Unit 7).

Financial management: [ fm]

1. Fundamentals of accounting and book-keeping.
2.objectives of fm
3.function of fm
4.analysis of financial statements.
4 a. balance sheet
4 b. income statement
4 c. cash flow statement

5. capital structure theories.

6. source of long term finance and cost of capital
7.concepts of components working capital
8. managing working capital
9. cash management
10. dividend decision
11. capital budgeting
12. Appraisal criteria
13. agribusiness financing system in India
14. money and capital markets.
15.national financial institution
16. regional ---“----
17. global ------“----
18. rural insurance
19. risk management
20.micro credit

Unit 4.
Agricultural finance
1.Importance of agriculture finance
2. rural credit structure
Demand
Supply
Source
Forms
3.estimation of credit requirement
4. cost of credit/ capital
5. credit appraisal
 5a. 3 Rs
5b. 3 Cs.
6. reforms in agriculture credit policy.
7. innovations in agriculture financing
8. microfinance
9. kisan credit card
10. role of institutions in agri finance
10 a. public sectors banks
10 b. private sectors banks
11. co operatives
12. micro finance institutions (MFS)
13. SELF HELP GROUP (SHGs)
14. International financial institutions
15. principal of agricultural financial management.
16. success and failures of cooperative sectors in India
17. role of cooperatives under emerging economic scenario
18.agricultural project analysis
19. internal rate of return (IRR)
20. Benefit cost ratio (B-C) ratio analysis.

Unit 5. agricul marketing and price analysis

1. marketing in developing company
2. marketing structure
3. marketing conduct
4. marketing performance analysis
5. marketable surplus
6. marketed surplus
7. marketing function
8. ----“-------processing
9. ----“------ transportation
10. storage
11. ware housing
12. forward trading
13. future markets and commodity
14.boards
15.channels in marketing
16. price spread
17.price efficiency
18.problems in marketing agricultural produce
19. govt interventions including regulated markets.
 20. procurement
21.buffer stock
22.operations
23.cooperatives marketing
24. demand and supply model
24 A. formulation
24 b. estimation
25 c. projection

25.marketed surplus model

26.marketing of agricultural inputs
27. market integration
28. price stabilization measures and policies

unit 8. marketing managemet

1. Indian marketing environment

2. rural marketing’ agricultural marketing system
3. wholesaling and retailing behaviour
4. the buying process
5. marketing mix
6. marketing strategy
7. marketing information system
8. market research
9. marketing extension
10.rural retailing
11. international marketing and finance
12.planning
13. market segmentation
14. marketing organization
15. land targeting

unit 9;
production and operations management
1. operations management of an agro- industrial unit including
operations system and processes
2. productivity of operations
3. work force productivity
4. fascilities management
 5. operations planning and control
6. material and supply chain management
7. quality management.

Unit 10
strategic management
1. meaning
2. concepts
3. scope
4. framework for strategic management
5. industrial (external) and organizational (internal) environment
factors influencing strategy
6. scanning the external and internal environment
7. strategy formulation
8. swot analysis
9. strategy implementations
10. strategy and structure
11. strategic analysis
12. strategy and technology
13. strategy and leadership
14. total quality management
15. the customer resources
16. development of strategy
17. creating competitive advantage strategy
18. evaluation of strategy

unit 11. entrepreneurial skills and new venture planning

1. entrepreneurship and small business concepts

2. process of business opportunity identification
3. project feasibility study
4. detailed business plan preparation
5. managing small enterprises
6. planning for growth
7. sickness in small enterprises
8. government policies for promotion of small and tiny enterprises
 9. rehabilization of sick enterprises
10. enterpreneurship

unit 2 natuarl resource management

1. characteristics
2. classification
3. sustainability issues
4. role of economics in natural resource
accounting planning, management and policy formulation

5. social welfare function

6. allocation of renewable and non renewable res ( forests, water, land,
etc) under various market structure
7. management strategies for major natural res
8. govt. programmes for conservation and development of natural
resources

Unit 11 entrepreneurial skills and new venture planning

ENTREPRENEURSHIP

• A theory of evolution of economic activities.

• A continuous process of economic development.

• An ingredient to economic development.

• Essentially a creative activity or an innovative function.

• A risk taking factor which is responsible for an end result.

• Usually understood with reference to individual business.

• The name given to the factor of production, which performs the

functions of enterprise.

• Creates awareness among people about economic activity.

• Generates Self-employment and additional employment

WHY ENTREPRENEURSHIP

• To improve backwardness of the people.

• Economic development of the region.

• To analysis resource utilization.

• Proper utilization of human potentiality.

• Special attention to take up new activities.

• To create self-employment and generation of employment opportunity.

• Eradication of regional imbalances.

• Better economic gain.

Or
concept of entrepreneurship
a combination of creativity and innovation. It is a stance taken within the business
applying inherent creativity as the act of 'thinking of' new things. It involves coming up
with innovative ideas and trying out new methods within the operations. The concept of
entrepreneurship is also concerned with new ways of looking at opportunities and
identifying a new approach towards solving problems. Entrepreneurship requires the
entrepreneur to shift paradigms and do away with old assumptions and perspectives. The
entrepreneur basically adopts techniques to stimulate creativity amongst employees.

The concept of entrepreneurship involves the consideration of a number of opportunities

to enhance employee performance and business profits. The entrepreneur is expected to
imply strategic planning to assess if the opportunities provided for growth are worthwhile
and how they could be successfully exploited. Strategic planning is an essential part of
the concept of entrepreneurship and effective application helps to ensure successful
operation. It is a useful tool within the sphere of influence of entrepreneurship and serves
a niche market for improving on the business performance. The concept of
entrepreneurship involves the owner taking absolute responsibility of empowering the
employees and in turn, affecting sales and profitability of the business.

Small business
From Wikipedia, the free encyclopedia
Jump to: navigation, search

A small business is a business that is privately owned and operated, with a small number
of employees and relatively low volume of sales. Small businesses are normally privately
owned corporations, partnerships, or sole proprietorships. The legal definition of "small"
varies by country and by industry, ranging from fewer than 15 employees under Fair
Work Act 2009, 50 employees in the European Union,[citation needed] and fewer than 500
employees to qualify for many U.S. Small Business Administration programs.[1] Small
businesses can also be classified according to other methods such as sales, assets, or net
profits.

Small businesses are common in many countries, depending on the economic system in
operation. Typical examples include: convenience stores, other small shops (such as a
bakery or delicatessen), hairdressers, tradesmen, lawyers, accountants, restaurants, guest
houses, photographers, small-scale manufacturing etc.

The smallest businesses, often located in private homes, are called microbusinesses
(term used by international organizations such as the World Bank and the International
Finance Corporation) or SoHos. The term "mom and pop business" is a common
colloquial expression for a single-family operated business with few (or no) employees
other than the owners. When judged by the number of employees, the American and the
European definitions of a microbusiness are the same: under 10 employees. There is a
notable trend to further segment different-sized microbusinesses; for instance, the term
Very Small Business is now being used to refer to businesses that are the smallest of the
smallest, such as those operated completely by one person or by 1-3 employees.[citation needed]

Project Feasibility Study

October 14 2010

A project feasibility study is a process that must be undertaken after the stakeholders
conceive of the idea for a deliverable, but before any serious planning is started. This is
basically the economics of the project and its deliverable on whether it will make the
company money and for whom the deliverable will be sold to.

There are many different areas a project feasibility study must uncover, such as specific
information so an informed decision on proceeding can be made by the stakeholders. The
technology and systems that will be needed to take the deliverable from its initiation to a
successful conclusion must be readily available. This is to say the production facilities of
a company can handle or be modified to accommodate the needs necessary for the
production of the deliverable.

After it has been determined that a company can produce the deliverable for a profit with
little to no deviation for the company’s core business practices, the next step in a project
feasibility study will involve the consumer. This is the part that requires extensive field
work.

The field work part of a project feasibility study examines the target audience in depth.
Part of this is the cost-based study that examines the exact costs of manufacturing the
deliverable and what will be the benefit or profits that the deliverable provides the
stakeholders and the company.
The cost that needed to be examined in the project feasibility study should include not
only the manufacturing of the deliverable, but also the advertising of the product and the
transportation costs of supplying the deliverable to the target audience. An example of
this would be transporting the deliverable to Alaska. If the profit per unit was $10 and the
transportation cost per unit was $9.50, it is not very economical to conduct the business
deal. It the transportation cost was over $10 then it would be disastrous and the company
would lose money on this business venture.

A project feasibility study is designed to take all the guess work out of who the
deliverable will be sold to and how much it will cost to do so. It can also be called the
economics of the project. Business plan preparation is not as complex as it may seem to
the new entrepreneurs. Begin by asking yourself a few core questions.

Business plan preparation is not as complex as it may seem to the new entrepreneurs.
Begin by asking yourself a few core questions.

o Which product or service are you going to make available? (Name the needs they will
fulfill.)

o Who all form your customer base? Why will they be willing to purchase your good or
service?

o What are the means to reach this identified customer base?

o From where will you get the initial funding for the business?

o What other resources will be required to accomplish the stated goals?

Business plan preparation calls for a settlement of these issues in an honest and realistic
manner. Besides these central questions, you will also need the answer to some short-
term questions.

o What kind of customer base are you looking for: wide or steady?

o What are the methods employed by your competitors?

o Does advertising have a big role to play in your business? Will it greatly affect your
profit margins?

o If yes, which form of advertising suits your business? Which media will you employ for
the publicity of your product or service?

Use of the appropriate information and a detailed analysis will help in systematic
business plan preparation. After organizing your thoughts and concerns, pen down the
answers to the raised questions. If available, make good use of relevant financial data.
Record your income and expenditures in the plan; this will serve as a benchmark when
you review your performance at a later date.

Maintain a fluid mindset that allows you to accommodate the changes as it is not wise to
commit yourself totally in the beginning. Aggressive revisions dictated by the changing
circumstances, and an increase in the knowledge and experience make the plan a living
document. A dynamic plan lends great momentum to the business.

Since 1999, Growthink's business plan consultants have developed more than 1,500
business plans. Growthink clients have collectively raised over $1 billion in venture
capital funding, and Growthink has become the firm of choice for venture capital firms,
angel investors, corporations and entrepreneurs in the know. To learn more about our
business plan services, call 877-BIZ-PLAN (877-249-7526). Growthink has also
developed a business plan template that allows entrepreneurs to quickly and cost-
effectively develop professional business plans.

Article Source: http://EzineArticles.com/?expert=Dave_Lavinsky

Government Policies for Small and Tiny Enterprises

The Small Scale Industrial Sector has emerged as a dynamic and vibrant sector of the
economy during the eighties. At the end of the Seventh Plan period, it accounted for nearly 35
percent of the gross value of output in the manufacturing sector and over 40 percent of the
total exports from the country. It also provided employment opportunities to around 12 million
people.
The primary objective of the Small Scale Industrial Policy during the nineties would be to
impart more vitality and growth-impetus to the sector to enable it to contribute its mite fully to
the economy, particularly in terms of growth of output, employment and exports. The sector
has been substantially delicensed. Further efforts would be made to deregulate and
debureaucratise the sector with a view to remove all fetters on its growth potential, reposing
greater faith in small and young entrepreneurs.
All statutes, regulations and procedures would be reviewed and modified, wherever necessary,
to ensure that their operations do not militate against the interests of the small and village
enterprises.

1.0 TINY ENTERPRISES

1.1 Government have already announced increase in the investment limits in plant and
machinery of small scale industries, ancillary units and export – oriented units to Rs 6 million,
Rs 7.5 million, and Rs 200 thousand respectively. Such limits in respect of "TINY"
ENTERPRISES would now be increased from the present Rs 200 thousand to Rs. 500
thousand, irrespective of location of the unit. Limit in plant and machinery for determining the
status of SSI/Ancillary units as on date is Rs 10 million. For tiny it is Rs 2.5 million and for
SSSBE Rs 500 thousand.

1.2 Service sub-sector is a fast growing area and there is need to provide support to it in view
of its recognized potential for generating employment. Hence all Industry-related service and
business enterprises, recognized as small scale industries and their investment ceilings would
correspond to those of Tiny enterprises.

1.3 A separate package for the promotion of Tiny Enterprises is now being introduced. This
constitutes the main thrust of Government’s new policy.

1.4 While the small scale sector (other than ‘Tiny Enterprises’) would be mainly entitled to
one-time benefits (like preference in land allocation/power connection, access to facilities for
skill/technology up gradation), the ‘Tiny’ enterprises would also be eligible for additional
support on a continuing basis, including easier access to institutional finance, priority in the
Government Purchase Programme and relaxation from certain provisions of labour laws.

1.5 It has also been decided to widen the scope of the National Equity Fund Scheme to cover
projects up to Rs. 1 million for equity support (up to 15 per cent). Single Window Loan
Scheme has also been enlarged to cover projects up to Rs 2 million with working capital
margin up to Rs 1 million. Composite loans under Single Window Scheme, now available
only through State Financial Corporations (SFCs) and twin function State Small Industries
Development Corporation (SSIDCs), would also be channelised through commercial banks.
This would facilitate access to a larger number of entrepreneurs.

2.0 FINANCIAL SUPPORT MEASURES

2.1 Inadequate access to credit – both short term and long term – remains a perennial problem
facing the small scale sector. Emphasis would henceforth shift from subsidized/cheap credit,
except for specified target groups, and efforts would be made to ensure both adequate flow of
credit on a normative basis, and the quality of its delivery, for viable operations of this sector.
A special monitoring agency would be set up to oversee that the genuine credit needs of the
small scale sector are fully met.

2.2 To provide access to the capital market and to encourage modernization and technological
up gradation, it has been decided to allow equity participation by other industrial undertakings
in the SSI, not exceeding 24 per cent of the total shareholding. This would also provide a
powerful boost to ancillarisation & sub-contracting, leading to expansion of employment
opportunities.

2.3 Regulatory provisions relating to the management of private limited companies are being
liberalized. A Limited Partnership Act will be introduced to enhance the supply of risk capital
to the small scale sector. Such an Act would limit the financial liability of the new and non-
active partners/entrepreneurs to the capital invested.

2.4 A beginning has been made towards solving the problem of delayed payments to small
industries by setting up of ‘factoring’ services through Small Industries Development Bank of
India (SIDBI). Network of such services would be set up throughout the country and operated
through commercial banks. A suitable legislation will be introduced to ensure prompt payment
of Small Industries’ bills.

3.0 INFRASTRUCTURAL FACILITIES

3.1 To facilitate location of industries in rural/backward areas and to promote stronger
linkages between agriculture and industry, a new Scheme of Integrated Infrastructural
Development (including Technological Back-up Services) for Small Scale Industries would be
implemented with the active participation of State Governments and financial institutions. A
beginning in this direction will be made this year itself.

3.2 A Technology Development Cell (TDC) would be set up in the Small Industries
Development Organization (SIDO) which would provide technology inputs to improve
productivity and competitiveness of the products of the small scale sector. The TDC would
coordinate the activities of the Tool Rooms, Process-cum-Product Development Centers
(PPDCs), existing as well as to be established under SIDO, and would also interact with the
other industrial research and development organizations to achieve its objectives.

3.3 Adequacy and equitable distribution of indigenous and imported raw materials would be
ensured to the small scale sector, particularly the tiny sub-sector. Policies would be so
designed that they do not militate against entry of new units. Based on the capacity needs,
Tiny/Small Scale units would be given priority in allocation of indigenous raw materials.

3.4 A proper and adequate arrangement for delivery of total package of incentives and services
at the District level will be evolved and implemented.

4.0 MARKETING AND EXPORTS

4.1 In spite of the vast domestic market, marketing remains a problem area for small and tiny
enterprises. Mass consumption labour intensive products are predominantly being marketed by
the organized sector. The tiny/small scale sector will be enabled to have a significant share of
such markets. In addition to the existing support mechanism, market promotion would be
undertaken through cooperative/public sector institutions, other specialized/professional
marketing agencies and consortia approach, backed up by such incentives, as considered
necessary.

4.2 National Small Industries Corporation (NSIC) would concentrate on marketing of mass
consumption items under common brand name and organic links between NSIC and SSIDCs
would be established.

4.3 Government recognizes the need to widen and deepen complementarily in production
programmes of large/medium and small industrial sectors. Parts, components, sub-assemblies,
etc. required by large public/private sector undertakings would be encouraged for production
in a techno-economically viable manner through small scale ancillary units. Industry
associations would be encouraged to establish sub-contracting exchanges, in addition to
strengthening the existing ones under the SIDO. Emphasis would also be laid on promotion of
a viable and competitive ‘component’ market.

4.4 Though the Small Scale Sector is making significant contribution to total exports, both
direct and indirect, a large potential remains untapped. The SIDO has been recognized as the
nodal agency to support the small scale industries in export promotion. An Export
Development Centre would be set up in SIDO to serve the small scale industries through its
network of field offices to further augment export activities of this sector.

5.0 MODERNIZATION, TECHNOLOGICAL AND QUALITY UP GRADATION

5.1 A greater degree of awareness to produce goods and services conforming to national and
international standards would be created among the small scale sector.

5.2 Industry Associations would be encouraged and supported to establish quality counseling
and common testing facilities. Technology Information Centres to provide updated knowledge
on technology and markets would be established.

5.3 Where non-conformity with quality and standards involves risk to human life and public
health, compulsory quality control would be enforced.

5.4 A reoriented Programme of modernization and technological up gradation aimed at

improving productivity, efficiency and cost effectiveness in the small scale sector would be
pursued. Specific industries in large concentrations/clusters would be identified for studies in
conjunction with SIDBI and other banks. Such studies will establish commercial viability of
modernization prescriptions, and financial support would be provided for modernization of
these industries on a priority basis.

5.5 Indian Institutes of Technology (IITs) and selected Regional/other Engineering Colleges
will serve as Technological Information, Design and Development Centres in their respective
command areas.

6.0 PROMOTION OF ENTREPRENEURSHIP

6.1 Government will continue to support first generation entrepreneurs through training and
will support their efforts. Large number of EDP trainers and motivators will be trained to
significantly expand the Entrepreneurship Development Programmes (EDP). Industry
Associations would also be encouraged to participate in this venture effectively.

6.2 EDP would be built into the curricula of vocational and other degree level courses.

6.3 Women entrepreneurs will receive support through special training Programme. Definition
of "Women Enterprises" would be simplified. The present stipulation regarding employment
of majority of women workers would be dispensed with and units in which women
entrepreneurs have a majority shareholding and management control, would be defined as
"Women Enterprises".

7.0 SIMPLIFICATION OF RULES AND PROCEDURES

7.1 The persistent complaint of small scale units of being subjected to a large number of Acts
and Laws, being required to maintain a number of registers and submit returns, and face an
army of inspectors, would be attended to within a specified time frame of three months.

7.2 Procedures would be simplified, bureaucratic controls effectively reduced, unnecessary

interference eliminated and paper work cut down to the minimum to enable the entrepreneurs
to concentrate on production and marketing functions.

Rehabilitation of sick enterprises

Various measures taken by the Government and RBI for the development of MSE
include

product reservation, fiscal concessions, preferential allocation of credit (by including the
same in
Priority Sector) and regulated rate of interest (for total credit requirement upto Rs 2 lacs),
launch of
Credit Guarantee Fund Trust for Small Industries, [later rechristened as Credit Guarantee
Trust for
Micro and Small Enterprises (CGTMSE)], extension of business and technical services,
preferential
procurement by the government. Small Industries Development Bank of India (SIDBI) has
been set up
in April 1990 as the principal financial institution for promotion, financing and
development of the small
enterprises sector and for coordinating the activities of other institutions engaged in
similar activities.
Several expert committees namely Narsimham Committee, Nayak Committee, Kapoor
Committee,
Ganguly Committee, Khan Committee, Murthy Committee, Kohli Committee and
Rangarajan
Committee have also been set up over the last few years to analyse the problems of the
small
enterprises sector and suggest remedial actions. The pace of de-reservation of small
enterprise items
has been accelerated so as to ensure that size does not remain a constraint to higher
production,
cost-efficiency and technological upgradation. The Government can now focus on smooth
migration of
small enterprises to medium enterprises and then to large enterprises progressively. It
should act as a
catalyst for such migration in addition to its role as facilitator for setting up new
enterprises and
sustaining them.

The recent policy packages for improving the flow of credit and growth of the sector are
as under.
2.1.7 Announcements in Union Budget 2008-09
a. Creation of a Risk Capital Fund of Rs. 2000 crores with SIDBI.
b. Creation of a fund of Rs. 2000 crores with SIDBI for providing refinance to MSME sector
c. Reduction in CGTMSE guarantee fee from 1.5% to 1% and annual service fee from
0.75%
to 0.5% for loans upto Rs. 5 lacs.
d. Allowing retired bank officers and ex-servicemen to act as Business Facilitators /
Business
Correspondents and Credit Counsellors.
e. Provision of Rs 100 crores for development of six Mega Clusters at - Varanasi &
Sibsagar
for handlooms, Bhiwandi & Erode for Powerlooms and Narsapur & Moradabad for
handicrafts.
2.1. 8 Package for Promotion of Micro and Small Enterprises, 2007
The Ministry of MSME announced a package for promotion of Micro and Small Enterprises
in
February 2007. The major features of the package are as under:
a. Implementation of the measures for 20% year on year growth to be closely monitored
by
the RBI and the Government.
b. SIDBI, assisted by scaled up Government grant, to cover 50 lakhs additional
beneficiaries
over the five years beginning 2006-07.
c. Creation of Risk Capital Fund by the Government with SIDBI
d. SIDBI to increase the number of branches from 56 to 100 in two years beginning 2006-
07.
e. Eligible loan limit under the Credit Guarantee Fund Scheme raised to Rs.50 lakhs. The
credit guarantee cover raised from 75 per cent to 80 per cent for micro enterprises for
loans
up to Rs. 5 lakhs. The corpus of the Fund to be raised from Rs.1,189 crores as on 1 April
2006 to Rs.2,500 crores over a period of five years.

REHABILITATION OF SICK MSMEs

Like any other entity, business enterprises are likely to develop stress and fall sick due to
internal or
external problems. As in any other sickness, the need for timely treatment after
identification of
sickness cannot be overemphasized in MSMEs. The disease may spread further, in case
there is
delay in treatment. In case a unit is not found viable, recovery of the dues of lenders
through a fair,
efficient and swift legal mechanism should be the focus. This is one way to manage
sickness - the exit
route which may be employed only in terminally ill i.e. non viable cases. However, for
viable units,
timely and effective rehabilitation by way of renegotiation of terms of loans, induction of
fresh dose of
funds, business restructuring, change of management etc may become necessary. The
process
should not only be quick, efficient, cheap and fair to all stakeholders but also acceptable
to and
implementable by all, with necessary monitoring arrangement for implementation of the
same.
The Group has considered the issue of sickness in MSME sector in detail and recommends
as under.
9.1 DEFINITION OF SICKNESS
A Micro or Small Enterprise (as defined in the MSMED Act 2006) may be said to
have become
sick, if any of the borrowal account of the enterprise remains NPA for three
months or more
Or
There is erosion in the networth due to accumulated losses to the extent of
50% of its
networth.
The existing stipulation that the unit should have been in commercial
production for at least
two years may be removed so as to enable the banks to rehabilitate units where there
is delay in
commencement of commercial production and there is a need for handholding due to
time/cost
overruns etc.
Accounts where willful default is identified or the borrower is absconding
should not be
classified as sick units and accordingly should not be eligible for any relief and
concessions.
During our interactions with the entrepreneurs and their associations, it was stated that
at times,
banks do not come forward for rehabilitation citing willful default by the borrower.
Therefore,
declaration of a borrower as a wilfull defaulter should be done strictly in
accordance with the
guidelines issued by RBI.
RBI has revised the definitions of non-SSI sick accounts and non-SSI weak accounts vide
its
notification dated 19-03-2008. These definitions are :
 A Non-SSI sick unit is a non-SSI Industrial undertaking (regardless of type of
incorporation)
whose accumulated losses, as at the end of the latest financial year, equal or exceed its
entre
networth (viz. paid up capital and free reserves).
 A Non-SSI weak unit is a non-SSI industrial undertaking (regardless of type of
incorporation)
if
a. any of its borrowal accounts (principal or interest) has remained overdue for a period
exceeding one year;
or
b. there is erosion in the net worth due to accumulated losses to the extent of 50% of its
net
worth during the previous financial year.
The definitions have been issued recently by RBI, after considering all factors and
therefore we do
not suggest any change in the definition of sickness in medium enterprises.
However, for the
sake of uniformity, we suggest change of the term “Non-SSI weak unit” to
“non-SSI incipient
sick unit”.
9.2 The data given in the table 8.2 reveals poor identification and rehabilitation
undertaken or carried
out. The success rate of rehabilitation packages is not known but in the given
circumstances, the
same too is expected to be low. Some SME Associations have expressed an opinion that a
serious
entrepreneur tries to induct funds (his own, borrowed from friends and relatives or other
informal
sources) in the business, as and when it faces any problem. The process goes on for
sometime i.e. till
he is no more in a position to do so. It is only thereafter that he approaches the bank and
shares his
position, still only hesitatingly. By the time the banker comes to know the real state of
affairs, it is
normally too late and the unit is beyond redemption. To overcome this situation, the
Group feels that
the process of rehabilitation should actually start at the stage of incipient sickness.
9.3 DEFINING INCIPIENT SICKNESS
While the concept of incipient sickness exists, the same has not been defined for MSMEs
in the
guidelines so far and needs to be defined. An account may be treated to have
reached the stage
of incipient sickness/ potential sickness, if any of the following events are
triggered.
a. There is delay in commencement of commercial production by more than six
months for
reasons beyond the control of the promoters and entailing cost overrun.
b. The company incurs losses for two years or cash loss for one year, beyond
the accepted
timeframe on account of change in economic and fiscal policies affecting the
working of
MSEs or otherwise.
c. The capacity utilization is less than 50% of the projected level in terms of
quantity or the
sales are less than 50% of the projected level in terms of value during a year.
The rehabilitation process should start on a proactive basis at the point of
incipient sickness
as defined above and not sickness. This will ensure that the rehabilitation of the unit
will start right
from the stage of sickness itself even if the nursing process does not succeed at the
incipient sickness
stage.
9.4 VIABILITY
The existing criteria for viability are reasonable. However, decision on viability
of a unit may be
taken at the earliest but not later than 3 months of becoming sick under any
circumstances.
In order to arrest the tendency of the banks to declare the sick MSMEs as unviable and go
for
recovery, we suggest that the following procedure should be adopted by the banks
before
declaring any MSME unit as unviable.
a. A unit should be declared unviable only if the viability status is evidenced by
a viability
study. However, it may not be feasible to conduct viability study in very small
units and
will only increase paperwork. For tiny micro enterprises, Branch Manager may
take a
decision on viability and record the same, alongwith the justification.
b. The said viability study and the declaration of the unit as unviable should
have the
approval of the next higher authority/ present sanctioning authority, except in
tiny micro
enterprises. However, in tiny micro enterprises, an opportunity may be given to
the
borrower to present his case to the Branch Manager before declaring a unit as
unviable.
c. The next higher authority should take such decision only after giving an
opportunity to the
promoters of the unit to present their case. They should be informed in writing
about the
reasons for declaring the unit as unviable before giving this opportunity so that
the
promoters can present their case properly.
d. Decision of the above higher authority should be informed to the promoters
in writing. The
above process should be completed in a time bound manner not later than 3
months.
However, banks may take decision in cases of malfeasance or fraud without
following the
above procedure.
9.5 REHABILITATION MEASURES
9.5.1 The extant RBI guidelines on sick small enterprises whether as regards the relief
and
concessions, viability parameters or coordination among the banks/ FIs and Government
agencies
are adequate to manage the sickness in MSME sector. Apparently, the problems remain in
the
implementation of guidelines and not the guidelines per se. More stringent monitoring at
the level of
HO of the banks/ FIs as also at the level of RBI may help in timely identification and
treatment of
sickness in MSME sector. However, minor modifications in the guidelines are expected to
further
strengthen the same.

SOME NEW SUGGESTIONS

Banks may consider recovery of principal on the basis of tagging of sales, starting from
the quarter
of commencement of repayment. However, tagging should be less than the cash margins
of the
unit.
In order to make the process of settlement of debt through OTS speedier and to provide
resources
to such intending borrowers, RBI may consider allowing scaling down of debt burden to
sustainable
levels. Further, in order to incentivise lenders to fund the OTS and additional requirement
of funds,
the new lenders may be allowed to convert a part of the debt into equity.
As an incentive for proper restructuring package at the time of rehabilitation, necessary
support for
business restructuring, modernisation, expansion, diversification and technological
upgradation as
may be felt necessary by the lenders may also be encouraged. Support of schemes like
Credit
 Linked Capital Subsidy Scheme in case of units in other (than rural) areas, KVIC Margin
Money
Scheme (for units in rural areas) may be extended for rehabilitation packages also.
In terms of extant RBI guidelines, an account gets downgraded if initial moratorium on
interest
payment is extended as a part of restructuring. These guidelines need to be waived
especially for
MSMEs.

Unit 10. Strategic management

Strategic management is a field that deals with the major intended
and emergent initiatives taken by general managers on behalf of
owners, involving utilization of resources, to enhance the
performance of firms in their external environments.[1] It entails
specifying the organization's mission, vision and objectives,
developing policies and plans, often in terms of projects and
programs, which are designed to achieve these objectives, and
then allocating resources to implement the policies and plans,
projects and programs. A balanced scorecard is often used to
evaluate the overall performance of the business and its progress
towards objectives .

Strategic management is a level of managerial activity under setting goals and over
Tactics. Strategic management provides overall direction to the enterprise and is closely
related to the field of Organization Studies. In the field of business administration it is
useful to talk about "strategic alignment" between the organization and its environment or
"strategic consistency". Strategic management includes not only the management team
but can also include the Board of Directors and other stakeholders of the organization. It
depends on the organizational structure.

“Strategic management is an ongoing process that evaluates and controls the business and
the industries in which the company is involved; assesses its competitors and sets goals
and strategies to meet all existing and potential competitors; and then reassesses each
strategy annually or quarterly [i.e. regularly] to determine how it has been implemented
and whether it has succeeded or needs replacement by a new strategy to meet changed
circumstances, new technology, new competitors, a new economic environment., or a
new social, financial, or political environment.”

Strategic management - Definition

Strategic management is the process of specifying an organization's objectives, developing policies and plans to achieve
these objectives, and allocating resources so as to implement the plans. It is the highest level of managerial activity, usually
performed by the company's Chief Executive Officer (CEO) and executive team. It provides overall direction to the whole
enterprise. An organization’s strategy must be appropriate for its resources, circumstances, and objectives. The process
involves matching the companies' strategic advantages to the business environment the organization faces. One objective of
an overall corporate strategy is to put the organization into a position to carry out its mission effectively and efficiently. A
good corporate strategy should integrate an organization’s goals, policies, and action sequences (tactics) into a cohesive
whole.

Strategy formulation and implementation

Strategic management can be seen as a combination of strategy formulation and strategy

implementation. Strategy formulation involves:

• Doing a situation analysis: both internal and external; both micro-environmental

and macro-environmental.
• Concurrent with this assessment, objectives are set. This involves crafting vision
statements (long term), mission statements (medium term), overall corporate
objectives (both financial and strategic), strategic business unit objectives (both
financial and strategic), and tactical objectives.
• These objectives should, in the light of the situation analysis, suggest a strategic
plan. The plan provides the details of how to obtain these goals.

This three-step strategy formation process is sometimes referred to as determining where

you are now, determining where you want to go, and then determining how to get there.
These three questions are the essence of strategic planning.

Strategy implementation involves:

• Allocation of sufficient resources (financial, personnel, time, computer system

support)
• Establishing a chain of command or some alternative structure (such as cross
functional teams)
• Assigning responsibility of specific tasks or processes to specific individuals or
groups
• It also involves managing the process. This includes monitoring results,
comparing to benchmarks and best practices, evaluating the efficacy and
efficiency of the process, controlling for variances, and making adjustments to the
process as necessary.
• When implementing specific programs, this involves acquiring the requisite
resources, developing the process, training, process testing, documentation, and
integration with (and/or conversion from) legacy processes.

Strategy formation and implementation is an on-going, never-ending, integrated process

requiring continuous reassessment and reformation. Strategic management is dynamic.
See Strategy dynamics. It involves a complex pattern of actions and reactions. It is
partially planned and partially unplanned. Strategy is both planned and emergent,
dynamic, and interactive. Some people (such as Andy Grove at Intel) feel that there are
critical points at which a strategy must take a new direction in order to be in step with a
changing business environment. These critical points of change are called strategic
inflection points.

Strategic management operates on several time scales. Short term strategies involve
planning and managing for the present. Long term strategies involve preparing for and
preempting the future. Marketing strategist, Derek Abell (1993), has suggested that
understanding this dual nature of strategic management is the least understood part of the
process. He claims that balancing the temporal aspects of strategic planning requires the
use of dual strategies simultaneously.

General Approaches

In general terms, there are two approaches to strategic management:

• The Industrial Organization Approach

o based on economic theory — deals with issues like competitive rivalry,
resource allocation, economies of scale
o assumptions — rationality, self interested behaviour, profit maximization
• The Sociological Approach
o deals primarily with human interactions
o assumptions — bounded rationality, satisfying behaviour, profit sub-
optimality. An example of a company that currently operate this way is
Google

defination

the art and science of formulating, implementing and evaluating cross functional
decisions that enable an organization to achieve its objectives

external (industrial) factors:

competitive, economic, social, cultural,demographic, legal, technological, governmental,
political, environmental.

Internal (organizational) factors:

Management, marketing, research & development, purchasing, distribution,
production/operations, manufacturing, finance / accounting, packaging, human resource
management, vendor relations, computer information systems, employee/ manager
relations, promotion.

Concept of Strategic Management

Strategic management is a comprehensive area that covers almost all the
functional areas of the organization. It is an umbrella concept of management
that comprises all such functional areas as marketing, finance & account,
human resource, and production & operation into a top level management
discipline. Therefore, strategic management has an importance in the
organizational success and failure than any specific functional areas.
The Scope Of Strategic Management

J. Constable has defined the area addressed by strategic management as "the

management processes and decisions which determine the long-term structure and
activities of the organization". This definition incorporates five key themes:

* Management process. Management process as relate to how strategies are created and
changed.

* Management decisions. The decisions must relate clearly to a solution of perceived

problems (how to avoid a threat; how to capitalize on an opportunity).

* Time scales. The strategic time horizon is long. However, it for company in real
trouble can be very short.

* Structure of the organization. An organization is managed by people within a

structure. The decisions which result from the way that managers work together within
the structure can result in strategic change.

* Activities of the organization. This is a potentially limitless area of study and we

normally shall centre upon all activities which affect the organization.

Strategic management process involves the entire range of decisions. Typically, strategic
issues have six identifiable dimensions:

* Strategic issues require top-management decisions

* Strategic issues involve the allocation of large amounts of company resources

* Strategic issues are likely to have significant impact on the long-term prosperity of the
firm

* Strategic issues are future oriented

* Strategic issues usually have major multifunctional or multibusiness consequences

* Strategic issues necessitate considering factors in the firm's external environment.

Or

Scope of strategic management:

. (1) To fix mission of the unit:

 (2) To make favorable internal environment:

(3) Analysis and evaluation of External environment:

(4) SWOT analysis to be made:

(5) Selection of new alternatives to achieve mission:

(6) To develop grand strategy

7) To fix short-term annual targets

(8) To raise resources and facilities

(9) Evaluation and control on activities:

(1) To fix mission of the unit: There is certain objectives, behind establishment of the
each company. To achieve such objectives, long term as well short-term purposes and
goals are fixed. On achieving purposes and goals gradually, mission of the unit is
achieved, at last. As per example, within a span of 15 years, to make a full-fledged
motor-car, running on road by solar energy, so that, one can help in the social as well
national aim of controlling pollution, arose out of burning of fuel viz. petrol, diesel,
within a span of 20 years. A strategy is prepared to achieve mission of the company by
long term as well short-term goals and aims.

(2) To make favorable internal environment: In internal environment of business,

financial resources, production tools and production capacity, selling capacity,
manpower, physical facilities etc. are included. In case if such environmental resources
are not proper, to meet with objectives of the unit, efforts should be made to make it
convenient, e. g. Technical changes to be made for increase in production capacity. For
increase in selling capacity, marketing should be made effective, necessary training to be
provided to the salesmen, and encouraging remunerating system to be introduced etc.

(3) Analysis and evaluation of External environment: An awareness to be made, by

making analysis of external environmental factors that how they are affecting, business
activities adversely. In external environment, policy of competitors, product of
competitors, trend of customers, new research, education, technology, government
policy, fashion, taxes etc. many such matters are involved. An evaluation to be made in
relation to, external environmental factors affecting currently and in future, by making its
analysis e. g. government’s export import policy and tax policy, how it’s affecting the
business, considering the trend of customers in changing fashion, into account, marketing
management should be arranged.
(4) SWOT analysis to be made: After making study of internal as well external
environment, SWOT analysis should be done. In which, company’s strength, weakness,
opportunities and threats are taken into account. Such each factor are related to the
company’s objectives and proper strategy is made, to avoid obstructive matters among
this e. g. Company has enough export orientation, but its labor are not working regularly.
This is the company’s weakness. If proper steps are taken, company has enough potential
for increase in export business. But, if no timely proper steps are taken, then there is risk
of product to be out of fashion and wastage of product.

(5) Selection of new alternatives to achieve mission: For achievement of mis¬sion of the
company, proper selection of an alternative should be made out of many alternatives
found out for benefit of achievement of mission. At this stage, best alternative is selected,
keeping company’s capacity, weaknesses, risks, and business opportunities into
consideration, e. g. For mission of preparing motorcar running by solar energy, first of all
preference should be given, for preparing small machines or vehicles run by solar energy,
after getting success on it, mission of preparing “solar motor-car” can be achieved.

(6) To develop grand strategy: In relation to company’s business alternatives ascertained,

it is necessary to clarify long-term objectives of the company. For success of such
objective, a goal strategy is prepared, e. g. for production of small machines and vehicles,
run by solar energy, a location to be selected, to erect plant, to keep research department,
pro¬duction to be done on experimental basis and thereafter commercial production to be
made.

(7) To fix short-term annual targets: For success of company’s top mission, a short-term
targets are required to be ascertained. Generally, they are of half-year or annual duration.
For this a time schedule and budget is prepared. During annual period, a time table is
prepared that, production of which product, when and how much would be made e. g.
when production of machineries or vehicles is to be made, it is necessary to fix targets,
that during how much period, how many and what vehicles would be manufactured.

(8) To raise resources and facilities: To achieve targets as per time schedule, it is
necessary to raise required resources and facilities. In relation to increase in production, it
is required to increase employees and their facilities. At this stage, proper distribution of
financial as well non-financial resources is to be made after ascertaining their availability,
necessary changes in administration to be made, to encourage employees in relation to
achieve targets etc. such matters are taken into account.

(9) Evaluation and control on activities: It is necessary to evaluate regularly that, short-
term targets, within decided period, for success of entire strategy, are achieved, at what
rate. If activities are not progressing towards direction of decided goals, steps, viz.
training to related employees, guidance, leadership and encouragement should be taken.
By comparing results with original targets, activities can be made more effective by
controlling steps, if results are not favorable, e. g. as controlling steps, necessary changes
in technology, providing training, making contracts with traders, changes in policy,
procedure and methods may be made.
From above stated points, it can be state that, in process of strategic management, matters
starting from clarification of mission up to its (achievement, are included.).

SWOT Analysis:

SWOT is an abbreviation of Strength, Weaknesses, Opportunities and Threats. In

SWOT analysis manager has to analyze external and internal business environments
so as to know the potential opportunities and threats arising out of external forces
and internal strengths and weaknesses that can help in deploying resources. SWOT
analysis thus focuses manager's attention on core activities which can determine
competitive advantage of the company and help him devise appropriate business
strategy to leverage those competencies profitably. However, SWOT analysis should
not be used rigidly. It should always be used coupled with continuous monitoring of
the environment and market intelligence and research.

Strategic analysis
An objective analysis and understanding of your markets and your
costs and capabilities forms the bedrock for the strategy
development process. From this analysis and by applying creativity
will come a number of options and opportunities that can be used
to build and implement a solid strategic plan for new or existing
markets.

Setting a strategy requires knowledge in three areas:

Customers: Existing customers and potential customers and markets. What do they do?
What would help them do what they do better? What are their needs? Where are the most
profitable customers?

Competencies: Skills, knowledge and relationships. What do you do well? What abilities
could you draw on? What costs do you have to carry? Where do you make money?

Competition: The whole competitive environment from regulation to real life

competition. What is the basis of competition? Where are the threats? Where is their
pressure and where is the market easy?
Analysis of the three areas is interrelated. Who you choose as your target audience will
have implications for what capabilities you need, which will have an impact on what
competitive pressures are around which will influence who you choose as your target
audience.

We take each of these areas in turn.

• Analysis of target markets

• Analysis of competencies
• Analysis of competition and environment

Some companies will have all this knowledge to hand easily and readily. Others will
require information and analysis to be carried out in order to bring together the
knowledge together into one place.

Total quality management

TQM is a set of management practices throughout the organization,

geared to ensure the organization consistently meets or exceeds
customer requirements. TQM places strong focus on process
measurement and controls as means of continuous improvement.
or
To.tal Quality Management (or TQM) is a management concept coined by W. Edwards
Deming. The basis of TQM is to reduce the errors produced during the manufacturing or
service process, increase customer satisfaction, streamline supply chain management, aim
for modernization of equipment and ensure workers have the highest level of training.
One of the principal aims of TQM is to limit errors to 1 per 1 million units produced.
Total Quality Management is often associated with the development, deployment, and
maintenance of organizational systems that are required for various business processes.

TQM and Six Sigma

The main difference between TQM and Six Sigma (a newer concept) is the approach.
TQM tries to improve quality by ensuring conformance to internal requirements, while
Six Sigma focuses on improving quality by reducing the number of defects and
impurities.[1

Total Quality Management (TQM) is an approach that seeks to improve quality and
performance which will meet or exceed customer expectations. This can be achieved by
integrating all quality-related functions and processes throughout the company. TQM
looks at the overall quality measures used by a company including managing quality
design and development, quality control and maintenance, quality improvement, and
quality assurance. TQM takes into account all quality measures taken at all levels and
involving all company employees.

Origins Of TQM

Total quality management has evolved from the quality assurance methods that were first
developed around the time of the First World War. The war effort led to large scale
manufacturing efforts that often produced poor quality. To help correct this, quality
inspectors were introduced on the production line to ensure that the level of failures due
to quality was minimized.

After the First World War, quality inspection became more commonplace in
manufacturing environments and this led to the introduction of Statistical Quality Control
(SQC), a theory developed by Dr. W. Edwards Deming. This quality method provided a
statistical method of quality based on sampling. Where it was not possible to inspect
every item, a sample was tested for quality. The theory of SQC was based on the notion
that a variation in the production process leads to variation in the end product. If the
variation in the process could be removed this would lead to a higher level of quality in
the end product.

After World War Two, the industrial manufacturers in Japan produced poor quality items.
In a response to this, the Japanese Union of Scientists and Engineers invited Dr. Deming
to train engineers in quality processes. By the 1950’s quality control was an integral part
of Japanese manufacturing and was adopted by all levels of workers within an
organization.

By the 1970’s the notion of total quality was being discussed. This was seen as company-
wide quality control that involves all employees from top management to the workers, in
quality control. In the next decade more non-Japanese companies were introducing
quality management procedures that based on the results seen in Japan. The new wave of
quality control became known as Total Quality Management, which was used to describe
the many quality-focused strategies and techniques that became the center of focus for
the quality movement.

Principles of TQM

TQM can be defined as the management of initiatives and procedures that are aimed at
achieving the delivery of quality products and services. A number of key principles can
be identified in defining TQM, including:

• Executive Management – Top management should act as the main driver for
TQM and create an environment that ensures its success.
• Training – Employees should receive regular training on the methods and
concepts of quality.
• Customer Focus – Improvements in quality should improve customer satisfaction.
• Decision Making – Quality decisions should be made based on measurements.
 • Methodology and Tools – Use of appropriate methodology and tools ensures that
non-conformances are identified, measured and responded to consistently.
• Continuous Improvement – Companies should continuously work towards
improving manufacturing and quality procedures.
• Company Culture – The culture of the company should aim at developing
employees ability to work together to improve quality.
• Employee Involvement – Employees should be encouraged to be pro-active in
identifying and addressing quality related problems.

The Cost Of TQM

Many companies believe that the costs of the introduction of TQM are far greater than
the benefits it will produce. However research across a number of industries has costs
involved in doing nothing, i.e. the direct and indirect costs of quality problems, are far
greater than the costs of implementing TQM.

The American quality expert, Phil Crosby, wrote that many companies chose to pay for
the poor quality in what he referred to as the “Price of Nonconformance”. The costs are
identified in the Prevention, Appraisal, Failure (PAF) Model.

Prevention costs are associated with the design, implementation and maintenance of the
TQM system. They are planned and incurred before actual operation, and can include:

• Product Requirements – The setting specifications for incoming materials,

processes, finished products/services.
• Quality Planning – Creation of plans for quality, reliability, operational,
production and inspections.
• Quality Assurance – The creation and maintenance of the quality system.
• Training – The development, preparation and maintenance of processes.

Appraisal costs are associated with the vendors and customers evaluation of purchased
materials and services to ensure they are within specification. They can include:

• Verification – Inspection of incoming material against agreed upon specifications.

• Quality Audits – Check that the quality system is functioning correctly.
• Vendor Evaluation – Assessment and approval of vendors.

Failure costs can be split into those resulting from internal and external failure. Internal
failure costs occur when results fail to reach quality standards and are detected before
they are shipped to the customer. These can include:

• Waste – Unnecessary work or holding stocks as a result of errors, poor

organization or communication.
• Scrap – Defective product or material that cannot be repaired, used or sold.
• Rework – Correction of defective material or errors.
 • Failure Analysis – This is required to establish the causes of internal product
failure.

External failure costs occur when the products or services fail to reach quality standards,
but are not detected until after the customer receives the item. These can include:

• Repairs – Servicing of returned products or at the customer site.

• Warranty Claims – Items are replaced or services re-performed under warranty.
• Complaints – All work and costs associated with dealing with customer’s
complaints.
• Returns – Transportation, investigation and handling of returned item

What Is Venture Planning?

1. Venture Planning is a personal assessment of your feelings and the feasibility of a
venture.

2. Venture Planning answers the question, should I be doing this and why?

3. The Venture Feasibility process examines seven key factors in any venture.

a. The Founders' Compelling Interest: The force that drives you.

b. Customer Opportunities based on customer wants and needs.

c. Customer Profiles defines the target market and potential customers

d. Venture Concepts evaluates alternatives to filling those needs.

e. Financial Resources identifies and evaluates the financial resources need to pursue
alternative venture models.

f. Entrepreneurial Assessment to find out if the entrepreneur and the venture are in
alignment with respect to goals rewards, compelling interests and the ventures mission.

g. Final venture evaluation of feasibility and comparison of alternatives.

4. What Venture Planning is not? It is not about writing a Business Plan. Sometimes a
business plan is not needed.
5. Venture Planning does not require detailed funding source analysis, professional
opinions, entity formation or detailed market analysis.

6. Venture Planning is development of a means of comparing various business models,

usually through financial modeling to answer the following questions:

a. Which venture concept produces the most sales, the best margins, the highest net profit
and the lowest breakeven?

b. Which model requires the least investment by entrepreneurs and others?

c. Which concept requires equity as opposed to debt financing?

d. Which produces the highest "Return on Investment" and the best liquidity?
 e. Which model requires the entrepreneur to give up the least equity?

f. Identify and quantify the risks involved with execution of each model.

7. Venture Formation involves all of the following stages:

Idea - Concept Development - Venture Development - Monitoring Progress - Initiating New Changes -
Venture Feasibility Analysis - Business or Operational Plan - Budget vs. Actual - New Plans.

Scanning the external and internal environment

SWOT Analysis
A scan of the internal and external environment is an important part of the strategic
planning process. Environmental factors internal to the firm usually can be classified as
strengths (S) or weaknesses (W), and those external to the firm can be classified as
opportunities (O) or threats (T). Such an analysis of the strategic environment is referred
to as a SWOT analysis.

The SWOT analysis provides information that is helpful in matching the firm's
resources and capabilities to the competitive environment in which it operates.
As such, it is instrumental in strategy formulation and selection. The following
diagram shows how a SWOT analysis fits into an environmental scan:

SWOT Analysis Framework

Environmental Scan
/ \
Internal Analysis External Analysis
/\ /\
Strengths Weaknesses Opportunities Threats
|
SWOT Matrix

Strengths

A firm's strengths are its resources and capabilities that can be used as a basis
for developing a competitive advantage. Examples of such strengths include:

• patents
• strong brand names
• good reputation among customers
• cost advantages from proprietary know-how
• exclusive access to high grade natural resources
 • favorable access to distribution networks

Weaknesses

The absence of certain strengths may be viewed as a weakness. For example,

each of the following may be considered weaknesses:

• lack of patent protection

• a weak brand name
• poor reputation among customers
• high cost structure
• lack of access to the best natural resources
• lack of access to key distribution channels

In some cases, a weakness may be the flip side of a strength. Take the case in
which a firm has a large amount of manufacturing capacity. While this capacity
may be considered a strength that competitors do not share, it also may be a
considered a weakness if the large investment in manufacturing capacity
prevents the firm from reacting quickly to changes in the strategic environment.

Opportunities

The external environmental analysis may reveal certain new opportunities for
profit and growth. Some examples of such opportunities include:

• an unfulfilled customer need

• arrival of new technologies
• loosening of regulations
• removal of international trade barriers

Threats

Changes in the external environmental also may present threats to the firm.
Some examples of such threats include:

• shifts in consumer tastes away from the firm's products

• emergence of substitute products
• new regulations
• increased trade barriers

The SWOT Matrix

A firm should not necessarily pursue the more lucrative opportunities. Rather, it
may have a better chance at developing a competitive advantage by identifying a
fit between the firm's strengths and upcoming opportunities. In some cases, the
firm can overcome a weakness in order to prepare itself to pursue a compelling
opportunity.

To develop strategies that take into account the SWOT profile, a matrix of these
factors can be constructed. The SWOT matrix (also known as a TOWS Matrix) is
shown below:

SWOT / TOWS Matrix

Strengths Weaknesses

Opportunities S-O strategies W-O strategies

Threats S-T strategies W-T strategies

• S-O strategies pursue opportunities that are a good fit to the company's
strengths.
• W-O strategies overcome weaknesses to pursue opportunities.
• S-T strategies identify ways that the firm can use its strengths to reduce
its vulnerability to external threats.
• W-T strategies establish a defensive plan to prevent the firm's
weaknesses from making it highly susceptible to external threats.

or
Organizational environment consists of both external and internal factors. Environment
must be scanned so as to determine development and forecasts of factors that will
influence organizational success. Environmental scanning refers to possession and
utilization of information about occasions, patterns, trends, and relationships within
an organization’s internal and external environment. It helps the managers to decide
the future path of the organization. Scanning must identify the threats and opportunities
existing in the environment. While strategy formulation, an organization must take
advantage of the opportunities and minimize the threats. A threat for one organization
may be an opportunity for another.

Internal analysis of the environment is the first step of environment scanning.

Organizations should observe the internal organizational environment. This includes
employee interaction with other employees, employee interaction with management,
manager interaction with other managers, and management interaction with shareholders,
access to natural resources, brand awareness, organizational structure, main staff,
operational potential, etc.
Also, discussions, interviews, and surveys can be used to assess the internal environment.
Analysis of internal environment helps in identifying strengths and weaknesses of an
organization.

As business becomes more competitive, and there are rapid changes in the external
environment, information from external environment adds crucial elements to the
effectiveness of long-term plans. As environment is dynamic, it becomes essential to
identify competitors’ moves and actions. Organizations have also to update the core
competencies and internal environment as per external environment. Environmental
factors are infinite, hence, organization should be agile and vigile to accept and adjust to
the environmental changes. For instance - Monitoring might indicate that an original
forecast of the prices of the raw materials that are involved in the product are no more
credible, which could imply the requirement for more focused scanning, forecasting and
analysis to create a more trustworthy prediction about the input costs. In a similar
manner, there can be changes in factors such as competitor’s activities, technology,
market tastes and preferences.

While in external analysis, three correlated environment should be studied and analyzed
—

• immediate / industry environment

• national environment
• broader socio-economic environment / macro-environment

Examining the industry environment needs an appraisal of the competitive structure of

the organization’s industry, including the competitive position of a particular
organization and it’s main rivals. Also, an assessment of the nature, stage, dynamics and
history of the industry is essential. It also implies evaluating the effect of globalization on
competition within the industry. Analyzing the national environment needs an appraisal
of whether the national framework helps in achieving competitive advantage in the
globalized environment. Analysis of macro-environment includes exploring macro-
economic, social, government, legal, technological and international factors that may
influence the environment. The analysis of organization’s external environment reveals
opportunities and threats for an organization.

Strategic managers must not only recognize the present state of the environment and their
industry but also be able to predict its future positions.

Development of strategy
A strategy is an organizations plan to achieve its mission - which is the purpose for the
organizations existence.
The development process involves three conceptual ways in which firms achieve their
missions:

• Differentiation
• Cost Leadership
• Response

Effective strategies are also developed through proper evaluation of a S.W.O.T. analysis
to gain competitive advantage.

unit 9;
production and operations management

Quality management: Quality management can be considered to

have four main components: quality planning, quality control,
quality assurance and quality improvement.[1] Quality management
is focused not only on product/service quality, but also the means
to achieve it. Quality management therefore uses quality assurance
and control of processes as well as products to achieve more
consistent quality.

Principles

Quality management adopts a number of management principles[3] that can be

used by top management to guide their organisations towards improved
performance. The principles include:

Customer focus

Since the organizations depend on their customers, therefore they should understand
current and future customer needs, should meet customer requirements and try to exceed
the expectations of customers.[4]

Leadership

Leaders of an organization establish unity of purpose and direction of it. They should go
for creation and maintenance of such an internal environment, in which people can
become fully involved in achieving the organization's quality objective.[4]

Involvement of people

People at all levels of an organization are the essence of it. Their complete involvement
enables their abilities to be used for the benefit of the organization.[4]
Process approach

The desired result can be achieved when activities and related resources are managed in
an organization as process.[4]

System approach to management

An organization's effectiveness and efficiency in achieving its quality objectives are

contributed by identifying, understanding and managing all interrelated processes as a
system.[4]

Continual improvement

One of the permanent quality objectives of an organization should be the continual

improvement of its overall performance.[4]

Factual approach to decision making

Effective decisions are always based on the data analysis and information.[4]

Mutually beneficial supplier relationships

Since an organization and its suppliers are interdependent, therefore a mutually beneficial
relationship between them increases the ability of both to add value.[4]

These eight principles form the basis for the quality management system standard ISO
9001:2008.[4]

Quality improvement

There are many methods for quality improvement. These cover product improvement,
process improvement and people based improvement. In the following list are methods of
quality management and techniques that incorporate and drive quality improvement:

1. ISO 9004:2008 — guidelines for performance improvement.

2. ISO 15504-4: 2005 — information technology — process assessment — Part 4:
Guidance on use for process improvement and process capability determination.
3. QFD — quality function deployment, also known as the house of quality
approach.
4. Kaizen — 改善, Japanese for change for the better; the common English term is
continuous improvement.
5. Zero Defect Program — created by NEC Corporation of Japan, based upon
statistical process control and one of the inputs for the inventors of Six Sigma.
6. Six Sigma — 6σ, Six Sigma combines established methods such as statistical
process control, design of experiments and FMEA in an overall framework.
 7. PDCA — plan, do, check, act cycle for quality control purposes. (Six Sigma's
DMAIC method (define, measure, analyze, improve, control) may be viewed as a
particular implementation of this.)
8. Quality circle — a group (people oriented) approach to improvement.
9. Taguchi methods — statistical oriented methods including quality robustness,
quality loss function, and target specifications.
10. The Toyota Production System — reworked in the west into lean manufacturing.
11. Kansei Engineering — an approach that focuses on capturing customer emotional
feedback about products to drive improvement.
12. TQM — total quality management is a management strategy aimed at embedding
awareness of quality in all organizational processes. First promoted in Japan with
the Deming prize which was adopted and adapted in USA as the Malcolm
Baldrige National Quality Award and in Europe as the European Foundation for
Quality Management award (each with their own variations).
13. TRIZ — meaning "theory of inventive problem solving"
14. BPR — business process reengineering, a management approach aiming at 'clean
slate' improvements (That is, ignoring existing practices).
15. OQM — Object-oriented Quality Management, a model for quality management.
[5]

Quality terms

• Quality Improvement can be distinguished from Quality Control in that Quality

Improvement is the purposeful change of a process to improve the reliability of
achieving an outcome.
• Quality Control is the ongoing effort to maintain the integrity of a process to
maintain the reliability of achieving an outcome.
• Quality Assurance is the planned or systematic actions necessary to provide
enough confidence that a product or service will satisfy the given requirements

Supply chain management

Supply Chain Management (SCM) is the management of a network of interconnected

businesses involved in the ultimate provision of product and service packages required by
end customers (Harland, 1996).[1] Supply Chain Management spans all movement and
storage of raw materials, work-in-process inventory, and finished goods from point of
origin to point of consumption (supply chain).

Another definition is provided by the APICS Dictionary when it defines SCM as the
"design, planning, execution, control, and monitoring of supply chain activities with the
objective of creating net value, building a competitive infrastructure, leveraging
worldwide logistics, synchronizing supply with demand and measuring performance
globally."
Definitions

• Supply Chain Management is the systemic, strategic coordination of the

traditional business functions and the tactics across these business functions
within a particular company and across businesses within the supply chain, for the
purposes of improving the long-term performance of the individual companies
and the supply chain as a whole (Mentzer et al., 2001).[2]

• Global Supply Chain Forum - Supply Chain Management is the integration of key
business processes across the supply chain for the purpose of creating value for
customers and stakeholders (Lambert, 2008)[4].

• According to the Council of Supply Chain Management Professionals (CSCMP),

Supply chain management encompasses the planning and management of all
activities involved in sourcing, procurement, conversion, and logistics
management. It also includes the crucial components of coordination and
collaboration with channel partners, which can be suppliers, intermediaries, third-
party service providers, and customers. In essence, supply chain management
integrates supply and demand management within and across companies. More
recently, the loosely coupled, self-organizing network of businesses that
cooperate to provide product and service offerings has been called the Extended
Enterprise.

A supply chain, as opposed to supply chain management, is a set of organizations directly

linked by one or more of the upstream and downstream flows of products, services,
finances, and information from a source to a customer. Managing a supply chain is
'supply chain management' (Mentzer et al., 2001).[5]

Problems addressed by Supply Chain Management

Supply chain management must address the following problems:

• Distribution Network Configuration: number, location and network missions of

suppliers, production facilities, distribution centers, warehouses, cross-docks and
customers.
• Distribution Strategy: questions of operating control (centralized, decentralized
or shared); delivery scheme, e.g., direct shipment, pool point shipping, cross
docking, DSD (direct store delivery), closed loop shipping; mode of
transportation, e.g., motor carrier, including truckload, LTL, parcel; railroad;
intermodal transport, including TOFC (trailer on flatcar) and COFC (container on
flatcar); ocean freight; airfreight; replenishment strategy (e.g., pull, push or
hybrid); and transportation control (e.g., owner-operated, private carrier, common
carrier, contract carrier, or 3PL).
 • Trade-Offs in Logistical Activities: The above activities must be well
coordinated in order to achieve the lowest total logistics cost. Trade-offs may
increase the total cost if only one of the activities is optimized. For example, full
truckload (FTL) rates are more economical on a cost per pallet basis than less than
truckload (LTL) shipments. If, however, a full truckload of a product is ordered to
reduce transportation costs, there will be an increase in inventory holding costs
which may increase total logistics costs. It is therefore imperative to take a
systems approach when planning logistical activities. These trade-offs are key to
developing the most efficient and effective Logistics and SCM strategy.
• Information: Integration of processes through the supply chain to share valuable
information, including demand signals, forecasts, inventory, transportation,
potential collaboration, etc.
• Inventory Management: Quantity and location of inventory, including raw
materials, work-in-progress (WIP) and finished goods.
• Cash-Flow: Arranging the payment terms and methodologies for exchanging
funds across entities within the supply chain.

Supply chain execution means managing and coordinating the movement of materials,
information and funds across the supply chain. The flow is bi-directional.

[edit] Activities/functions

Supply chain management is a cross-function approach including managing the

movement of raw materials into an organization, certain aspects of the internal processing
of materials into finished goods, and the movement of finished goods out of the
organization and toward the end-consumer. As organizations strive to focus on core
competencies and becoming more flexible, they reduce their ownership of raw materials
sources and distribution channels. These functions are increasingly being outsourced to
other entities that can perform the activities better or more cost effectively. The effect is
to increase the number of organizations involved in satisfying customer demand, while
reducing management control of daily logistics operations. Less control and more supply
chain partners led to the creation of supply chain management concepts. The purpose of
supply chain management is to improve trust and collaboration among supply chain
partners, thus improving inventory visibility and the velocity of inventory movement.

Several models have been proposed for understanding the activities required to manage
material movements across organizational and functional boundaries. SCOR is a supply
chain management model promoted by the Supply Chain Council. Another model is the
SCM Model proposed by the Global Supply Chain Forum (GSCF). Supply chain
activities can be grouped into strategic, tactical, and operational levels . The CSCMP has
adopted The American Productivity & Quality Center (APQC) Process Classification
FrameworkSM a high-level, industry-neutral enterprise process model that allows
organizations to see their business processes from a cross-industry viewpoint[6].
[edit] Strategic Level

• Strategic network optimization, including the number, location, and size of

warehousing, distribution centers, and facilities.
• Strategic partnerships with suppliers, distributors, and customers, creating
communication channels for critical information and operational improvements
such as cross docking, direct shipping, and third-party logistics.
• Product life cycle management, so that new and existing products can be
optimally integrated into the supply chain and capacity management activities.
• Information technology chain operations.
• Where-to-make and make-buy decisions.
• Aligning overall organizational strategy with supply strategy.
• It is for long term and needs resource commitment.

[edit] Tactical Level

• Sourcing contracts and other purchasing decisions.

• Production decisions, including contracting, scheduling, and planning process
definition.
• Inventory decisions, including quantity, location, and quality of inventory.
• Transportation strategy, including frequency, routes, and contracting.
• Benchmarking of all operations against competitors and implementation of best
practices throughout the enterprise.
• Milestone payments.
• Focus on customer demand.

[edit] Operational Level

• Daily production and distribution planning, including all nodes in the supply
chain.
• Production scheduling for each manufacturing facility in the supply chain (minute
by minute).
• Demand planning and forecasting, coordinating the demand forecast of all
customers and sharing the forecast with all suppliers.
• Sourcing planning, including current inventory and forecast demand, in
collaboration with all suppliers.
• Inbound operations, including transportation from suppliers and receiving
inventory.
• Production operations, including the consumption of materials and flow of
finished goods.
• Outbound operations, including all fulfillment activities, warehousing and
transportation to customers.
• Order promising, accounting for all constraints in the supply chain, including all
suppliers, manufacturing facilities, distribution centers, and other customers.
 • From production level to supply level accounting all transit damage cases &
arrange to settlement at customer level by maintaining company loss through
insurance company.

[edit] Importance of Supply Chain Management

Organizations increasingly find that they must rely on effective supply chains, or
networks, to compete in the global market and networked economy.[7] In Peter Drucker's
(1998) new management paradigms, this concept of business relationships extends
beyond traditional enterprise boundaries and seeks to organize entire business processes
throughout a value chain of multiple companies.

During the past decades, globalization, outsourcing and information technology have
enabled many organizations, such as Dell and Hewlett Packard, to successfully operate
solid collaborative supply networks in which each specialized business partner focuses on
only a few key strategic activities (Scott, 1993). This inter-organizational supply network
can be acknowledged as a new form of organization. However, with the complicated
interactions among the players, the network structure fits neither "market" nor
"hierarchy" categories (Powell, 1990). It is not clear what kind of performance impacts
different supply network structures could have on firms, and little is known about the
coordination conditions and trade-offs that may exist among the players. From a systems
perspective, a complex network structure can be decomposed into individual component
firms (Zhang and Dilts, 2004). Traditionally, companies in a supply network concentrate
on the inputs and outputs of the processes, with little concern for the internal
management working of other individual players. Therefore, the choice of an internal
management control structure is known to impact local firm performance (Mintzberg,
1979).

In the 21st century, changes in the business environment have contributed to the
development of supply chain networks. First, as an outcome of globalization and the
proliferation of multinational companies, joint ventures, strategic alliances and business
partnerships, significant success factors were identified, complementing the earlier "Just-
In-Time", "Lean Manufacturing" and "Agile Manufacturing" practices.[8] Second,
technological changes, particularly the dramatic fall in information communication costs,
which are a significant component of transaction costs, have led to changes in
coordination among the members of the supply chain network (Coase, 1998).

Many researchers have recognized these kinds of supply network structures as a new
organization form, using terms such as "Keiretsu", "Extended Enterprise", "Virtual
Corporation", "Global Production Network", and "Next Generation Manufacturing
System".[9] In general, such a structure can be defined as "a group of semi-independent
organizations, each with their capabilities, which collaborate in ever-changing
constellations to serve one or more markets in order to achieve some business goal
specific to that collaboration" (Akkermans, 2001).
The security management system for supply chains is described in ISO/IEC 28000 and
ISO/IEC 28001 and related standards published jointly by ISO and IEC.

[edit] Historical developments in Supply Chain Management

Six major movements can be observed in the evolution of supply chain management
studies: Creation, Integration, and Globalization (Lavassani et al., 2008a), Specialization
Phases One and Two, and SCM 2.0.

1. Creation Era

The term supply chain management was first coined by a U.S. industry consultant in the
early 1980s. However, the concept of a supply chain in management was of great
importance long before, in the early 20th century, especially with the creation of the
assembly line. The characteristics of this era of supply chain management include the
need for large-scale changes, re-engineering, downsizing driven by cost reduction
programs, and widespread attention to the Japanese practice of management.

2. Integration Era

This era of supply chain management studies was highlighted with the development of
Electronic Data Interchange (EDI) systems in the 1960s and developed through the 1990s
by the introduction of Enterprise Resource Planning (ERP) systems. This era has
continued to develop into the 21st century with the expansion of internet-based
collaborative systems. This era of supply chain evolution is characterized by both
increasing value-adding and cost reductions through integration.

3. Globalization Era

The third movement of supply chain management development, the globalization era, can
be characterized by the attention given to global systems of supplier relationships and the
expansion of supply chains over national boundaries and into other continents. Although
the use of global sources in the supply chain of organizations can be traced back several
decades (e.g., in the oil industry), it was not until the late 1980s that a considerable
number of organizations started to integrate global sources into their core business. This
era is characterized by the globalization of supply chain management in organizations
with the goal of increasing their competitive advantage, value-adding, and reducing costs
through global sourcing.

4. Specialization Era—Phase One: Outsourced Manufacturing and Distribution

In the 1990s industries began to focus on “core competencies” and adopted a

specialization model. Companies abandoned vertical integration, sold off non-core
operations, and outsourced those functions to other companies. This changed
management requirements by extending the supply chain well beyond company walls and
distributing management across specialized supply chain partnerships.
This transition also re-focused the fundamental perspectives of each respective
organization. OEMs became brand owners that needed deep visibility into their supply
base. They had to control the entire supply chain from above instead of from within.
Contract manufacturers had to manage bills of material with different part numbering
schemes from multiple OEMs and support customer requests for work -in-process
visibility and vendor-managed inventory (VMI).

The specialization model creates manufacturing and distribution networks composed of

multiple, individual supply chains specific to products, suppliers, and customers who
work together to design, manufacture, distribute, market, sell, and service a product. The
set of partners may change according to a given market, region, or channel, resulting in a
proliferation of trading partner environments, each with its own unique characteristics
and demands.

5. Specialization Era—Phase Two: Supply Chain Management as a Service

Specialization within the supply chain began in the 1980s with the inception of
transportation brokerages, warehouse management, and non-asset-based carriers and has
matured beyond transportation and logistics into aspects of supply planning,
collaboration, execution and performance management.

At any given moment, market forces could demand changes from suppliers, logistics
providers, locations and customers, and from any number of these specialized
participants as components of supply chain networks. This variability has significant
effects on the supply chain infrastructure, from the foundation layers of establishing and
managing the electronic communication between the trading partners to more complex
requirements including the configuration of the processes and work flows that are
essential to the management of the network itself.

Supply chain specialization enables companies to improve their overall competencies in

the same way that outsourced manufacturing and distribution has done; it allows them to
focus on their core competencies and assemble networks of specific, best-in-class
partners to contribute to the overall value chain itself, thereby increasing overall
performance and efficiency. The ability to quickly obtain and deploy this domain-specific
supply chain expertise without developing and maintaining an entirely unique and
complex competency in house is the leading reason why supply chain specialization is
gaining popularity.

Outsourced technology hosting for supply chain solutions debuted in the late 1990s and
has taken root primarily in transportation and collaboration categories. This has
progressed from the Application Service Provider (ASP) model from approximately 1998
through 2003 to the On-Demand model from approximately 2003-2006 to the Software
as a Service (SaaS) model currently in focus today.

6. Supply Chain Management 2.0 (SCM 2.0)

Building on globalization and specialization, the term SCM 2.0 has been coined to
describe both the changes within the supply chain itself as well as the evolution of the
processes, methods and tools that manage it in this new "era".

Web 2.0 is defined as a trend in the use of the World Wide Web that is meant to increase
creativity, information sharing, and collaboration among users. At its core, the common
attribute that Web 2.0 brings is to help navigate the vast amount of information available
on the Web in order to find what is being sought. It is the notion of a usable pathway.
SCM 2.0 follows this notion into supply chain operations. It is the pathway to SCM
results, a combination of the processes, methodologies, tools and delivery options to
guide companies to their results quickly as the complexity and speed of the supply chain
increase due to the effects of global competition, rapid price fluctuations, surging oil
prices, short product life cycles, expanded specialization, near-/far- and off-shoring, and
talent scarcity.

This article appears to contain a large number of buzzwords. Specific concerns

can be found on the Talk page. Please improve this article if you can. (November
2010)

SCM 2.0 leverages proven solutions designed to rapidly deliver results with the agility to
quickly manage future change for continuous flexibility, value and success. This is
delivered through competency networks composed of best-of-breed supply chain domain
expertise to understand which elements, both operationally and organizationally, are the
critical few that deliver the results as well as through intimate understanding of how to
manage these elements to achieve desired results. Finally, the solutions are delivered in a
variety of options, such as no-touch via business process outsourcing, mid-touch via
managed services and software as a service (SaaS), or high touch in the traditional
software deployment model.

[edit] Supply chain business process integration

Successful SCM requires a change from managing individual functions to integrating

activities into key supply chain processes. An example scenario: the purchasing
department places orders as requirements become known. The marketing department,
responding to customer demand, communicates with several distributors and retailers as
it attempts to determine ways to satisfy this demand. Information shared between supply
chain partners can only be fully leveraged through process integration.

Supply chain business process integration involves collaborative work between buyers
and suppliers, joint product development, common systems and shared information.
According to Lambert and Cooper (2000), operating an integrated supply chain requires a
continuous information flow. However, in many companies, management has reached the
conclusion that optimizing the product flows cannot be accomplished without
implementing a process approach to the business. The key supply chain processes stated
by Lambert (2004) [10] are:
 • Customer relationship management
• Customer service management
• Demand management
• Order fulfillment
• Manufacturing flow management
• Supplier relationship management
• Product development and commercialization
• Returns management

Much has been written about demand management. Best-in-Class companies have similar
characteristics, which include the following: a) Internal and external collaboration b)
Lead time reduction initiatives c) Tighter feedback from customer and market demand d)
Customer level forecasting

One could suggest other key critical supply business processes which combine these
processes stated by Lambert such as:

a. Customer service management

b. Procurement
c. Product development and commercialization
d. Manufacturing flow management/support
e. Physical distribution
f. Outsourcing/partnerships
g. Performance measurement

a) Customer service management process

Customer Relationship Management concerns the relationship between the organization

and its customers. Customer service is the source of customer information. It also
provides the customer with real-time information on scheduling and product availability
through interfaces with the company's production and distribution operations. Successful
organizations use the following steps to build customer relationships:

• determine mutually satisfying goals for organization and customers

• establish and maintain customer rapport
• produce positive feelings in the organization and the customers

b) Procurement process

Strategic plans are drawn up with suppliers to support the manufacturing flow
management process and the development of new products. In firms where operations
extend globally, sourcing should be managed on a global basis. The desired outcome is a
win-win relationship where both parties benefit, and a reduction in time required for the
design cycle and product development. Also, the purchasing function develops rapid
communication systems, such as electronic data interchange (EDI) and Internet linkage to
convey possible requirements more rapidly. Activities related to obtaining products and
materials from outside suppliers involve resource planning, supply sourcing, negotiation,
order placement, inbound transportation, storage, handling and quality assurance, many
of which include the responsibility to coordinate with suppliers on matters of scheduling,
supply continuity, hedging, and research into new sources or programs.

c) Product development and commercialization

Here, customers and suppliers must be integrated into the product development process in
order to reduce time to market. As product life cycles shorten, the appropriate products
must be developed and successfully launched with ever shorter time-schedules to remain
competitive. According to Lambert and Cooper (2000), managers of the product
development and commercialization process must:

1. coordinate with customer relationship management to identify customer-

articulated needs;
2. select materials and suppliers in conjunction with procurement, and
3. develop production technology in manufacturing flow to manufacture and
integrate into the best supply chain flow for the product/market combination.

d) Manufacturing flow management process

The manufacturing process produces and supplies products to the distribution channels
based on past forecasts. Manufacturing processes must be flexible to respond to market
changes and must accommodate mass customization. Orders are processes operating on a
just-in-time (JIT) basis in minimum lot sizes. Also, changes in the manufacturing flow
process lead to shorter cycle times, meaning improved responsiveness and efficiency in
meeting customer demand. Activities related to planning, scheduling and supporting
manufacturing operations, such as work-in-process storage, handling, transportation, and
time phasing of components, inventory at manufacturing sites and maximum flexibility in
the coordination of geographic and final assemblies postponement of physical
distribution operations.

e) Physical distribution

This concerns movement of a finished product/service to customers. In physical

distribution, the customer is the final destination of a marketing channel, and the
availability of the product/service is a vital part of each channel participant's marketing
effort. It is also through the physical distribution process that the time and space of
customer service become an integral part of marketing, thus it links a marketing channel
with its customers (e.g., links manufacturers, wholesalers, retailers).

f) Outsourcing/partnerships

This is not just outsourcing the procurement of materials and components, but also
outsourcing of services that traditionally have been provided in-house. The logic of this
trend is that the company will increasingly focus on those activities in the value chain
where it has a distinctive advantage, and outsource everything else. This movement has
been particularly evident in logistics where the provision of transport, warehousing and
inventory control is increasingly subcontracted to specialists or logistics partners. Also,
managing and controlling this network of partners and suppliers requires a blend of both
central and local involvement. Hence, strategic decisions need to be taken centrally, with
the monitoring and control of supplier performance and day-to-day liaison with logistics
partners being best managed at a local level.

g) Performance measurement

Experts found a strong relationship from the largest arcs of supplier and customer
integration to market share and profitability. Taking advantage of supplier capabilities
and emphasizing a long-term supply chain perspective in customer relationships can both
be correlated with firm performance. As logistics competency becomes a more critical
factor in creating and maintaining competitive advantage, logistics measurement becomes
increasingly important because the difference between profitable and unprofitable
operations becomes more narrow. A.T. Kearney Consultants (1985) noted that firms
engaging in comprehensive performance measurement realized improvements in overall
productivity. According to experts, internal measures are generally collected and
analyzed by the firm including

1. Cost
2. Customer Service
3. Productivity measures
4. Asset measurement, and
5. Quality.

External performance measurement is examined through customer perception measures

and "best practice" benchmarking, and includes 1) customer perception measurement,
and 2) best practice benchmarking.

h)Warehoising Management : As a case of reducing company cost & expenses,

warehousing management is carrying the valuable role against operations. In case of
perfect storing & office with all convenient facilities in company level, reducing
manpower cost, dispatching authority with on time delivery, loading & unloading
facilities with proper area, area for service station, stock management system etc.

Components of Supply Chain Management are as follows: 1. Standardization 2.

Postponement 3. Customization

[edit] Theories of supply chain management

Currently there is a gap in the literature available on supply chain management studies:
there is no theoretical support for explaining the existence and the boundaries of supply
chain management. A few authors such as Halldorsson, et al. (2003), Ketchen and Hult
(2006) and Lavassani, et al. (2008b) have tried to provide theoretical foundations for
different areas related to supply chain by employing organizational theories. These
theories include:

• Resource-Based View (RBV)

• Transaction Cost Analysis (TCA)
• Knowledge-Based View (KBV)
• Strategic Choice Theory (SCT)
• Agency Theory (AT)
• Institutional theory (InT)
• Systems Theory (ST)
• Network Perspective (NP)

[edit] Supply Chain Centroids

In the study of supply chain management, the concept of centroids has become an
important economic consideration. A centroid is place that has a high proportion of a
country’s population and a high proportion of its manufacturing, generally within 500 mi
(805 km). In the U.S., two major supply chain centroids have been defined, one near
Dayton, Ohio and a second near Riverside, California.

The centroid near Dayton is particularly important because it is closest to the population
center of the US and Canada. Dayton is within 500 miles of 60% of the population and
manufacturing capacity of the U.S., as well as 60 percent of Canada’s population[11]. The
region includes the Interstate 70/75 interchange, which is one of the busiest in the nation
with 154,000 vehicles passing through in a day. Of those, anywhere between 30 percent
and 35 percent are trucks hauling goods. In addition, the I-75 corridor is home to the
busiest north-south rail route east of the Mississippi.[12]

[edit] Tax efficient supply chain management

Tax Efficient Supply Chain Management is a business model which consider the effect
of Tax in design and implementation of supply chain management. As the consequence
of Globalization, business which is cross-nation should pay different tax rates in different
countries. Due to the differences, global players have the opportunity to calculate and
optimize supply chain based on tax efficiency[13] legally. It is used as a method of gaining
more profit for company which owns global supply chain.

[edit] Supply chain sustainability

Supply chain sustainability is a business issue affecting an organization’s supply chain or

logistics network and is frequently quantified by comparison with SECH ratings. SECH
ratings are defined as social, ethical, cultural and health footprints. Consumers have
become more aware of the environmental impact of their purchases and companies’
SECH ratings and, along with non-governmental organizations ([NGO]s), are setting the
agenda for transitions to organically-grown foods, anti-sweatshop labor codes and
locally-produced goods that support independent and small businesses. Because supply
chains frequently account for over 75% of a company’s carbon footprint[14] many
organizations are exploring how they can reduce this and thus improve their SECH
rating.

For example, in July, 2009 the U.S. based Wal-Mart corporation announced its intentions
to create a global sustainability index that would rate products according to the
environmental and social impact made while the products were manufactured and
distributed. The sustainability rating index is intended to create environmental
accountability in Wal-Mart's supply chain, and provide the motivation and infrastructure
for other retail industry companies to do the same.[15]

[edit] Components of supply chain management integration

The management components of SCM

The SCM components are the third element of the four-square circulation framework.
The level of integration and management of a business process link is a function of the
number and level, ranging from low to high, of components added to the link (Ellram and
Cooper, 1990; Houlihan, 1985). Consequently, adding more management components or
increasing the level of each component can increase the level of integration of the
business process link. The literature on business process re-engineering,[16] buyer-supplier
relationships,[17] and SCM[18] suggests various possible components that must receive
managerial attention when managing supply relationships. Lambert and Cooper (2000)
identified the following components:

• Planning and control

• Work structure
• Organization structure
• Product flow facility structure
• Information flow facility structure
• Management methods
• Power and leadership structure
• Risk and reward structure
• Culture and attitude

However, a more careful examination of the existing literature[19] leads to a more

comprehensive understanding of what should be the key critical supply chain
components, the "branches" of the previous identified supply chain business processes,
that is, what kind of relationship the components may have that are related to suppliers
and customers. Bowersox and Closs states that the emphasis on cooperation represents
the synergism leading to the highest level of joint achievement (Bowersox and Closs,
1996). A primary level channel participant is a business that is willing to participate in
the inventory ownership responsibility or assume other aspects of financial risk, thus
including primary level components (Bowersox and Closs, 1996). A secondary level
participant (specialized) is a business that participates in channel relationships by
performing essential services for primary participants, including secondary level
components, which support primary participants. Third level channel participants and
components that support the primary level channel participants and are the fundamental
branches of the secondary level components may also be included.

Consequently, Lambert and Cooper's framework of supply chain components does not
lead to any conclusion about what are the primary or secondary (specialized) level supply
chain components (see Bowersox and Closs, 1996, p. 93). That is, what supply chain
components should be viewed as primary or secondary, how should these components be
structured in order to have a more comprehensive supply chain structure, and how to
examine the supply chain as an integrative one (See above sections 2.1 and 3.1).

Reverse Supply Chain Reverse logistics is the process of managing the return of goods.
Reverse logistics is also referred to as "Aftermarket Customer Services". In other words,
any time money is taken from a company's warranty reserve or service logistics budget
one can speak of a reverse logistics operation.

[edit] Supply chain systems and value

Supply chain systems configure value for those that organise the networks. Value is the
additional revenue over and above the costs of building the network. Co-creating value
and sharing the benefits appropriately to encourage effective participation is a key
challenge for any supply system. Tony Hines defines value as follows: “Ultimately it is
the customer who pays the price for service delivered that confirms value and not the
producer who simply adds cost until that point” [20]

[edit] Global supply chain management

Global supply chains pose challenges regarding both quantity and value:

Supply and Value Chain Trends

• Globalization
• Increased cross border sourcing
• Collaboration for parts of value chain with low-cost providers
• Shared service centers for logistical and administrative functions
• Increasingly global operations, which require increasingly global coordination
and planning to achieve global optimums
• Complex problems involve also midsized companies to an increasing degree,

These trends have many benefits for manufacturers because they make possible larger lot
sizes, lower taxes, and better environments (culture, infrastructure, special tax zones,
sophisticated OEM) for their products. Meanwhile, on top of the problems recognized in
supply chain management, there will be many more challenges when the scope of supply
chains is global. This is because with a supply chain of a larger scope, the lead time is
much longer. Furthermore, there are more issues involved such as multi-currencies,
different policies and different laws. The consequent problems include:1. different
currencies and valuations in different countries; 2. different tax laws (Tax Efficient
Supply Chain Management); 3. different trading protocols; 4. lack of transparency of cost
and profit.

Operational planning and control

Operational planning and control decisions involve scheduling and control of labor,
materials, and capital input to produce the desired quantity and quality of output most
efficiently.

Operational planning and control are based on forecasts of future demand for the output
of the system. But even with the best possible forecasting and the most finely tuned
operations system, demand cannot always be met with existing system capacity in a given
time period. Unexpected market trends, new product developments, or competitors’
actions can throw the forecasts off, and problems in the operations system can reduce
capacity. At these times, shorter term managerial decisions must be made to allocate
system capacity to meet demand. This is what the hoteling system at Ernst & Young
makes possible. At these times, as well, managers must also think about the longer term
implications of the changes in demand and capacity needs. United Parcel Services (UPS)
and Federal Express are two organizations where long term trends in package volumes
are the ever present concerns of managers.

Facility management

Facility management is an interdisciplinary field primarily devoted to the maintenance

and care of commercial or institutional buildings, such as hospitals, clinics, hotels,
resorts, schools, office complexes, sports arenas or convention centers. Duties may
include the care of air conditioning, electric power, plumbing and lighting systems;
cleaning; decoration; groundskeeping and security. Some or all of these duties can be
assisted by computer programs. These duties can be thought of as non-core or support
services, because they are not the primary business (taken in the broadest sense of the
word) of the owner organization.

It is the role of the facility management function (whether it is a separate department or

small team) to coordinate and oversee the safe, secure, and environmentally-sound
operations and maintenance of these assets in a cost effective manner aimed at long-term
preservation of the asset value, and also other janitorial duties such as making sure the
environment is properly cleaned and sanitized for its tenants. In those cases where the
operation of the facility directly involves the occupants and/or customers of the owner
organization, the satisfactory delivery of facility-related services to these people will be
an important consideration too; hence, the term "end-user satisfaction" is often used both
as a goal and a measure of performance.

The term facility management is similar to property management although not exactly the
same. While both manage the day to day operations of a facility the property such as
cleaning, maintenance and security, similar to Janitors, one must not confuse it with such
a title. The property manager has an expanded role which includes leasing and marketing
activities whereas the facility manager role focuses on existing tenants who usually are
owner occupants. An important feature of facility management is that it takes account of
human needs of its tenants in the use of buildings and other constructed facilities. These
softer factors complement the harder factors associated with the maintenance and care of
engineering services installations.

Facility management is performed during the operational phase of a building’s life cycle,
which normally extends over many decades .A major challenge facing facility owners is
reducing demand for energy for economic reasons, but also because energy consumption
goes hand-in-hand with carbon emissions. Reducing energy during the operational phase
of a facility's life similarly reduces carbon emissions. When considering that 30-40% of a
country's total carbon emissions is attributable to buildings and other constructed
facilities, it is clear that operations and, hence, facility management have a significant
role to play.

Role

The discipline of facility management and the role of facility managers in particular are
evolving to the extent that many managers have to operate at two levels: strategic-tactical
and operational.

Environmental Health and Safety

• Waste Removal
• OSHA (Occupational Health and Safety)Regulations (could be a different
organization depending on type of building i.e. hospital)
• HAZMAT (Hazardous Material) compliance
• Building Cleanliness: This sub-discipline of facility management includes routine
cleaning (restrooms, common areas) as well as more specific emphasis on dust
control [2] and hygiene maintenance.[3]

Mechanical Systems

• HVAC/R (Heating, Ventilating, Air conditioning and Refrigeration)

o Indoor Air Quality
o Temperature Control
• Preventative Maintenance (Scheduled maintenance to prevent break down)
• Predictive Maintenance (Use of equipment or tests to predict when maintenance
will be needed)
• Elevator Maintenance

Power Systems

• Normal power
o Electrical Substations
 o Switchgear
• Emergency power systems
o Uninterruptible power supply (UPS) systems
o Standby generators

Building Systems

• Building Automation Systems (BAS)

• Building Monitoring systems (monitoring capabilities only)
• Security and Locks

Life/Safety Systems

• Sprinkler systems
• Smoke/fire detection systems
• Fire Extinguishers
o Gaseous Extinguishers
o FM-200
o FE-25
o Halon
• Signage
• Evacuation Plans

Space Management

• Office Space Layout

• Furniture Placement and Systems

Definitions

One definition provided by the International Facility Management Association (IFMA)

is:

"A profession that encompasses multiple disciplines to ensure functionality of the

built environment by integrating people, place, processes and technology."

Another broader definition provided by IFMA is: "The practice or coordinating the
physical workplace with the people and work of the organization; integrates the
principles of business administration, architecture, and the behavioral and engineering
sciences."

The British Institute of Facilities Management has formally adopted the CEN definition
but also offers a slightly simpler description:
 "Facilities management is the integration of multi-disciplinary activities within
the built environment and the management of their impact upon people and the
workplace".

Workforce productivity

Workforce productivity is the amount of goods and services that a worker produces
in a given amount of time. It is one of several types of productivity that economists
measure. Workforce productivity can be measured for a firm, a process, an industry, or a
country. It was originally (and often still is) called labor productivity because it was
originally studied only with respect to the work of laborers as opposed to managers or
professionals.

The OECD defines it as "the ratio of a volume measure of output to a volume measure of
input".[1] Volume measures of output are normally gross domestic product (GDP) or gross
value added (GVA), expressed at constant prices i.e. adjusted for inflation. The three
most commonly used measures of input are: hours worked; workforce jobs; and number
of people in employment.

Measured labour productivity will vary as a function of both other input factors and the
efficiency with which the factors of production are used (total factor productivity). So
two firms or countries may have equal total factor productivity (productive technologies)
but because one has more capital to use, labour productivity will be higher.

Output per worker corresponds to the "average product of labour" and can be contrasted
with the marginal product of labour, which refers to the increase in output that results
from a corresponding (marginal) increase in labour input.

Measurement Issues

Worker productivity can be measured in physical terms or in cows terms.

Whilst the output produced is generally measurable in the private sector, it may be
difficult to measure in the public sector or in NGOs. The input may be more difficult to
measure in an unbiased way as soon as we move away from the idea of homogeneous
labour ("per worker" or "per standard labour hour"):

• the intensity of labour-effort, and the quality of labour effort generally.

• the creative activity involved in producing technical innovations.
• the relative efficiency gains resulting from different systems of management,
organization, co-ordination or engineering.
• the productive effects of some forms of labour on other forms of labour.

These aspects of productivity refer to the qualitative, rather than quantitative, dimensions
of labour input. If you think that one firm/country is using labour much more intensely,
you might not want to say this is due to greater labour productivity, since the output per
labour-effort may be the same. This insight becomes particularly important when a large
part of what is produced in an economy consists of services. Management may be very
preoccupied with the productivity of employees, but the productivity gains of
management itself might be very difficult to prove. Modern management literature
emphasizes the important effect of the overall work culture or organizational culture that
an enterprise has. But again the specific effects of any particular culture on productivity
may be unprovable.

Factors affecting labour productivity

In a survey of manufacturing growth and performance in Britain, it was found that:

“The factors affecting labour productivity or the performance of individual work roles are
of broadly the same type as those that affect the performance of manufacturing firms as a
whole. They include: (1) physical-organic, location, and technological factors; (2)
cultural belief-value and individual attitudinal, motivational and behavioural factors; (3)
international influences – e.g. levels of innovativeness and efficiency on the part of the
owners and managers of inward investing foreign companies; (4) managerial-
organizational and wider economic and political-legal environments; (5) levels of
flexibility in internal labour markets and the organization of work activities – e.g. the
presence or absence of traditional craft demarcation lines and barriers to occupational
entry; and (6) individual rewards and payment systems, and the effectiveness of
personnel managers and others in recruiting, training, communicating with, and
performance-motivating employees on the basis of pay and other incentives. The
emergence of computers has been noted as a significant factor in increasing labor
productivity in the late 1990's, by some, and as an insignificant factor by others, such as
R.J. Gordon. Although computers have existed for most of the 20th century, some
economic researchers have noted a lag in productivity growth caused by computers that
didn't come until the late 1990's.”[6][1]

Indian marketing environment

The marketing environment in iindia is undergoing rapid transformation and this is

particularly significant for Indian companies. Many companies have started utilizing the
opportunities that are emerging in achanging environment.

Consists of actors and forces outside the

organization that affect management’s ability
to build and maintain relationships with
target customers.

–Studying the environment allows marketers to

take advantage of opportunities as well as to
combat threats.
–Marketing intelligence and research are used to
collect information about the environment
includes:
–Microenvironment: actors close to the
company that affect its ability to serve its
customers.
–Macroenvironment: larger societal forces
that affect the microenvironment.
•Considered to be beyond the control of
the organization.

Actors in the microenvironment

include:

–The company itself

–Suppliers
–Marketing intermediaries
–Customers
–Competitors
–Publics.

The macroenvironment ;-

The company and all of the other actors

operate in a larger macro environment of
forces that shape opportunities and pose
threats to the company.

Forces in the macroevironment can be

categorized as:

–Demographic
–Economic
–Natural
–Technological
–Political
–Cultural
Rural Marketing
The concept of Rural Marketing in India Economy has always played an influential
role in the lives of people. In India, leaving out a few metropolitan cities, all the districts
and industrial townships are connected with rural markets.

The rural market in India is not a separate entity in itself and it is highly influenced by the
sociological and behavioral factors operating in the country. The rural population in India
accounts for around 627 million, which is exactly 74.3 percent of the total population.

The Registrars of Companies in different states chiefly manage: The rural market in
India brings in bigger revenues in the country, as the rural regions comprise of the
maximum consumers in this country. The rural market in Indian economy generates
almost more than half of the country's income. Rural marketing in Indian economy can be
classified under two broad categories. These are:

• The market for consumer goods that comprise of both durable and non-durable
goods
• The market for agricultural inputs that include fertilizers, pesticides, seeds, and so
on

The concept of rural marketing in India is often been found to form ambiguity in the
minds of people who think rural marketing is all about agricultural marketing. However,
rural marketing determines the carrying out of business activities bringing in the flow of
goods from urban sectors to the rural regions of the country as well as the marketing of
various products manufactured by the non-agricultural workers from rural to urban areas.
To be precise, Rural Marketing in India Economy covers two broad sections, namely:

• Selling of agricultural items in the urban areas

• Selling of manufactured products in the rural regions

Some of the important features or characteristics of Rural Marketing in India Economy

are being listed below:

• With the initiation of various rural development programmes there have been an
upsurge of employment opportunities for the rural poor. One of the biggest cause
behind the steady growth of rural market is that it is not exploited and also yet to
be explored.

• The rural market in India is vast and scattered and offers a plethora of
opportunities in comparison to the urban sector. It covers the maximum
population and regions and thereby, the maximum number of consumers.

• The social status of the rural regions is precarious as the income level and literacy
is extremely low along with the range of traditional values and superstitious
beliefs that have always been a major impediment in the progression of this
sector.
 • The steps taken by the Government of India to initiate proper irrigation,
infrastructural developments, prevention of flood, grants for fertilizers, and
various schemes to cut down the poverty line have improved the condition of the
rural masses.

Agricultural Marketing systems in India

1. Sale to moneylenders and traders
A considerable part of the total produce is sold by the farmers to the village traders and
moneylenders. According to an estimate 85% of wheat, 75% of oil seeds in U.P., 90% of
jute in West Bengal and 60% of wheat, 70% of oil seeds and 35% of cotton in Punjab are
sold by the farmers in the villages themselves. Often the money lenders act as a
commission agent of the wholesale trader.

2. Hats and shanties

Hats are village markets often held once or twice a week, while shanties are also village
markets held at longer intervals or on special occasions. The agents of the wholesale
merchants, operating in different mandies also visit these markets.

The area covered by a "hat" usually varies from 5 to 10 miles. Most of "hats" are very
poorly equipped, are uncovered and lack storage, drainage, and other facilities. It is
important to observe that only small and marginal farmers sell their produce in such
markets. The big farmers with large surplus go to the larger wholesale markets.

3. Mandies or wholesale markets

One wholesale market often serves a number of villages and is generally located in a city.
In such mandies, business is carried on by arhatiyas. The farmers sell their produce to
these arhatiyas with the help of brokers, who are generally the agents of arhatiyas.
Because of the malpractices of these middlemen, problems of transporting the produce
from villages to mandies, the small and marginal farmers are hesitant of coming to these
mandies.

The arhatiyas of these mandies sell off the produce to the retail merchants. However,
paddy, cotton and oilseeds are sold off to the mills for processing. The marketing system
for sugarcane is different. The farmers sell their produce directly to the sugar mills.

4. Co-operative marketing

To improve the efficiency of the agricultural marketing and to save farmers from the
exploitation and malpractices of middlemen, emphasis has been laid on the development
of co-operative marketing societies. Such societies are formed by farmers to take
advantage of collective bargaining.

A marketing society collects surplus from it members and sell it in the mandi
collectively. This improves the bargaining power of the members and they are able to
obtain a better price for the produce. In addition to the sale of produce, these societies
also serve the members in a number of other ways.
VIII. Improvement of Agricultural Marketing System

Government of India has adopted a number of measures to improve agricultural

marketing, the important ones being - establishment of regulated markets, construction of
warehouses, provision for grading, and standarization of produce, standarisation of
weight and measures, daily broadcasting of market prices of agricultural crops on All
India Radio, improvement of transport facilities, etc.

1. Marketing surveys

In the first place the government has undertaken marketing surveys of various goods and
has published these surveys. These surveys have brought out the various problems
connected with the marketing of goods and have made suggestions for their removal.

2. Grading and standardization

The government has done much to grade and standardize many agricultural goods. Under
the Agricultural Produce (Grading and Marketing) Act the Government has set up
grading stations for commodities like ghee, flour, eggs, etc. The graded goods are
stamped with the seal of the Agricultural Marketing Department -AGMARK The
«Agmark" goods have a wider market and command better prices.

A Central Quality Control Laboratory has been set up at Nagpur and eight other regional
laboratories in different parts of the country with the purpose of testing the quality and
quality of agricultural products applying for the Government's "Agmark" have been
created The Government is further streamlining quality control enforcement and
inspection and improvement in grading.
or

The term agricultural marketing is composed of two words -agriculture and marketing.
Agriculture, in the broadest sense means activities aimed at the use of natural resources
for human welfare, and marketing connotes a series of activities involved in moving the
goods from the point of production to the point of consumption. Specification, the subject
of agricultural marketing includes marketing functions, agencies, channels, efficiency and
cost, price spread and market integration, producers surplus etc. The agricultural
marketing system is a link between the farm and the non-farm sectors.

In India Agriculture was practiced formerly on a subsistence basis; the villages were self
sufficient, people exchanged their goods, and services within the village on a barter basis.
With the development of means of transport and storage facilities, agriculture has become
commercial in character, the farmer grows those crops that fetch a better price. Marketing
of agricultural produce is considered as an integral part of agriculture, since an
agriculturist is encouraged to make more investment and to increase production. Thus
there is an increasing awareness that it is not enough to produce a crop or animal product;
it must be marketed as well.

Agricultural marketing involves in its simplest form the buying and selling of agricultural
produce. This definition of agricultural marketing may be accepted in olden days, when
the village economy was more or less self-sufficient, when the marketing of agricultural
produce presented no difficulty, as the farmer sold his produce directly to the consumer
on a cash or barter basis. But, in modem times, marketing of agricultural produce is
different from that of olden days. In modem marketing, agricultural produce has to
undergo a series of transfers or exchanges from one hand to another before it finally
reaches the consumer.

The National Commission on Agriculture, defined agricultural marketing as a process

which starts with a decision to produce a saleable farm commodity and it involves all
aspects of market structure of system, both functional and institutional, based on
technical and economic considerations and includes pre and post- harvest operations,
assembling, grading, storage, transportation and distribution. The Indian council of
Agricultural Research defined involvement of three important functions, namely (a)
assembling (concentration) (b) preparation for consumption (processing) and (c)
distribution.

II. Importance and Objectives of Agriculture Marketing

The farmer has realized the importance of adopting new techniques of production and is
making efforts for more income and higher standards of living. As a consequence, the
cropping pattern is no longer dictated by what he needs for his own personal consumption
but what is responsive to the market in terms of prices received by him. While the trade is
very organised the farmers are not Farmer is not conversant with the complexities of the
marketing system which is becoming more and more complicated. The cultivator is
handicapped by several disabilities as a seller. He sells his produce at an unfavorable
place, time and price.

Agricultural Marketing in India

Preface

I. Introduction
II. Importance and Objectives of Agricultural Marketing in India
III. Facilities Needed for Agricultural Marketing
IV. Inadequacies of Present Marketing System
V. Characteristics of Agricultural Products
VI. Methods of Sale and Marketing Agencies
VII. Agricultural Marketing in India
VIII. Improvement of Agricultural Marketing System
IX. Cooperative Marketing in India
X. Warehousing in India
XI. Ideal Marketing System
XII. Scientific Marketing of Farm Products
XIII. Conclusion

Preface
The term agricultural marketing is composed of two words -agriculture and marketing.
Agriculture, in the broadest sense means activities aimed at the use of natural resources
for human welfare, and marketing connotes a series of activities involved in moving the
goods from the point of production to the point of consumption. Specification, the subject
of agricultural marketing includes marketing functions, agencies, channels, efficiency and
cost, price spread and market integration, producers surplus etc. The agricultural
marketing system is a link between the farm and the non-farm sectors.

Introduction
In India Agriculture was practiced formerly on a
subsistence basis; the villages were self sufficient, people
exchanged their goods, and services within the village on
a barter basis. With the development of means of
transport and storage facilities, agriculture has become
commercial in character, the farmer grows those crops
that fetch a better price. Marketing of agricultural
produce is considered as an integral part of agriculture,
since an agriculturist is encouraged to make more
investment and to increase production. Thus there is an
increasing awareness that it is not enough to produce a
crop or animal product; it must be marketed as well.

Agricultural marketing involves in its simplest form the

buying and selling of agricultural produce. This
definition of agricultural marketing may be accepted in
olden days, when the village economy was more or less
self-sufficient, when the marketing of agricultural
produce presented no difficulty, as the farmer sold his produce directly to the consumer
on a cash or barter basis. But, in modem times, marketing of agricultural produce is
different from that of olden days. In modem marketing, agricultural produce has to
undergo a series of transfers or exchanges from one hand to another before it finally
reaches the consumer.

The National Commission on Agriculture, defined agricultural marketing as a process

which starts with a decision to produce a saleable farm commodity and it involves all
aspects of market structure of system, both functional and institutional, based on
technical and economic considerations and includes pre and post- harvest operations,
assembling, grading, storage, transportation and distribution. The Indian council of
Agricultural Research defined involvement of three important functions, namely (a)
assembling (concentration) (b) preparation for consumption (processing) and (c)
distribution.

II. Importance and Objectives of Agriculture Marketing

The farmer has realized the importance of adopting new techniques of production and is
making efforts for more income and higher standards of living. As a consequence, the
cropping pattern is no longer dictated by what he needs for his own personal consumption
but what is responsive to the market in terms of prices received by him. While the trade is
very organised the farmers are not Farmer is not conversant with the complexities of the
marketing system which is becoming more and more complicated. The cultivator is
handicapped by several disabilities as a seller. He sells his produce at an unfavorable
place, time and price.

The objectives of an efficient marketing system are:

1. to enable the primary producers to get the best possible returns,

2. to provide facilities for lifting all produce, the farmers are willing, to sell at an
incentive price,
3. to reduce the price difference between the primary producer and ultimate consumer,
and
4. to make available all products of farm origin to consumers at reasonable price without
impairing on the quality of the produce.

III. Facilities Needed for Agricultural Marketing

In order to have best advantage in marketing of his agricultural produce the farmer should
enjoy certain basic facilities.

1. He should have proper facilities for storing his goods.

2. He should have holding capacity, in the sense, that he should be able to wait for times
when he could get better prices for his produce and not dispose of his stocks immediately
after the harvest when the prices are very low.

3. He should have adequate and cheap transport facilities which could enable him to take
his surplus produce to the mandi rather than dispose it of in the village itself to the village
money-lender-cum-merchant at low prices.

4. He should have clear information regarding the market conditions as well as about
the ruling prices, otherwise may be cheated. There should be organized and
 regulated markets where the farmer will not be cheated by the -dalals- and
-arhatiyas-.

5. The number of intermediaries should be as small as possible, so that the

middleman's profits are reduced. This increases! the returns to the farmers.

http://www.freeessays123.com/essay18927/internationaltradeconcept.html