Entrpreneurship Development Series-3 Dr Sandhya Shrivastava.ppt

Management Coach Dr. Sandhya
Shrivastava

Entrepreneurship
Development
Management Coach Dr. Sandhya Shrivastava
Lecture Series -3

ENTREPRENEURSHIP DEVELOPMENT
UNIT - III
• The nature of international entrepreneurship.
• Importance of international business to the
firm.
• International versus domestics
entrepreneurship.
• Stages of economic development.
• Institutional support for new ventures.
• Supporting organizations.
• Incentives and facilities.
• Financial institutions and Small Scale
Industries.
• Government policies for SSIs.

Lecture
no
Contents (sub topics) Slide no
1 The nature of international entrepreneurship. 239-244
2 Importance of international business to the firm. 246-256
3 International versus domestics entrepreneurship 258-261
4 Stages of economic development 263-275
5 Supporting organizations 277-282
6 Incentive and facilities. 284-292
7 Financial institutions and Small Scale Industries. 294-295
8 Financial institutions and Small Scale Industries 297-301
9 Government policies for SSIs. 303-306
10 Government policies for SSIs. 308-314
FAQ’S, MCQ’s, CASE STUDY & ASSIGNMENTS 316-320
LECTURE
PLAN
Unit- III Sub: ENTREPRENEURSHIP DEVELOPMENT

Lecture 1
The nature of International
Entrepreneurship

Definition:
 International entrepreneurship is the process of an
entrepreneur conducting business activities across
national boundaries.

Nature of International Entrepreneurship
 Complex & diverse
 Political
 Cultural
 Economic
 technological

Nature of international entrepreneurship
 World wide in scope
 Resources
 Market
 Competition
Shrivastava

Nature of international entrepreneurship
 Multi disciplinary
 Global challenges
 Commercial risks
Political risks
Legal risks
Cargo risks
Credit risks
Shrivastava

Reasons for International Entrepreneurship
 To expand sales
 Acquire resources
 Diversify sources of sales and supply
 Minimize risk
 Expansion of technology
 Liberalization of Cross-Border Movements

Routes of international
entrepreneurship
 Direct exporting
 Licensing
 Joint ventures
 Manufacturing
 Assembly operations
 Management contract
 Turn-key operations
 Acquisitions & mergers
 Wholly owned subsidies

Lecture 2
Importance of International Business to the firm

Importance of international business
to the firm
 International Entrepreneurship can
–Fuel economic growth
–Create employment
–Generate prosperity for citizens

to the firm
 International business has become increasingly
important to firms of all sizes particularly today when
every firm is competing in a hypercompetitive global
economy.
 The successful entrepreneur will be someone who
fully understands how international business differs
from purely domestic business.

to the firm
 Is managing international business
different from managing domestic
business?
 What are the strategic issues to be
resolved in international business
management?

to the firm
 What are the options available for
engaging in international business?
 How should one assess the decision
to enter into an international market?

to the firm
 Importance for the Nation:
 Higher economic growth rate.
 Reduction in annual rate of inflation.
 Relieving the critical balance of
payments.

to the firm
 Rebuilt foreign exchange reserve.
 Cutting down the fiscal deficits
 Achieve economic stabilization.
 Liberalizing the domestic economy.
 Relaxing the restrictions on external
sector.

to the firm
 Importance for the entrepreneur:
 Expanded profit potential.
 More customers.
 More capital.
 Lower cost suppliers.
 Lower cost labour.

 Acquire resources
 Minimize risk
 Expansion of technology
 Liberalization of Cross-Border
Movements

Benefits & gains of internationalization
 International investment inflow.
 Outsourcing & subcontracting.
 Competitive & learning effects.
 International economic cooperation.
 Price stabilisation.
 Technological gains.
 Greater specialization.
 Larger markets.

Reasons for the growth of international
entrepreneurship
 Financial superiorities
 Expansion of market territory.
 Technological superiorities.
 Marketing superiorities.
 Product innovation.

Lecture 3
International versus domestic
entrepreneurship

entrepreneurship
 Uncontrollable Factors
– Economics
• Stage of Development
• Balance of payment
• Type of system
– Bartering
– Third-party arrangements

entrepreneurship
 Uncontrollable Factors
– Political-Legal environment
– Cultural environment
– Technological environment

entrepreneurship
 Although international and domestic
entrepreneurs alike are concerned
with sales, costs, and profits.

entrepreneurship
 The difference between domestic and
international entrepreneurship is the
variation in the relative importance of
the factors affecting each decisions.

Lecture 4
Stages of Economic Development

Definition of Economic Development
Process that influences growth and restructuring
of an economy to enhance the economic well
being of a community. The desired result is
creation of wealth for a region.

Economic Development Partners
 Elected officials
 Governmental staff (city, county and state)
 Economic development organizations
 Utilities
 Chambers of Commerce
 Neighborhood Associations
 Commercial real estate professionals
 Developers
 Educational Institutions
 Financial community
 Citizens

Economic Development Partners
Training Goals
 To understand the economic
development process and how it works
in the Greater Des Moines area.
 To provide an overview of the basic
concepts and principles of the economic
development process.
 To understand your role in the process

Economic Development Infrastructure
 Human Infrastructure
 Professional staff
 Partners
 Local Product
 Land
 Available buildings
 Zoning
 Physical infrastructure (i.e. water, sewer, gas, electric, roads,
telecommunications, etc.)
 Business Climate
 Workforce

Economic Development Infrastructure
 Program of Work
Marketing
Iowa Department of Economic Development (IDED)
Greater Des Moines Partnership (GDMP)
Counties
Communities
Prospect Process
Business Retention
Legislative monitoring and influencing

Stages of Economic Development
 Stage 1: The traditional society
 Stage 2: The preconditions for takeoff
 Stage 3: The takeoff
 Stage 4: The drive to maturity
 Stage 5: The age of high mass consumption
 The United Nations groups countries into three categories:
– MDCs (more-developed countries)
– LDCs (less-developed countries)
– LLDCs (least-developed countries)
 Newly Industrialized Countries (NICs) - Countries that are
experiencing rapid economic expansion and
industrialization and do not exactly fit as LDCs or MDCs

Objectives of Developing Countries
 Industrialization is the fundamental objective of
most developing countries.
 Most countries see in economic growth the
achievement of social as well as economic goals.
– Better education
– Better and more effective government
– Elimination of many social inequities
– Improvements in moral and ethical responsibilities
 The trend toward privatization is currently a major
economic phenomenon in industrialized as well
as in developing countries.

Infrastructure and Development
 Infrastructure represents those types of capital goods
that serve the activities of many industries.
 The quality of an infrastructure directly affects a
country’s economic growth potential and the ability of
an enterprise to engage effectively in business.
 The less developed a country is the less adequate the
infrastructure is for conducting business.
 Countries begin to lose economic development
ground when their infrastructure cannot support an
expanding population and economy.

Models of Economic Development
 Over time, the importance of the sectors changes.
 Primary is the first sector to be important, followed, in
sequence, by the others.
 As the tertiary and later sectors increase in importance, the
earlier ones (primary and secondary) decline in relative
importance.
 This is shown in the sector model, in which MEDCs have
experienced the changes described above, whereas LEDCs
have not yet experienced the full range of the changes.
Shrivastava

Rostov's model of economic development
 Based on the experiences of the rich industrialised nations.
 Concerned with the stages countries go through to
achieved economic growth.
 Investment = key to economic growth.
 With increasing investment, a country will move from a
subsistence-based economy (stage 1) to an economy
dominated by the production of consumer goods and
tertiary and quaternary industries (stage 4-5).
 Rostow’s model implies that developing countries need to
follow the stages of development experienced by the
western industrialised nations.
Shrivastava

1 Traditional Society Subsistence economy,
agriculture, limited
technology
UK
Singapore
India
Up to
1750
Up to
1950
1950
2. Preconditions for take
off
More commercial
agriculture, transport
improves, one industry
dominates
UK
Singapore
India
1750
1960
1960
3. Take off Manufacturing develops
rapidly, further transport
infrastructure, more
investment (up to 15%
GDP) from abroad or
internal
UK
Singapore
India
1820
1975
1980
4. Drive to maturity Growth is self sustaining
and spreads to all parts
of country & economy,
linked to urbanisation,
more range of industry
UK
Singapore
India
1850
1985
1995
5. High mass
consumption
Rapid growth of tertiary
sector, a decline in
manufacturing
UK
Singapore
India
1940
1990
To come

Limitations of the Model
 Argued that the model is too simplistic.
 Dispute the assumption that the experiences of developed
countries are appropriate for all developing countries.
 Despite relatively large injections in aid, many LEDCs (e.g.
countries in Africa) are still at stage one.
 Those which have moved towards the take-off stage may
have done so by incurring huge national debts (Brazil,
Mexico).
 The time taken for a country to develop diminishes as
countries learn from already developed nations, the
development of the NICs (Singapore, Hong Kong, South
Korea and Taiwan).
 Eurocentric model.

Core-periphery model
 Economic growth and development are
never even.
 Takes into account regional variations
within countries (local or current
conditions).
 Core – most prosperous and developed
part of a country, or region.
 Periphery – Levels of wealth, development
and standards of living decrease with
distance from the core.

Lecture 5
Institutional support for new ventures
Supporting organizations

Supporting organizations
 MONEY MARKET INSTITUTIONS:
Money market institutions are the
institutions that promote short term loans.

Functions of the institutions of money
market
 To provide a balancing demand and support
scenario in the market of short term funds.
 To help the users and the providers of short
term funds
 To provide a focal point for central bank
intervention for influencing rates in the
economy.

KINDS OF MONEY MARKET INSTRUMENTS:
 Central bank
 Commercial bank
 Other financial agencies

Functions of Central Bank
 Note issuing authority
 Government banker
 Banker’s bank
 Foreign exchange
 Promoter of the financial system

Functions of Commercial Bank
 Manufacture money
 Repository functions
 To underwrite capital issue

CAPITAL MARKET INSTITUTIONS
 Investing institutions
 Development institutions
 Investment banks
 Merchant banks
 Mutual funds

Lecture 6
Incentives and facilities

Meaning:
 Incentives includes concessions,
subsidies and bounties.

The promotional measures cover
 Membership
 industrial extension services
 institutional support in respect of credit facilities and
scarce raw materials,
 factory recommendation in industrial estates,
 provision of developed sites for construction of sheds,
 provision of training facilities, subsidized power tariffs,
 supply of machinery on hire-purchase terms,
 assistance for domestic marketing as well as exports,
 special incentive for setting up enterprises in backward
areas etc..

Advantage of incentive & facilities
 Act as motivational force.
 Encourage the entrepreneur.
 By providing incentives & facilities
Government can:
 Bring industrial development.
 Develop more new entrepreneurs.
 Reduce overall problems of entrepreneurs.
 Help entrepreneurs to face competition.

Need for incentives
 To remove regional disparities in
development.
 To promote entrepreneurship &
strengthen the entrepreneurial base.
 To provide competitive strength,
survival and growth.
 To generate more employment.

Types of incentives
 Financial incentives
 Fiscal incentives
 General incentives
 Special incentives
 Reservation of items for exclusive
manufacture in SSI

Schenmes of incentives in operation
 Export import subsidies & bounties.
 Interest free loans
 Subsidy for R&D works.
 Capital investment subsidy.
 Interest subsidy.
 Subsidy for power generation.
 Exemption from property tax.
 Special incentive to women entrepreneurs.
 Exemption from income tax.

Other facilities
 Subsidised consultancy services.
 Subsidy for market studies.
 Adoption of indigenous technology.
 Machinery on hire-purchase.
 Special facilities for import of raw
materials.
 Transport subsidy.
 Seed capital assistance.

Lecture 7
Financial Institutions and Small Scale
Industries

Industries
 Financial institutions play an
important role in providing finance to
the business for long term purposes.
In India, there are following financial
institutions:

Financial Institutions and Small Scale Industries
 Industrial Finance Corporation of
India (IFCI)
 Industrial Development Bank of
India (IDBI)
 State Finance Corporation (SFC)
 Industrial Credit and Investment
Corporation of India (ICICI)
 Unit Trust of India (UTI)

Lecture 8
Industries

AII-India Dev. Banks
(IDBI, IFCI,ICICI,IIBI,IDFC,SIDBI)
Specialized Financial
Institutions
(Exim Bank, & NABARD)
Investment Institutions
(LIC,GIC,NIC,NIA,OIC,UII,UTI)
Others:
(NEDFi, NSIC, KVIC,TFCI,
ICICIVenture,IVCF)
State Level Institutions
-State Financial Corporations-
SFCs- 18)
- State Industrial Development
Corporations- SIDCs- 28)
-State Small Industries
Development Corporations-
SSIDCs-17)
-Technical Consultancy
Organisations –TCOs-18)
Development Finance Matrix: India

Long-term
-All India Financial
Institutions
(AIFIs)
-Regional DFIs
Short-term &
Medium-term
-Commercial
Banks
--Regional Rural
Banks ( RRBs)
Agriculture
Credit
-Cooperative
Banks
-NABARD
Non-banking
Finance
Companies
(NBFCs)
Government
owned Institutions/
Corporations
Non-Govt.
Organisations
(NGOs) & Micro
Finance
Institutions
(MFIs)
Institutional Network: Finance and Credit in India

 State Industrial Development
Corporation (SIDC)
 Industrial Reconstruction Corporation of
India (IRCI)
 Life Insurance Corporation of India (LIC)
 Small Industries Development Bank of
India (SIDBI)
 Industrial Reconstruction Bank of India
(IRBI)

 National Small Industries
Corporation (NSIC)
 National Bank for Agriculture &
Rural Development (NABARD)
 Export Import Bank of India

Promoting Entrepreneurship and Competitiveness
Small Industries Development Bank of India’s (SIDBI) Initiatives
SIDBI
Environmental
Initiatives
Cluster
Development
Technology
Upgrading
Entrepreneurship
Promotion
Information
Dissemination &
Credit Rating
Marketing
Assistance
Women’s
Empowerment
Rural
Industrialisation
Capacity
Building
Micro -
Finance

Lecture 9
GOVERNMENT POLICY FOR SSIs

 The small scale industry sector output contributes
approximately 30% of the GDP, 45% of the total
exports from India (direct as well as indirect exports )
and is the second largest employer of human
resources. The development of Small Scale Sector
has therefore been assigned an important role in
India's national plans. In order to protect, support and
promote small enterprises as also to help them
become self-supporting, a number of protective and
promotional measures have been undertaken by the
Government.

 Comprehensive policy package for
small scale industries and tiny sector
(announced on 30th and 31st August,
2000)

 By the end of March 2000, the SSI sector
accounted for nearly 40% of gross value of
output in the manufacturing sector and 35%
of total exports from the country.
 Through over 32 lakh units, the sector
provided employment to about 18 million
people.

The promotional measures cover:
 Industrial extension services.
 Institutional support in respect of credit facilities.
 Provision of developed sites for construction of
sheds,
 Provision of training facilities,
 Supply of machinery on hire purchase terms,
 Assistance for domestic marketing as well as
exports,
 Special incentive for setting up enterprises in
backward areas etc.
 Technical consultancy & financial assistance for
technological up gradation.

Lecture 10
Government policies for SSIs

Government policies for SSIs
 Industrial licensing
 Industrial Entrepreneur
Memorandum (IEM)
 Location policy
 Policy relating to small scale
undertakings
 Environmental clearances

SUPPORT TO SMALL SCALE SECTOR
 Policy support:
– The investment limit for the tiny sector will continue to
be Rs.25 lakhs.
– The investment limit for the SSI sector will continue to
be at Rs.1 crore.
– The Ministry of SSI & ARI will bring out a specific list
of hi-tech and export oriented industries which would
require the investment limit to be raised upto Rs.5
crore to admit suitable technology up gradation and to
enable them to maintain their competitive edge.
– The Limited Partnership Act will be drafted quickly
and got enacted. Attempt will be made to bring the Bill
before the next session of the Parliament.

 Fiscal support:
 To improve the competitiveness of
Small Scale Sector, the exemption
from excise duty limit raised from
Rs.50 lakhs to Rs.1 crore.

 Credit support:
 The composite loans limit raised from Rs.10 lakhs of Rs.25 lakhs.
 The Small Scale Service and Business (industry related) Enterprises
(SSSBEs) with a maximum investment of Rs.10 lakhs will qualify for
priority lending.
 In the National Equity Fund Scheme, the project cost limit will be raised
from Rs.25 lakhs to Rs.50 lakhs. The soft loan limit will be retained at
25% of the project cost subject to a maximum of Rs.10 lakhs per
project. Assistance under the Nef will be provided at a service charge of
5% per annum.
 The eligibility limit for coverage under the recently launched (August
2000) Credit Guarantee Scheme has been raised to Rs.25 lakhs from the
present limit of Rs.10 lakhs.
 The Department of Economic Affairs will appoint a Task Force to
suggest revitalization/restructuring of the State Finance Corporations.
 The Nayak Committee’s recommendations regarding provision of 20%
of the projected turnover as working capital is being recommended to
the financial institutions and banks.

 Infrastructural support:
 The Integrated Infrastructure Development (IID) Scheme
will progressively cover all areas in the country with
550% reservation for rural areas.
 Regarding upgrading the Industrial Estates, which are
languishing, the Ministry of SSI & ARI will draw up a
detailed scheme for the consideration of the Planning
Commission.
 A plan scheme for Cluster Development will be drawn up.
 The funds available under the non lapsable pool for the
North-East will be used for industrial infrastructure
development, setting up of incubation centers, for Cluster
Development and for setting up of IIDs in the North-East
including Sikkim.

 Technological support and quality improvement:
 Capital subsidy of 12% for investment in technology in
select sectors. An inter ministerial committee of experts
will be set up to define the scope of technology up
gradation and sectorial priorities.
 To encourage Total Quality Management, the scheme of
granting Rs. 75000 to each unit for opting ISO-9000
certification will continue for the next 6 years i.e. till the
end of the 10th plan.
 Commercial banks are being requested to develop
schemes to encourage investment in technology up
gradation and harmonize the same with SIDBI.
 One time capital grant of 50% will be given to small scale
associations which wish to develop and operate testing
laboratories, provided they are of international standard.

 Marketing support:
 SIDO will have a market development
assistance programme, similar to one
existing in the Ministry of Commerce &
Industry. It will be a plan scheme.
 The vendor development programme,
buyer-seller meets and exhibitions will
take be held more often and at dispersed
locations.

Questions

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