSME Policy is being
envisioned. Suggestions are being invited from everyone to put such a Policy in place. These
suggestions can be sent at policy@dcmsme.gov.in . All suggestions would be considered from
prospective entrepreneurs, existing entrepreneurs, Associations, Academia, Public Representatives
and that most important element of all in India, the concerned Citizen. 2 This consultation paper is
available for consultation for a period of 45 days after which all the suggestions received would be
considered and accordingly a Policy proposed. We solicit your guidance, advice and suggestions.
II. Any MSME Policy for India should take into account the various Ministries such as Ministry of
Commerce and Industry, Ministry of Textiles, Department of Electronics and Information Technology,
Ministry of Food Processing Industries, Ministry of Heavy Industries and Public Enterprises,
Department of Pharmaceuticals etc., and the Regulatory Ministries such as Ministry of Corporate
Affairs and Ministry of Finance. All the Policies should be aligned with each other because the focus
would be the entrepreneur, whether he is starting up, he is growing, he is wanting to become a large
domestic player or a global competitor; the Policy framework must enable and encourage all this. It
should also be aligned with MSME Policies of the State Governments of India. It should also take into
account the progressive policies in the Western and the Eastern Hemispheres. Our MSME Policy must
encourage establishment and growth of our units. Let it be understood that big businesses evolve
from small business only and go on to become several large companies. Examples are, Honda to
Microsoft, from Infosys to HCL in India. The first objective of this Policy thus must be not only to
encourage establishment and growth, but also, emphasise on growth. For this purpose, at the 3
outset, we need to define our MSMEs in such a fashion that the definition does not become a
hindrance to growth (which at present it is). Thus, it must not be the intention of any Policy to keep a
small entrepreneur, small. We must encourage the entrepreneur to grow and become a global player.
III. Policy Framework should at once be:
1. An enabling framework
2. A supporting framework, and
3. For very small businesses a) A Subsidy Framework. A Subsidy framework may be provided for small
entities with less than say Rs. 5 crores of turnover, but globally, 100 million USD i.e. Rs. 600 crores
annual turnover is recognised as a barrier after which a company is considered to be a serious player.
Till then, it is still considered to be a small player. Between Rs. 600 crores to Rs. 3000 crores ( $ 500
million ) is the space for the Small to Medium companies, globally. This actually is the backbone of
any countrys economy. This is also a very agile segment which is able to innovate, incubate ideas and
penetrate as well as create new markets. It would be noticed that in India, with some honourable
exceptions, policies are concentrating on Regulatory Regime and Subsidy Frameworks. Some
additionalities would be noticed in various States depending on their own needs. 4 But, an existing
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business having a turnover of Rs. 5 crores, which in the international context would still be considered
a Micro Business, does not have an enabling framework to grow to Rs. 50 crores, or, a Rs. 50 crores
turnover company does not have an enabling framework to grow to Rs. 500 crores. This has been a
large vacuum in the Policy space which seriously needs to be addressed. They include the Policies of
USA, Canada, Brazil and Argentina from the American Hemisphere, Germany, United Kingdom, France,
Denmark and Italy from the European Hemisphere. Japan, China, Indonesia, Malaysia and Singapore
from the Eastern Hemisphere and Australia.
IV. In India, services have grown up very rapidly. As per the latest estimates (2014) MSMEs
contribute 30% to the GDP in the Services Sector. Some trends are noticeable immediately. Services,
as career options, are attractive because it has a low entry barrier in terms of entry costs and can be
scaled up more rapidly than manufacturing. Scaling-up, depending upon the type of product is also
easier. However, a second trend noticeable is that we have not produced global level players in
providing services except in Information Technology (IT) and Information 5 Technology enabled
Services (ITeS). Take for example Courier Services major players are not Indians. Take for example
Bus Hoarding Service Provider - the Delhi contract is given to a non-Indian Company. India can
become a Global exporter of services. But, with the above exceptions, has not done so. How to enable
Indian service enterprises to become global players observing global levels of standards of services
and ensure that Indian service industry can become a global player? What steps should the
Government take to enable the Service Industry to grow? What steps or standards should be
prescribed for providing basic minimum level of standards? Do we require to set up Skill Development
Centres which teach these standards and should there be a regulatory framework? Given that we
have a numerous types of services, should there be an Industry driven Council which enforces such
standards? The above points need to be addressed in framing MSME Policy of the country so that an
eco system supporting Services Sector in MSMEs may be created.
V. A major and accelerating trend observed in the last one decade has been the role that
innovation is playing in driving the growth and expansion of small businesses to a billion dollar
enterprise. Several factors are playing a role in this. I) Development of Information Technology;
complex but, easy to use IT Technologies has become a major driver. II) Growth of e-commerce as a
new business platform which hardly existed 15 years back. 6 III) Growth of cellular networks and
smart phones combined with the above two mentioned technologies have created a new market
place. IV) Data analytic tools and advanced IT Systems have given new insights into understanding of
markets and consumer behavoiur and shaped the marketing as well as growth strategies. V) Context
of globalisation has ensured that the logistics and supply chain has become global, whether it is
manufacturing or services. VI) Global financial crisis of 2008-10 has only accelerated these processes
and trends. Those who understand these processes and have provided for enabling framework have
ensured that their small and medium businesses grow and do well. A shining example is Germany,
who leveraged the crisis of 2008-10 to make their mittleschandt (Small and Medium Companies)
become global players. Thus, Germany provided a set of Policies which encouraged and allowed the
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companies to do all the above mentioned points and reached out to them. Other countries which did
not put in place enabling Policy and are still struggling including in Europe.
VI. The major elements of the Policy should be the following:-
I) Start-up Regime Framework: More than 15 lakh students are passing out as Engineering
graduates, MBA and Polytechnic but a very few only, venture into establishing their own enterprise.
There is a need to encourage entrepreneurship in the country by providing a suitable eco system for
start ups for creating new enterprises both in Manufacturing and Service Sector. 7 What are the
elements for Start-up Regime Framework? What are the elements which should consist to enable a
young engineer to start his / her manufacturing enterprise, or, a service enterprise which can grow?
II) The Regulatory Regime Framework: The Regulatory Regime framework is required, but,
should not become a crippling regime to discourage growth. It should also have automatic approval
based on a robust IT back bone. Having said so, what should be the elements in a Regulatory Regime?
III) The Subsidy Regime Framework: The Subsidy Regime Framework may be required for very
small players of say less than Rs. 5 crores of turnover. The subsidy may be on a sliding scale and of a
varying nature. Thus for a start-up regime, he may be required a subsidy such as being provided by
Prime Ministers Employment Generation Programme (PMEGP) being run by the Ministry of MSME.
An enterprise with less than Rs.1 crore of turnover may require subsidies to explore new markets but
an enterprise with less than Rs.5 crore of turnover may require subsidies for rapid modernization. But
once an enterprise has grown to a certain level, they are not looking for subsidies but looking for a
growth trajectory. What should be the elements of a Subsidy Regime?
IV) Environment Compliance Framework for Green, Orange and Red Categories of Industries:
Environment compliance, Pollution Control as well as Energy Efficiency are the key elements of Zero
Effect for Industry. However, Pollution Control Board as well as compliances cannot impose such a
compliance load on Industry so as to make it unworkable. What should be the elements of
Environment Compliance Framework? What are the pain points for Industries which they feel today,
which need to be removed to enable robust growth without compromising on the standards? The
next seven Frameworks are actually parallel frameworks which address a very large space for on-
going and successful enterprises, who now would like to move to the next level of success and
growth. Thus, a Rs. 5 crore turn-over Company would look for ways and means to become a Rs. 50
crore turn-over Company in five years, or even earlier.
V) The Promotional Scheme Framework: What steps should be taken by the Government to
promote the successful businesses to attain the next level or the next cycle of growth. For example,
implementing the techniques such as 6 Sigma, Poka-Yoke or Kanban and Kaizen will enable it to have
a zero defect manufacturing because it has a zero defect process. This has already been successfully
tested in the country. What can be done to scale it up for the whole country? 9 Similarly, professional
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designing would help it attain better market value, better products and help it beat the competitor.
What other steps are suggested? With a view to enable growth, what should be the Promotional
Scheme Framework? What should be the elements helping the Promotional Scheme Framework?
VI) New Product Development Framework: New products do not seem to be coming out of India.
What steps should be taken to help the industry develop new products? What should be the element
helping the New Product Developemnt Framework?
VII) The Value Addition Mechanisms and Framework: Once again, India is low on value addition.
By increasing value addition, the total return to the Indian industry would increase substantially and
they would become more globally competitive. What steps should be taken by the Government to
help this value addition? What should be the element helping the Value Addition Mechanisms and
Framework?
VIII) Knowledge & Innovation Framework: Indian Institute of Science (IISc) and Council of Scientific
and Industrial Research (CSIR) are world class institutions who have conducted path breaking research
in several areas. Ministry of MSME has already taken steps to unlock this knowledge base and make it
available for the industry. The Indian Institute of Science has indicated as a first tranche, 195 projects
where the research is almost complete and which can be commercialized. Similarly, CSIR has indicated
642 products which it has developed which can be very quickly productized because the entire
process, including IP rights is available with CSIR. Whereas these are starting points, what other
elements should be there to promote the knowledge and innovation framework?
IX) Manufacturing and Services Excellence Framework: What should be the element helping the
Manufacturing and Service Excellence Framework?
X) Export Promotion and Marketing Framework: If the Indian industry has to grow, it must start
exporting more and tapping existing as well as new markets. Several elements already exist in the
ongoing schemes of Department of Commerce, Ministry of Commerce and Industry. But an equally
important market is the Indian market itself. This market is attracting international attention due to
its expand and depth. What are the steps needed for Indian companies to capture the Indian markets,
they are major suppliers 11 in the Indian markets with globally competitive products and globally
competitive prices. The only corollary would be that they would be expanding. Are there any
suggestions whereby our industry can break into new markets and expand their footprints in the
existing markets? What should be the element helping the Export Promotion Framework?
XI) The Growth Accelerator Framework: How to take a successful business with say, more than
Rs. 50 crore of turn over or a Rs. 100 crore of turn over for a year. What are the policy frameworks it
would need to become a global business and grow to a thousand crore or more of turn over? What
are the elements required by the businesses to keep continuously growing? What should be the
elements helping the Growth and Accelerator Framework?
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XII) Consultative Mechanism Framework How do we device it? What should be the role of
Associations? We need to put a dynamic and anticipative consultative mechanism whereby the
Government can be alerted, in real time, of an emerging problem of the industry and take immediate
and proactive steps to address that problem rather than be reactive. 12 What are the suggestions to
make this a vibrant consultative mechanism?
XIII) Financial Regime Framework What are the problems being faced by MSMEs for access to (a)
equity fund, (b) debt funds? A major reason why new SME fail is not for lack of profit but lack of
access. What are the steps that should be undertaken to ensure that there is flow of credit to MSMEs?
Can a credit bureau to record SMEs credit history for the banking sectors risk evaluation and loan
appraisals. The high interest rates often make an otherwise internationally competitive MSME loose
with competitive edge. On the other hand, a broad debt is available at the very low rate of interest.
Should the Government consider a mechanism of pooling the needs of MSMEs and acting as an
intermediary for providing debt at international prices (but including exchange risk coverage) to
MSMEs. What can be the alternative models for financing of MSMEs at the start-up stage and at the
growth stage, apart from bank credit? How to have a robust and supporting financial regime
framework which encourages credit of MSME?
XIV) Resources Provisioning Framework Human resources are a key for any MSME. On one hand
we have a demographic dividend; on the other hand, we have a situation where industry complaints
of not getting adequate trained labour. How to remove this mismatch? Land would become
increasingly scarce. Should India, as country, consciously adopt multi-storeyed Plug and Operate
model to provide lower capital cost for MSMEs? Raw material access is also a challenge. What steps
should be taken to breach and bridge this gap? Is there any other resources provisioning which needs
to be done?
XV) Exit Policy Framework
1. The exit policy framework is required in the following possible scenarios:
i. For a successful entrepreneur who would like to exit from the business at a profit. In India, the
culture of successful serial entrepreneurship is not there. This exists, in countries like the US. What
framework is needed for doing this in India?
ii. The second category of entrepreneurs who require an exit policy are those who are running a
successful business but their next generation is not interested in joining the business. They look for a
successful exit.
iiiThe third category of entrepreneurs looking for exit policy is those who are not done well in their
business but the business is still surviving. They would like to cut losses and exit.
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iv.The fourth category of entrepreneurs who require exit policy are those who have failed , are
having bank loans, but also have land resources as well as a factor which may be running or may be
closed. (2) What are the suitable exit framework for the above categories?
VII Overall Framework should provide an enabling environment, an easy comprehension to

MSMEs and act as a growth accelerator for the MSMEs. These frameworks singly or collectively then
need to be dovetailed to the needs of:-
i) Village and Rural Industries
ii) Traditional Industries
iii) Handicrafts and Handlooms
iv) Other industries such as Defence manufacturing Industries, Electronics Services Design and
Manufacturing Industries, Agro Food Processing Industries, Machine Tool Industries, Casting and
Forging Industries.
v) Industries where MSMEs are part of the value chain manufacturing in strategic industries such
as Aerospace, Shipping, Renewable Energy like solar and wind etc.
vi) Employment intensive industries such as Textiles, Readymade Garments, Leather and
Footwear, Gems and Jewellery.
vii) Industries where India enjoys a comparative advantage such as automobile and
pharmaceutical etc. The same framework, in principle, also needs to concentrate on providing value
additions, induction of knowledge and innovation, framework for manufacturing and service
excellence as well as productivity with zero defect outcomes and finally should have growth
acceleration for the larger industries, say with a turnover of more than Rs. 100 crores. This segment
will not need Government 15 subsidy, but would need policies that they can grow and become
globally competitive. All these function entities work with a consultative mechanism framework and
an enabling and transparent financial regime framework.
Role of Government in Promoting Entrepreneurship
Development of Basic facilities , Infrastructure, Utility and Services
Development of Industrial Estate
Development of Export Promotion Zone
Development of Special Economic Zone
Incentives & Concessions
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Industrial Estate Development
Cluster Development
Training Programmes
Marketing Aids
Labour Reform
Legal Regulations & Procedures
Basic Utilities & Services
MSME Policy in India
MSME Development Act2006
Manufacturing Enterprises :-
Service Enterprises :-
Salient Features of MSME Development Act2006
(A) Promotion , Development and Enhancement of competitiveness of these enterprises.
(B) Legal framework for recognition, classification and integration of each category.
(C) Establishment of specific funds for the promotion , development and enhancing the
competitiveness
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(D) Notifications of various schemes / programmes of government
(E) Progressive Credit Policies and Practices
(F) Preferences in Government Procurement to provides and services of the micro and small
enterprises
(G) Providing Credit Linked Capital Subsidy Scheme for Technology Upgradation
(H) Credit Support as RBI has issued guidelines the public sector banks to ensure 20 Percent year
on year growth in credit to MSME
(I) Scale up of operation of SIDBI to its credit operations for MSME
(J) Excise Exemption Limit
(K) Micro and Small Enterprises Cluster Development Programme
(L) Technologies and Quality Upgradation Support
(M) Marketing Promotion Support
(N) Entrepreneurial and Managerial Support
(O) Empowerment of Women Entrepreneurs
(P) Strengthening of Prime Minister Rozgar Yojna
(Q) Strengthening of Data Base for MSME Sector
Number of Units
Employment
Rate of Growth
Share in GDP
Value of Production
Extent of Sickness/Closure
Women Entrepreneurs
Export of Product/Services
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Legal requirements for establishment of new unit
(1) Stages In Formation Of A Company :
(a) Promotion Stage : To discover the business opportunities and the subsequent organization of
the funds, property, management ability to run a business concern for the purpose of making profit
there form. The person who undertakes these activities is a promoter. He originates a scheme for the
formation of the company , gets the Memorandum and Article prepared and registered and funds the
first directors, settles the terms of preliminary contracts and prospectus and makes arrangement for
raising the capital.
Meaning of Promotion and Promoter :
Promotion :
According to C.W.Gerstenberg Promotion is the discovery of business opportunities and the

subsequent orgainsation of funds, property and managerial ability into a business concerns for the
purpose of making profits therefrom
Promotion begins when a promoter discovers an idea regarding some business and ends up with the
launching of an enterprises as a going concern.
Promoter :
A promoter is one who conceives the idea of a business enterprise, He analyses its prospects and
works out a tentative schemes of organization. He brings together men, material, machines , money
and managerial ability and floats the enterprise.
A promoter is a businessman, who gives birth to a company after securing knowledge of the
business world. A promoter may be an individual, a firm, association, or even a company engaged in
the formation of the company.
Functions of Promoter :
(i) Identification of Business Idea or Opportunity
(ii) Feasibility Study or Detailed Investigation
(a)Technical Feasibility
(b) Financial Feasibility
(c) Economic Feasibility
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(iii) Companys Name Approval
(iv)Fixing Up Signatories to the Memorandum of Association
(v)Appointment of Professional
(vi)Preparation of Necessary Legal Documents
Legal Obligations of a promoter are as under :
(i) To exercise due care and intelligence in the work of promotion
(ii) To act without deceit , misfeasance or breach of trust towards the company.
(iii) To disclose full details of the nature and extent of money taken by him in the process of
promotion.
(iv) To deposit all money received on behalf of the companys bank account.
(v) To refrain from selling his own property to the company at unreasonably high prices.
(vi) To surrender any profits made during promotion of the company
(vii) To be personally liable for preliminary contracts till they are approved by the company
(viii) To pay compensation to those who have invested money in the company on the basis of the
untrue statements or misrepresentation in the prospectus.
Types of Promoters :
(i) Professional Promoters
(ii) Occasional Promoters
(iii) Institutional Promoters
Role of a Promoter :
(i) To discuss the concept of establishing a company and to conduct a feasibility study
(ii) To procure different assets to start a business or start negotiations to purchase a running
enterprise
(iii) To arrange money to pay the preliminary expenses
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(iv) To select the name of the company and to lay down its objectives
(v) To prepare the memorandum and article of association and other documents which are
necessary for the purpose of incorporation with the Registrar of Companies
(vi) To appoint first directors of the proposed company
(vii) To appoint bankers, legal advisers to the company
(viii) To prepare the prospectus and get it printed
(ix) To arrange for the capital from the public
(b) Incorporation Stage :
1. Memorandum of Association
2. Article of Association
3. Statement of Nominal Capital
4. A list of directors with their name in full, addresses , occupation and age
5. Consent of the directors to act as director , and
6. Notice of the address of the registered office
Alongwith the above documents , a statutory declaration has also to be filed. The declaration should
state that all the requirements of the law for registration have been duly complied with. The
declarartion may be made by any of the following persons :
(a) An advocate of the Supreme Court or High Court
(b) An attorney or pleader , entitled to appear before a High Court
(c) A Chartered Accountant practicing in India and who is engaged in the formation of the
Company
(d) BY any person , who is named in the Articles as Director, Manager or Secretary of the
Company
(C) Capital Subscription Stage :
A private company or a public company not having share capital can commence business
immediately after getting the certificate of incorporation . But a public company having a share
capital has to pass through the capital subscription stage before it can commence the business.In
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order to raise capital from the public, a prospectus is to be issued or a statement in lieu of prospectus
is to be filled with the Registrar of the Companies. The draft prospectus or statement in lieu of
prospectus is approved by the Board of Directors in its meeting before it could filed with the Registrar
and issued to the public. The Board may decide to get the issue of share capital underwritten to
ensure that minimum subscription is raised.
( D ) Commencement of Business Stage :
A public company having share capital must obtain a certificate to commence business from
the Registrar of Companies before it can commence business. In order to obtain this certificate, the
company must comply with the provisions of the Companies Act. When these requirements have
been complied with , the Registrar of Companies will issue a trading certificate known as certificate to
commence business to the company which is a conclusive evidence that the company is entitled to
commence business.
Legal Requirement of Incorporation of a Company :
(1) Filing of Documents
(i) Memorandum of Association
(ii) Articles of Association
(iii) List of Directors
(iv) Written Consent of Directors
(v) Declaration Regarding Qualification of Shares
(vi) Notice of Registered Office
(vii) Statutory Declaration
(2) Payment of Stamp Duty and Registration Fee
(3) Issue of Certificate of Incorporation
Raising of Capital :
(i) SEBI Approval for Raising Capital
(ii) Filing of Prospectus
(iii) Appointment of Bankers, Brokers and Underwriters
(iv) Minimum Subscription

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(v) Application to Stock Exchange
(vi) Allotment of Shares
Commencement of Business :
Issue of Certificate To Commence Business
Memorandum of Association :
Memorandum of Association is the most important document of a company. It is the charter or

constitution of the company. It lays down the powers and objects of the company as well as the scope
of operations of the company beyond which it cannot go. The basic purpose of Memorandum of
Association of a company is to enable its shareholders, creditors and others to know its objects ,
powers and permitted range of activities
Contents of Memorandum of Association :
(1) Name Clause
(2) Registered Office Clause
(3) Objects Clause
(4) Liability Clause
(5) Capital Clause
(6) Subscription or Association Clause
Articles of Association :
The Articles of Association of a company contains the rules and regulations relating to the
Management of its internal affairs. They define the rights, powers and duties of the management, the
mode and form in which the business of the company is to be carried on and the manner in which
changes in the internal regulations of the company may be made from time to time
Prospectus :
A prospectus is defined as any prospectus , notice, circular , advertisement or other documents

inviting offers from the public for the subscription or purchase of any share in or debentures of a body
corporate
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Entrepreneurial Consultancy Process and Methods, Monitoring techniques.
Management Consulting as a Form of Entrepreneurial Learning and a Source of Business Knowledge .
Management consultancy, since its start as a profession and as a business 150 years ago, is expanding
rapidly throughout the world. Management consulting is the rendering of assistance and independent
advice about management issues. Management consultants have skills in research, analysis,
communication and change management. They are able to identify problems, find relevant data,
synthesize information, develop proposals for improvement, overcome resistance, transfer
management techniques, and help clients to learn from experience. Besides traditional management
consulting (e.g. strategy, organization, HR, change management, IT advice and project management)
new service lines (e.g. development and integration excluding software development and
outsourcing) also belong to this profession . Management consultants are agents in the dissemination
of business knowledge thanks to their expertise and knowledge management practices. However,
relatively few studies focus specifically on their role in projects with entrepreneurs and their
organisations.
Knowledge transferred by a management consultant consists of two main types:
Explicit knowledge that can be transferred to an entrepreneur through different media as reports,
books, archives, databases and IT groupware technology
Tacit knowledge that can be transferred to an entrepreneur through personal contact and
collaboration In the paper the implementation of management consulting as a form of business
knowledge source for entrepreneurs is explored.
The framework for management consultancy in sense of entrepreneurial learning is based on

extensive professional experience in the region, multi-year surveys, and a review of the literature. The
paper highlights the important role of management consultants as disseminators of information and
new practices, and of independent advice to entrepreneurs as a subset of managers population.
Although management practice is as old as society itself, management theory and management
consulting are of more recent origin. In that sense, management consulting is less than 150 years old,
but real growth has been exercised in the 20th century. However, recent further rapid developments
and refinements in all three above mentioned areas, with diversification, transparency, and
accountability as emerging trends, have made giant strides in the West, especially in the United
States, from the 1930s to the present and in Western Europe since the 1950s. In that sense, managers,
academics, and consultants are valued in terms expertise, trust, and coaching along with
implementation of their consulting assignments. The growth of management consulting industry in
great measure is a result of its successful stringent practices with clients in bringing new knowledge as
well as a consolidation of their roles in confirming or legitimating senior client knowledge and
preferences . Also, as a result of overall developments in the society in terms of growth of
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management discourse in the public, clients are more familiar with some of the types of knowledge
and tools typically associated with consultants
Management consulting : In general, consulting is a knowledge-based service that can be sold and
bought, but because being often intangible, it is difficult to demonstrate its advantages to potential
clients. Miles (1999) highlights four aspects of consultancy as important:
human capital and knowledge intensive,
high degree of intangible activities and services,
difficulties in standardization of the consulting process and procedures
intensive interaction between consultants and clients.
According to Schein, (1996), consultancy is considered as a helping with an aim. In this process a
special interaction develops between the consultant and the client. Therefore, in consultancy, besides
recognizing the problem of the client, it is also important to recognize the interaction between
consultant and client.
Kubr, (1996), says that regardless of semantic and stylistic differences, approaches and conceptions
related to the basic concept of management consulting, it can be basically divide into two groups:
functional and independent professional services. In that respect he has developed a definition of
management consulting saying that management consultancy is a professional service, which is
rendered to organizations and their top executives with the aim of giving assistance to the relevant
organizations in achieving their goals, identifying their problems, solving these problems, identifying
new possibilities, acquiring necessary abilities and in accomplishing changes. From the client side it is
important to define what types of products and services consultants deliver to the clients.
Markham (1999), suggests that management consultancy interventions, by its nature, can involve a
number of levels (providing information, conducting planning, managing changes, developing learning
capabilities).
Levels of Consulting Interventions :
Management Consulting is a professional service that helps entrepreneurs to:
Analyze and diagnose problems and conditions,
Develop solutions, and
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Implement changes in their enterprises In providing those services, management consultants are
seen as knowledge workers conveying knowledge to the clients.
In offering and proposing their advices, management consultants are asked to cover a range of topics,
making the perishable facets of their services tangible and lasting.
The major management consultancy service categories are traditionally divided into four groups:
strategy,
human resources,
operations, and
information technology
The last two categories have become dominant in the past 10 years worldwide. Further development
has expanded the scope of services to customer relations, finance, strategy, supply chain
management. (Gross, Poor, 2008)
Management consultants as a source of knowledge Management : Consultants are professionals who

bring specialized knowledge and a set of skills to the client organization in a way that moves the
organization forward. Greiner Metzger, (1983), describe the management consultant as someone,
who is in possession of the competence, status, reputation and recognition needed for his job.
Consultants generally have an educational background relevant to the area they consult in. Because
consultants work with numerous organizations, they bring knowledge and experience from past
assignments to help their clients in new situations, such as business growth, crisis management, etc.
In that sense, consultants are valuable source of business knowledge for entrepreneurs. Consultants
know how to capitalize on client strengths and realize opportunities while addressing weaknesses and
mitigating threats, all in exploring and identifying an appropriate solution. Consultants usually have
skills in research, analysis, communication and change management. They are able to identify
problems, find relevant data, synthesize information, develop proposals for improvement, overcome
resistance, transfer management techniques, and help clients to learn from experience. They know
how to engage the client to participate as closely and intensively as possible in the assignment. They
understand the linkages in the clients business value chain, rigorously apply relevant toolkits and
packages, and have extensive knowledge of the dynamics and direction of the industry client belongs
to.
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Related to the character of their work, consultants can basically be divided in the two big groups:
Resource consultant, suggesting solutions based on his expertise and experience and persuading
clients about the correctness of these solutions and gives assistance in the implementation,
Process consultant, assisting the client in searching for solutions with methods that facilitate and
raise creativity of the client, and as a consequence of that approach, the clients themselves will be
able to implement solutions.
Management consultancy market is extremely competitive and clients are increasingly selective and
demanding which requires from management consultants to reflect continuously on their acting,
performance and value added to clients. They have to consider how to improve client satisfaction
developing in the same time the image of the profession and strengthening the credibility of
management consultants. Establishing a benchmark in terms of raising professional standards for the
whole management consulting industry aligned with increasing public transparency and
accountability can help clients to recognize professionalism and ethics of consultants In order to
encourage continuous professional development by striving for high standards, and foster the
continuing evolution of management consultancy practice, International Council of Management
Consulting Institutes developed internationally recognised set of core standards for management
consultants defining competences for the profession
ICMCI Professional Standards Competency Model
Management consulting competency model represents a framework consisting of guidelines, tools,

and techniques for managing the application of knowledge and skills to address all or part of a
business issues. A methodology serves to help translate industry knowledge and technical
competencies into an approach for the delivery of a service. (Lucia and Lepsinger 1999), This
competence model as a form of professional standard and ethics of the practice, when implemented
broadly, will be the resulting in high level of consultant competences and reliable consultancy
services, improving the consistency and quality of services under predefined criteria for the
knowledge, skills and abilities, the consultants are expected to exercise in their work with clients.
Knowledge transfer and role of consultants : Knowledge transfer The conventional view describes
consultants as disseminators of business knowledge, following evidence of knowledge flow in the
form of clients acquiring new or increased knowledge from their interactions with expert consultants
in the formal knowledge domain of the consulting assignment. In that sense, concepts, frameworks,
processes/options, tools, skills and languages associated with procurement, systems design and
management, strategic portfolio analysis were developed. Client learning is not always an explicit or
contractual element in assignments. In identifying the dominant domain of entrepreneurial learning
claimed from consulting assignments as being that of processes rather than what might be expected
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from the conventional view of consultancy as the clients experts relationship, other significant
although neglected, knowledge flow channels and directions are evident:
From consultants to clients - Aside from what might be expected in terms of consultants bringing
sector knowledge to assignments, in the strategy case, they also provide internal organisational
knowledge in the form of client procedures, personnel and strategic data. In this way, the consultants
can be considered to be behaving as an organisational library or memory. Among consultants and
clients - general and consultancy project management knowledge and responsibility are reported to
have been gained by clients
From clients to consultants as it is acknowledged in the literature, consultants gain client

organisation and contextual knowledge especially from participation in contextualising their analyses
and prescriptions as well as in seeking to identify future business opportunities
Among clients - the very act of commissioning consultants, dedicating financial and other resources
to it, prompted reflection among clients and seeking out other sources of information
Among consultants learning is evident among consultants in terms of incidental observation and
coaching with respect to client, process and testing and using tools and frameworks. In consulting the
knowledge, experience and personality of a consultant is more important than any procedure or
technical instrument, and that can be assured with adequate training and experience. Management
consulting nowadays is the most important manufacturer of new management science, beyond
researches done at universities.
Role of Management Consultants : Consultants are considered as core agents in the dissemination of
business knowledge because of their relative expertise and knowledge of management practices.
However, relatively few studies focus specifically on their role in projects with client organisations.
According to Meister (1993) and Por-Gross, (2003) in terms of the consulting process, in general, the
consultant can act in three roles
Expert/ Resource consultant, preparing and suggesting solutions based on his very expertise and
experience, convincing clients about the effectiveness of proposed solutions and assisting in the
implementation (if required). An expert consultant transfers usually tacit knowledge (Polanyi, 1967)
Process/People consultant, assisting the client in searching for solutions with techniques and
methods that facilitate and increase the creativity of the client, enabling the clients themselves to
implement solutions. The process consulting is inevitable part in some consulting disciplines as
organizational development and change consulting projects (Schein, 2002). Working with a client a
process consultant typically transfers explicit knowledge.
Mix consultant, combining both, the tacit and explicit knowledge for the success of consulting
intervention with client.
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Depending to the needs of the entrepreneur and in line with nature of the assignment, a management
consultant can change his/her role, and apply different skills during an assignment in client
organization.
Management consultants role and skills model :
The precise combination of skill mix will vary according discipline and level of engagement with client
Characteristics of entrepreneurial learning : Entrepreneurial learning is an important area which is not

well understood in either the academic study of entrepreneurship or the practical development of
new entrepreneurs. The main conclusion coming from the extensive literature on entrepreneurship
education is that while education can provide cultural awareness, knowledge and skills for
entrepreneurship, the art of entrepreneurial practice is learned experientially in business rather
than the educational environment (Gibb, 1996; Gorman et al., 1997; Jack and Anderson, 1999),
Learning must be understood as a contextual and active rather than a purely educational process.
Rae, (2005) identified three major themes related to the entrepreneurs learning. These themes
consist of personal and social emergence, the negotiated enterprise, and contextual learning. Within
these major themes, a total of 11 subsidiary themes were identified and Triadic model of
entrepreneurial learning was developed.
Contextual learning occurs through participation in community, industry and other networks in which
individual experiences are related, compared and shared meaning is constructed. Through these
situated experiences and relationships people can develop intuition and the ability to recognise
opportunities.
The negotiated enterprise concept emphasises that the business venture is not enacted by one person
alone, but through negotiated relationships with others. The ideas and aspirations of individuals are
realised through interactive processes of exchange with others within and around the enterprise,
including customers, investors and co-actors such as partners or employees.
Personal and social emergence is the development of entrepreneurial identity, including early life and
family experiences, education and career formation, and social relationships. It includes the formation
of a sense of self and of future aspirations. Following recommendations and implementing above
explained learning model, a set of competencies required for entrepreneurs to exercise during their
entrepreneurial career can be developed to help them to improve overall performance of their
businesses. Competency based performance is a concept that is used widely within the world of
business. One comprehensive definition of competency proposed by Parry, (1996) says that
competence is a cluster of related knowledge, skills, and abilities that affects a major part of ones job
(a role or responsibility), that correlates with performance on the job, that can be measured against
wellaccepted standards, and that can be improved via training and development.
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Entrepreneurship competences model : Competencies often serve as the basis for identifying critical
skills that are needed in the workplace. One might suspect, competencies are gained through a variety
of channels life experience, formal education; apprenticeship; on-the-job experience; as well as
training and development programs. Of course, all of these channels come together and contribute to
overall job competence. In this sense, competencies represent the glue that ties work activity to the
bot The Entrepreneurship Competency Model is depicted in a diagram consisting of nine layers.
The arrangement of the layers is not meant to be hierarchical, or to imply that competencies at the
top are at a higher level of skill. The model represents the increasing specialization and specificity in
the application of skills as moving up the layers. Layers 1-4 are divided into blocks. The blocks
represent competency areas, that is, the applied skills, knowledge, abilities essential to successful
entrepreneurial performance.
The both models demonstrate similarities in competences required for both consultants
and entrepreneurs to successfully perform critical work functions or tasks in defined work
environment or context. For entrepreneurs this makes the process of learning and transfer of
knowledge more effective.
There are numerous reasons why entrepreneurs and organizations turn to consultants. In
the past decades companies have undergone significant changes. More and more companies
outsource services of some of their internal organizational departments that were created in previous
years. Areas of management are getting more and more specialized. According to Markham
(1999) there are three factors that make the intervention of a consultant absolutely necessary.
These are as follows:
Objectivity provided by outside, independent persons.
Uncertainty of projects can be significantly reduced by the assignment of outside consultants.
The intervention of a consultant can facilitate organizational learning and knowledge transfer.
Kubr (1996) emphasizes the work of consultants as a source of business knowledge to the
entrepreneurs
giving five reasons for why consultancy, this very particular and special business activity
is needed:
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giving assistance to an organization to reach its goals,
solving management and business problems,
identifying new possibilities
facilitating learning
preparing and implementing changes.
Until the 1980s the function of the consultant in the consultant-client relationship was basically in
many ways similar to the role of the supplier, who rendered different products and services.
Over the past years this relationship has gradually become a mutual partnership, and the goal
has more and more become raising the effectiveness of the client. Maister, (1993), emphasizes three
basic commonalties of the mission of consulting as a profession: advice, satisfaction and success. The
management of these commonalities requires a delicate balancing between the client demands and
the realities of the market and client organisation.
Bower (1982) explains with the following six factors how clients can use consultants as a source
of business knowledge:
Consultants possess competencies that clients do not.
They have knowledge of previously successful methods in case of other companies.
They devote enough time to examine the relevant problem.
They have adequate professional background.
They are independent.
They are able to draw up actions that assist them in the implementation of their suggestions.
In a highly competitive environment, enterprises need to continually change and evolve. Survival
and growth require an effort to re-evaluate and reaffirm their competitive advantages and
positions in the market. Managers and entrepreneurs must deal with numerous problems, and
consultants can assist them in dealing with:
Corrective problems trouble-shooting and/or turnaround
Progressive problems continuous improvement

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Creative problems new strategies and initiatives
Management consulting for SMEs :
This approach eliminates most of the gaps and barriers to hiring consultants to SMEs, as follows:
Provides a comprehensive review of the problem of small and medium enterprises
Allows for better communication and understanding between the consultants and entrepreneurs /
owners of small and medium enterprises
Allows consultant to combine a number of activities and information that are essential for SME
Work with multiple clients simultaneously, lowers consulting price for a small company
Increases the practical applicability of the solutions
Creates a new higher mutual trust and responsibility for the resulting advisory services
Simplifying administrative procedures and the process of providing advisory services
In the case of SMEs, it is best to hire a consultant who is specialized in SME consulting. However, in
practice it is quite difficult to get all this different knowledge integrated at a satisfactory level in a
person. Therefore, teamwork is just a solution in every demanding engagement of consultants.
Given the characteristics and challenges faced by entrepreneurs and owners of SMEs, we can consider
the general topic of business consulting as follows:
Define the functions and tasks of the owners of small and medium enterprises, in line with current
and future business challenges, while also limiting the direct involvement of entrepreneurs / owners
of other tasks and functions in the company. Therefore, the consultant must first examine the
specificity of the situation in the company from different perspectives. In this way he can help the
client to come up with new concepts, to formulate and to start looking at their own business from
various perspectives.
Develop understanding of management, which is on the one hand adequately to external

challenges, and on the other hand corresponds to the inner reality of companies. Thus, the
development of such an understanding of management, which is in line with microeconomic,
macroeconomic, social and other factors in the business environment.
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Alignment of managerial and professional tasks
Develop or expand the necessary managerial skills of the client coordinating the training program
and recommending institutions for further education
Creating a balance between personalized and structured leadership, which corresponds to the
company and the owner
Construction and development of managerial competencies and their application in practice. This is
primarily related to the development of operational management skills and abilities of the owner as
well as his willingness to share the responsibilities delegated to other members of the company. Here
a consultant is looking like a person who works on personal development
Recognition and extraction of function of owner / managers within and outside the company
Establishment of the strategic decisions
Design of the necessary process of change in the company, their location and its implementation
Management Consulting for SMEs includes a complete and comprehensive approach, in which they
can identify the functional elements of consulting, professional (vocational) counseling and
consultation in order to develop a personality (Barisic, 2004(, (Bellman, 2008):
Functional business consulting - refers to the fulfillment of managerial functions in a particular

company. The focus function of consulting is adequate implementation of tasks and roles of
managers, as well as his managerial skills.
Professional (vocational) counseling - in the forefront of the business solutions and models related
to a particular activity.
Advising personal development - the focus is personal development entrepreneur / owner or

manager of SMEs, improving its access business and its business relationships within and outside the
company.
The purpose of management consulting services to SMEs is to clarify the relationship and combining
and integrating all three aspects of the action of the owner companies. Consultant for owners of small
and medium enterprises is actually a specialist for the integration of the personal perspective into
the management system. In the focus of the functional business consulting is a development of
managerial action, as a condition that the function of management to small and medium-sized
businesses will be understood and realized on a more effective way. Given that the managerial
function in SMEs depends largely on the personal characteristics of entrepreneurs / owners, it must
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be taken into account that personal aspects, such as the issue of lifestyle and satisfaction,
maintaining interpersonal relationships, motivation, moral values, life goals and others, as these
factors can have a significant impact on performing management activities. Accordingly,
management consulting for entrepreneurs and owners of small and medium enterprises implies
adequate combination of personality and functional consulting and professional advisory services.
Depending on the complexity of the task, the consultant puts the spotlight on a certain person and
his ability, especially his model of thinking, problem solving and applying styles, and the way in which
the person is related to strategic tasks, organizational tasks or decision-making tasks. The goal of
business consulting is to make client ready and effective to act in relation to internal and external
circumstances, and that the decisions that are within his responsibility, are followed by quality of
implementation and results. Consultant seeks to support systemic and managerial action of a client
or to ensure in best sense the improvement of the clients position in the process of perception,
judgment and decision. As a specialist in spotting and solving management problems, information
processing and decision making, the consultant should have a high level of knowledge in these areas ,
as well as the ability to function in complex dynamic systems.
In the consulting to entrepreneurs / owners of small and medium-sized businesses the consultant
has to answer different multidisciplinary questions and requests. So, in addition to the expertise for
specific topics and issues, their knowledge and their abilities, they have gained through training and
experience, they have to spread to other systemic issues.
Under the systemic issues are implied psychosocial aspects of enterprise management consolidating
the knowledge in the areas of psychology, sociology, economy, management, organization, law and
various professional knowledge and expertise.
In a consulting process the consultant has to consider entirely the specificity of small and medium
enterprise, taking into account the personality of the owner, management system and the business
environment. In order for that to be successful, it is necessary to possess a multi-disciplinary
knowledge, with the higher level of trust between consultant and the client.
Optimal model of management consulting for small and medium enterprises should meet the
following requirements
A comprehensive approach to the advisory process in accordance with the European standards for
the provision of consultancy services EN16114
Possessing a multi-disciplinary knowledge and skills as a consultant or a consulting team
Focus on individual business owners / entrepreneurs, functional topics and you easy control
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Covering the general requirements of management function
Respect ethical principles and sustain mutual trust between consultant and the client (business
owners);
Set clear goals and achieve measurable results
Consultant assumes responsibility for the results of consulting;
Ensure the monitoring and implementation of modern trends in business
Define acceptable price of consulting services
The challenges in consulting SMEs are connected with nature and characteristics of SMEs:
Limited access to finance
Not experienced buyers of Consultants
Not experienced in managing Consultants
Often too focussed on fixing a symptom ahead of identifying and correcting the cause
See the need for external help but not sure where to look for a trusted source
Havent necessarily experienced the value of working with consultants before
Often too busy running the business to work-on the business
SMEs usually dont come with large budgets
SMEs dont understand the consulting process
Consultants are reluctant to impart knowledge
In order to establish a trustful and successful cooperation with client coming from SME sector and
ensure that consulting to SMEs works, it is needed following to consider.
Pre-qualifying - the need and that the client is truly ready for help
Build a process to service SMEs out of consultants core consulting competencies
Outline a well defined process to the client in language they can relate to
Put forward a fixed fee against the defined process
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Get payment in small regular amounts
Reduce time of consulting (the client budget) spent on areas of data collection and basic analysis -
have the client do that component under your guidance
Avoid travel - its lost time and time the SME cannot afford to pay you to do
Avoid subsidy work - where agencies fund all of the process (client must have investment in process
Monitoring Techniques :
It is important that the team monitor the progress or results of the change and ask the following kinds
of questions.
Have we achieved what we set out to do?
Is the change yielding the benefits hoped for?
Is the change going according to plan?
Are people responding positively to the change?
What do we need to adjust or do differently to make things work better?
One of the reasons for setting objectives and targets for the change is so that you have something
against which to measure progress, for example, unless you set a date for completion of a task, it may
continue on, never quite getting finished.
Monitoring and evaluation
It is surprisingly easy for a planned change to go off track or to grow or change direction without
agreement or approval. For this reason, it is necessary to monitor progress, analyse the information
gathered and make necessary adjustments based on the change plan.
Monitoring is a process of checking progress during implementation.
Evaluation is a review process based on information, views and opinions collected.
The mechanisms you and your team use to monitor change will of course depend on the nature of the
change and what is being monitored. Often more than one method is used to gain feedback or a
response from different perspectives.
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A key aspect of monitoring is being able to collect accurate information about:
facts
opinions
reports
outputs
behaviour
error levels
complaints.
Monitoring techniques need not be elaborate, but they should fit the purpose, be timely and
appropriate.
Here are some basic monitoring techniques you might use:
observation
talking with people
monitoring work performance and output
monitoring absenteeism and staff turnover
employee surveys (before, during and after the change)
baseline measuring before and after the change
benchmarking with other work units
financial recording
usage recording
focus groups to provide direct feedback
questionnaires
feedback sheets
measuring the time it takes to complete tasks
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recording errors
recording questions asked
monitoring returns (for example, customer returns)
logging the level of complaints.
Recording and reporting evaluations
Managing and maintaining change evaluation records requires attention to standards, procedures,
system rules and strategic needs. Allocation of recording and reporting responsibilities is important
for accountability.
To identify needs and responsibilities, you need to be familiar with:
interpreting the organisations strategic plans and evaluation objectives to know what has to
be recorded
identifying records and classifying them
record-keeping processes and systems, for example, retention periods, disposal methods and
archiving procedures.
appropriate ways to extract and report change-related information.
When you have gathered monitoring information, you need to complete the vital step of analysing it
and developing solutions. At this stage you need to keep an open mind, be objective and try to create
a fresh approach. You may arrive at one solution or a number of possible solutions. You may find it
beneficial to use diagrams or flow charts to help paint the overall picture for each solution.
The more specific your report and your solutions, the easier it will be to implement the changes; for
example, you may have identified a problem with the way staff create files. Your recommendation
should outline the improved procedure for creating files. Similarly, you may recommend that a
particular system be adopted for naming and storing electronic documents. This system should be
outlined clearly in your report.
Providing feedback to team members
The change process is likely to impact on the work practices of individuals and the whole team. It is
important that you as team leader provide prompt, timely and constructive feedback to staff on their
performance.
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Staff should know ahead of time what aspects of their work are to be evaluated, and know that action
will be taken where appropriate. Your feedback might cover:
actual performance outcomes
the quality of the product or delivery
the level and quality of interaction as a group
adherence to budget or time requirements
problems or variations to plans.
Remember that change by its very nature requires people to adjust, adopt new work practices and do
some things differently. It can be a stressful time for staff and your feedback should be provided with
this in mind.
Your feedback should be a continuous process, based on your observations, discussions with the staff
concerned and feedback you have received from others.
Team reflection and discussion
An important part of the monitoring process is to involve team members who are implementing the
change or are affected by it. They will be in a good position to pick up on any variations or problems
and to provide feedback.
For this to work, there needs to be a climate where team members are encouraged to reflect on
progress and to suggest improvements and discuss these as a group. As team leader, you will be
involved in:
affirming that all team members have a monitoring role
specifying the monitoring tasks they are expected to undertake
providing team members with the support/training they need to undertake the tasks
encouraging team members to be innovative and creative in their thinking
providing strategies or ground rules for supporting group evaluation and discussion.
Respond positively to suggestions from the team
Just as you encourage team members to listen to and take on board suggestions from their
colleagues, you as leader need to be prepared to receive feedback from individuals and the group and
to take action as appropriate.
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This involves treating staff as professionals, respecting their opinions, genuinely thanking
them for their ideas and being honest about what areas you can and cannot negotiate in terms of
their suggestions.
Seeking feedback from others
Even if a change seems to be confined to one section or unit, its impact may be felt elsewhere in the
organisation, or externally. For this reason changes in your area may need to be evaluated on the
basis of feedback from:
other departments or sections
management
clients
other stakeholders, such as union delegates or occupational health and safety

representatives.
While stakeholders might offer unsolicited feedback, it is better if a feedback process involving
relevant individuals and groups can be built into the change plan.
The methods used for consultation should reflect the needs of the stakeholders, make effective use of
time and other resources, and ensure that confidentiality requirements are met.
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Brief Study Material of Subject

Entrepreneurship & Small Business

B.Com. (IIIrd Year)

Following theoretical approaches are used to explain the concept of Entrepreneurship :

Economic Approach Theory:

Sociological Approach Theory :

Sociologists consider the entrepreneurship as a process of role performance . Entrepreneurs are

1. Introduction of a new good

Psychological Approach Theory :

Libensteins X-Efficiency Theory :

Dynamic Entrepreneurship Innovation Theory :

Entrepreneurship comprises any purposeful activity that intimate, maintain or develop a

Theory of High Achievement

Entrepreneurial energies are generated by the adoption of exogenously suppliedreligious

Theory of Cultural Value

are not generally done in the ordinary course of business routine.

In this definition , Schmpeter emphasized on the innovation process to be undertaken by the

( D ) Ronstadt. Robert : Entrepreneurship is the dynamic process of creating incremental wealth.

(E) Drucker, Peter, F. : Entrepreneurship is a systematic innovation which consists of the

In this definition emphasis is on the management orientation to entrepreneurship

(A) Opportunity Based Entrepreneurship :

Nature & Characteristics of Entrepreneurship :

Entrepreneurship is expected to identify the environmental changes as an opportunity

Economic Growth Driver

A businessman may have to bear many types of risks such as :

(a) Loss of business assets

Risk is the chance of loss.It is the possibility of some adverse occurrence

The following important points should be noted with regard to risk :

(V) Social Risk

Strike, Riots, Civil Commotion, Political Unrest

(v) Change in Technology and Production

Nature of Business Risks :

(1) Uncertainty is the main cause of risk

Causes of Business Risks :

(1) Natural Causes

(1) Financial and Non-financial Risks

(1) Identification of Risks

Derived from French Word Enterprendre means To Undertake

Entrepreneurial activity, especially when accompanied by initiative and resourcefulness

Look again at two key words above initiative and risk.

Period Connotations & Meaning

Organizer who was paid for his non-manual type of work

The entrepreneurs in an advanced economy is an individual who introduces something in the

International Labour Organisation :

1. Identification and Selection of Business Idea

(3) According to Motivation

(7) According to Sector

(9) According to Age and Gender

Emergence of Entrepreneurial Class

Refer To A Person Refer To A Process

Bases of Difference Entrepreneurs Professional Managers

(1) Motive Start a venture by setting up an Render Services in already

Entrepreneurship & Environment

Role of Entrepreneurship in Economic Development

Promote Capital Formation

Factors affecting Entrepreneurship

(1) Economic Factors

Entrepreneurship Development Programme

National Institute of Small Industry Extension Training (NISIET), Hyderabad

Creation of Employment Opportunities

Improvement in Per Capita Income

Use of Local Resources