Entrepreneurship and Small Scale Industries

ENTREPRENEURSHIP
13-Sep-18
MOHIT SENGER (Assistant Professor, COER)
1

ENTREPRENEURSHIP
Entrepreneurship refers to a process of action an
entrepreneur undertakes to establish his enterprise.
In other words entrepreneurship can be defined as an
ability to discover, create or invent opportunities and
exploit them to the benefit of the society, which in turn
brings prosperity to the innovator and his organization.
13-Sep-18 MOHIT SENGER (Assistant Professor, COER) 2
Entrepreneurship = Entrepreneur + Enterprise

ENTREPRENEUR
Entrepreneur is “one who organizes, manages and
assumes the risks of a business or enterprise.” In other
words “a person who organizes and manages any
enterprise, especially a business, usually with
considerable initiative and risk.”
 Peter Drucker : “An entrepreneur searches for change,
responds to it and exploits opportunities. Innovation is a
specific tool of an entrepreneur hence an effective
entrepreneur converts a source into a resource”.

CHARACTERISTICS / QUALITY OF AN ENTREPRENEUR
 Desire to Excel
 Hard Work
 Self Confidence
 Initiative
 Moderate Risk-Taker (Calculative Risk)
 Innovative
 Motivation
 Optimistic

 Flexibility
 Independence
 Leadership
 Good Human Relations Ability
 Analytical Ability
 Mental Ability
 Communication Ability
Contd.

FUNCTIONS OF ENTREPRENEUR
Entrepreneurial functions consisting of organization
building, risk taking and innovation.
Promotional functions consisting of discovery of idea,
detailed investigation; assembling of requirements and
financing the proposition.
Managerial functions consisting of planning, organizing
staffing, directing, coordinating and controlling.
Commercial functions representing production, finance
marketing, accounting and personnel.

DIFFERENCE BETWEEN ENTREPRENEUR AND
MANAGER
“An entrepreneur could be a manager but a manager
cannot be an entrepreneur”.
 An entrepreneur is intensely dedicated to develop
business through constant innovation. He may employ a
manager in order to perform some of his functions such
as setting objectives, policies, rules etc.
 A manager cannot replace an entrepreneur in spite of
performing the allotted duties because a manager has to
work as per the guidelines laid down by the
entrepreneur.

ENTREPRENEUR MANAGER
An entrepreneur is involved with
the start-up process.
A manager is involved with
running the business over a long
period of time.
An entrepreneur assumes financial,
material and psychological risks.
A manager does not have to bear
risks.
An entrepreneur is driven by
perception of opportunity .
A manager by the resources he
currently possesses.
An entrepreneur initiates change. A manager follows rules &
procedures .
An entrepreneur is his own boss. A manager is a hired employee.
An entrepreneur gets uncertain
rewards.
A manager gets fixed rewards and
salary.

Entrepreneur Entrepreneurship
The term entrepreneur is used to
describe men and women who
establish and manage their own
business.
The process of managing business
is called entrepreneurship.
Entrepreneurs are tangible people. Entrepreneurship is an abstraction.
An entrepreneur is a person. Entrepreneurship is a process .
Entrepreneur is the key individual
central to entrepreneurship who
makes things happen.
Entrepreneurship is the outcome of
complex socio-economic,
psychological and other factors.
DIFFERENCE BETWEEN ENTREPRENEUR AND
ENTREPRENEURSHIP

ENTERPRISE
 Entrepreneur is a person who starts an enterprise.
 The process of creation is called entrepreneurship.
The entrepreneur is the “actor” and entrepreneurship is the
“act”. The outcome of the actor and the act is called the
enterprise.
 An enterprise is the business organization that is formed
and which provides goods and services, creates jobs,
contributes to national income, exports and overall
economic development.

ROLE OF ENTREPRENEURSHIP IN DEVELOPMENT OF
ECONOMY
 Promotes Capital Formation
 Creates Large-Scale Employment Opportunities
 Promotes Balanced Regional Development
 Reduces Concentration of Economic Power
 Wealth Creation and Distribution
 Increasing Gross National Product and Per Capita Income
 Improvement in the Standard of Living
 Promotes Country's Export Trade
 Induces Backward and Forward Linkages
 Facilitates Overall Development

FACTORS FAVOURING ENTREPRENEURSHIP/
MOTIVATIONAL FACTORS OF ENTREPRENEURSHIP
 Developed Infrastructure Facilities
 Financial Assistance
 Protective and Promotional Policies
 Growth of Education
 Risk Taking Abilities
 Hunger for Success (Capitalistic View)
 Environment/Culture Impact
 Social Security
 Technical/Industrial Training Facilities
 Globalization

DEFINITIONS OF SMALL SCALE INDUSTRY (SSI)
 An industrial undertaking in which the investment in fixed
assets in plant and machinery, whether held on ownership
terms or on lease or by hire purchase, does not exceed
Rs.1 Crore as on March 31, 2010, is to be treated as a
small-scale industrial unit. However, this investment limit
is varied by the Government from time to time.

SMALL SCALE INDUSTRIES (SSI)
In most of the developing countries like India, Small
Scale Industries (SSI) constitutes an important and crucial
segment of the industrial sector.
SSI play an important role in employment creation,
resource utilisation and income generation and helping to
promote changes in a gradual and phased manner.

Small scale enterprises are generally more labour
intensive than larger organisations. As a matter of fact,
small scale sector has now emerged as a dynamic and
vibrant sector for the Indian economy in recent years.
Small Scale sector has attracted so much attention not
only from industrial planners and economists but also
from sociologists, administrators and politicians.
Contd.

 Ancillary Unit : This is a sub-class of SSIs. An industrial
undertaking which is engaged or is proposed to be
engaged in
 The manufacture of parts, components, sub-assemblies,
tooling or intermediates.
 Rendering of services, or supplying or rendering not
less than 50 per cent of its production or its total services,
as the case may be, to other units for production of other
articles and whose investment in fixed assets in plant and
machinery, whether held on ownership terms or on lease
or on hire purchase, does not exceed Rs 1 crore as on
March 31, 2001, is to be treated as an ancillary enterprise.
Contd.

 Export-oriented Unit (EOU): An industrial undertaking in
which the investment in fixed assets in plant and machinery,
whether held on ownership terms, or on lease, or by hire
purchase, does not exceed Rs.100 lakh i.e.1 crore and has an
obligation to export 30 per cent of production.
 Tiny Unit: The investment limit in plant and
machinery in respect of tiny enterprises is Rs 25 lakhs
irrespective of the location of the unit.
 Women entrepreneurs: A small-scale industrial
unit/industry related service or business enterprise,
managed by one or more women entrepreneurs in
proprietary concerns, or in which she/they individually or
jointly have
Contd.

Investment Ceilings for Small Scale Industries (2006)

OBJECTIVES OF SMALL SCALE INDUSTRIES
The small scale sector can stimulate economic activity and is
entrusted with the responsibility of realising the following
objectives:-
 To create more employment opportunities with less
investment.
 To remove economic backwardness of rural and less
developed regions of the economy.
 To reduce regional imbalances.
 To mobilise and ensure optimum utilisation of unexploited
resources of the country.

 To improve standard of living of people.
 To ensure equitable distribution of income and
wealth.
 To solve unemployment problem.
 To attain self-reliance.
 To adopt latest technology aimed at producing better
quality products at lower costs.
Contd.

ROLE OF SSIS IN NATIONAL ECONOMY
 Employment generation
 Mobilisation of resources and entrepreneurial skill
 Regional dispersal of industries
 Provides opportunities for development of technology
 Promotes exports
 Supports the growth of large industries
 Better industrial relations

CHARACTERISTICS OF SMALL SCALE INDUSTRIES
 Personal Character
 Flexibility
 Labour Intensive
 Local Area of Operation
 Short Gestation Period
 Registration
 Size
 Capital

GOVERNMENT POLICIES FOR SSI
Government policies are flexible and changes from
time to time, place to place and product to product.
Different policies are applicable for different states as
per the suitability of the states.
 Sales tax concessions.
 Water tax concessions.
 Electricity duty exemption concession

 Marketing assistance.
 Price preference while supplying products to government
organisation.
 Subsidy on expenses made on research and development .
 Subsidy on acquiring quality certificate like ISI marks,
AG mark, ISO 9000 series, ISO 14000 series.
 Single window system of clearance.
Contd.

SMALL BUSINESS AS A SEED TO ENTREPRENEURSHIP
Small enterprises are called Seedbed of entrepreneurship
due to the following reasons:
Small-scale enterprises can be started with lesser
investment, which can be contributed by the promoter or
arranged from friends and relatives.
Small-scale units carry on business on a small scale and
as such the element of risk is less.
Small-scale units are generally based on local resources
and as such there is no problem regarding their
availability.

 Small-scale entrepreneur adopts labour intensive
technology Thus he generates employment for himself as
well as for others.
 Small-scale units can be located anywhere and thus help
in the development of backward areas of the country.
 Small-scale units generally cater to local demand and
necessary modifications can be made in the products.
 Small-scale units provide ample opportunities for
creativity and experimentation.
Contd.

 Small-scale units have shorter gestation period and
hence waiting period for getting return on
investment is less.
 These units are relatively more environmental
friendly.
 Small-scale units help in building achievement
motivation amongst entrepreneurs.
Contd.

TYPES OF SMALL SCALE INDUSTRIES
 Resources Based SSI
 Demand Based SSI
 Ancillary Based SSIs
 Subsidiary type or Sub- Control type SSIs
 Linkage Based SSIs
 Export oriented based SSI
 Import substitute based SSI
 Technology based SSI
 Preference based SSI
 Policies Based SSI
 Competence Base SSI

STEPS TO START A SSI
1. Preliminary stage
 Decision to become an entrepreneur and start an
enterprise.
 Developing entrepreneurial characteristics.
 Studying business environment.
 Meeting entrepreneurs, people, experts and others.
 Searching the opportunity.

2. Decision making Stage
 Selecting business opportunities.
 Consulting DIC (Direct Industry Centre), SISI (Small Industries
Service Institute), consultants, banks, licensing authorities.
 Deciding the size, type, technology of the project.
 Deciding the location and survey site.
 Selection of exact site.
 Preparation of the project report
 Studying the project from technical, financial,
managerial and operational point of view.
 Deciding the product
13-Sep-18 MOHIT SENGER (Assistant Professor, COER)
30
Contd.

3. Planning stage
 Application for acquisition of land or exact site.
 Application for provisional registration
 Application for No-objection certificate, assurance from
bankers for finance.
 Application for licenses, permission, clearances from
state government, central government and from the
local authorities.
Contd.

 Application for loans and arrangement of capital
 Enquiry for plant and machineries etc.
 Preparing plans of the factory buildings
 Preparing plans for acquiring plants and machineries,
tools and equipment’s, furniture etc.
 Prepare the detailed project report
Contd.

4. Implementation stage
 Acquisition of land.
 Development of site.
 Construction of buildings and other infrastructure like
road, affluent disposed etc.
 Placing orders for plants and machineries, tools and
equipment, furniture and fixtures etc.
 Arranging electricity, water connection.
 Installation of plants and machineries and test running.
Contd.

 Recruitment, selection, training and placement of
manpower
 Procurement of raw material and other materials
 Finalise the marketing channel, distribution policy,
percentage of margin and commission to the middleman
etc.
 Carry on trial production and test marketing
Contd.

5. Managerial stage
 Evaluate the field performance of product and
examine the consumer's response.
 Appoint dealer, wholesalers, agents, and arrange
showrooms etc.
 Carry on commercial production.
 Carry on advertising and marketing activities.
 Distribution and selling.
 Managing the enterprise.

 Creation of external economies.
 Consolidating the marketing and selling network.
 Ensure growth and generate profits.
 Repayment of loan and interest.
 Keep pace with the change in technology, change in taste,
fashion of consumers, competition, and development of
new product, new substitute or alternatives.
 Carry on modernization, expansion, diversification etc.
Contd.

Entrepreneurship and Small Scale Industries

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