Unit 5-Digital Notes - MG 8091 EDP - VIII Sem Mech.pdf

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MG 8091 – ENTREPRENEURSHIP DEVELOPMENT
UNIT - V
Department: Mechanical Engineering
Batch/Year:2018-22/IV
Updated by: Mr. Sankarlal R L, Asst. Prof (Gr-II) / Mech
Date: 24/04/2022

1.TABLE OF CONTENTS
1. Contents
2. Course Objectives
3. Pre Requisites
4. Syllabus
5. Course outcomes
6. CO- PO/PSO Mapping
7. Lecture Plan
8. Activity based learning
9. Lecture Notes
10. Assignments
11. Part A Question & Answer
12. Part B Question & Answer
13. Supportive online Certification courses
14. Real time Applications in day to day life and to Industry
15. Contents beyond the Syllabus
16. Assessment Schedule
17. Prescribed Text Books & Reference Books
18. Mini Project suggestions

2. COURSE OBJECTIVES
To develop and strengthen entrepreneurial quality and
motivation in students and to impart basic entrepreneurial
skills and understanding to run a business efficiently and
effectively.

3. PRE REQUISITE CHART
MG 8591 - Principles of Management
GE 8077 - Total Quality
Management
MG 8091 – Entrepreneurship
Development

4. SYLLABUS
MG 8091 ENTREPRENEURSHIP DEVELOPMENT L T P C 3 0 03
UNIT I
ENTREPRENEURSHIP
SYLLABUS: Entrepreneur – Types of Entrepreneurs –
Difference between Entrepreneur and Intrapreneur Entrepreneurship in Economic
Growth, Factors Affecting Entrepreneurial Growth.
UNIT-2
MOTIVATION
SYLLABUS: Major Motives Influencing an Entrepreneur – Achievement Motivation
Training, Self Rating, Business Games, Thematic Apperception Test –
Stress Management, Entrepreneurship Development Programs – Need,
Objectives.
UNIT III
BUSINESS
SYLLABUS: Small Enterprises – Definition, Classification – Characteristics,
Ownership Structures – Project Formulation – Steps involved in setting up a
Business – identifying, selecting a Good Business opportunity, Market Survey and
Research, Techno Economic Feasibility Assessment – Preparation of Preliminary
Project Reports – Project Appraisal – Sources of Information – Classification of
Needs and Agencies.
UNIT IV
FINANCING AND ACOUNTING
SYLLABUS: Need – Sources of Finance, Term Loans, Capital Structure, Financial
Institution, Management of working Capital, Costing, Break Even Analysis, Taxation
– Income Tax, Excise Duty – Sales Tax.
UNIT V
SUPPORT TO ENTREPRENEURS
SYLLABUS: Sickness in small Business – Concept, Magnitude, Causes and
Consequences, Corrective Measures - Business Incubators – Government Policy for
Small Scale Enterprises – Growth Strategies in small industry – Expansion,
Diversification, Joint Venture, Merger and Sub Contracting.

5. COURSE OUTCOMES
1. Understand and Explain the role of entrepreneur in
economic growth of the nation
2. Outline the major motivation factors for becoming an
entrepreneur
3. Classify, compare and analyze for setting up of a good
business opportunity.
4. Summarize the various sources of finance and method of
accounting
5. Plan for establishing business opportunity with the
knowledge on Government norms
6. Apply the knowledge expanding business.

6. CO- PO/PSO MAPPING
PO1 PO2 PO3 PO4 PO5 PO6 PO7 PO8 PO9 PO10 PO11 PO12
CO1 - - 1 - - 1 1 - - - 3 -
CO2 - - - - - - - 2 3 - 3 -
CO3 - - - - 1 - - - - - 3 -
CO4 - - - - 1 - - - - - 3 -
CO5 - - - - - - - - - 1 3 -
CO6 - - 2 - - - 3 - - - 3 -
PSO1 PSO2 PSO3
CO1 - - 1
CO2 - - 1
CO3 - - 1
CO4 - - 2
CO5 - - 1
CO6 - - 1

7. LECTURE PLAN
UNIT 1 – ENTREPRENEURSHIP
S.
No. Topic
Total
No.
Of
Periods
Proposed
Date Actual
Lecture
Date
Pertaining
CO
Taxono
my
Level
Mode of
Delivery
1 Entrepreneur 2 CO1 K2 MD2
2 Types of
Entrepreneurs
2
CO1 K2 MD2
3
Difference
between
Entrepreneur
and
Intrapreneur
2
CO1 K2 MD2
4
Entrepreneurs
hip in
Economic
Growth
2
CO1 K2 MD2 &
MD3
5 Factors
Affecting
Entrepreneur
ial Growth
1
CO1 K2 MD2 &
MD3
Signature of Staff Incharge Signature of HOD
MODE OF DELIVERY:
MD 1. Chalk & Talk
MD 2. Power Point Presentation
MD 3. Video Lecture
MD 4. Seminar
MD 5. Field visit

UNIT 2 - MOTIVATION
S.
No. Topic
Total
No.
Of
Perio
ds
Proposed
Date Actual
Lecture
Date
Pertaini
ng
CO
Taxono
my
Level
Mode of
Delive
ry
1
Major Motives
Influencing an
Entrepreneur
1
CO2 K2 MD2
2
Major Motives
Influencing an
Entrepreneur
1 CO2 K2 MD2
3
Achievement
Motivation
Training, Self
Rating,
Business
Games
2
CO2 K2 MD2
4
Thematic Apperception
Test 1
CO2 K2 MD2
&
MD3
5
Stress Management 2
CO2 K2 MD2
6
Entrepreneurship
Development Programs
– Need, Objectives
2 CO2 K2 MD2
MODE OF DELIVERY:
MD 1. Chalk & Talk
MD 3. Video Lecture
MD 4. Seminar
MD 5. Field visit

UNIT 3 - BUSINESS
S.
N
o.
Topic
Total
No.
Of
Periods
Proposed
Date
Actual
Lecture
Date
Pertaini
ng
CO
Taxon
om
y
Le
vel
Mode
of
Deliv
ery
1
Small Enterprises –
Definition, Classification,
Characteristics
1 CO3 K2 MD2
2 1 CO3 K2 MD2
3
Ownership Structures,
Project Formulation – Steps
involved in setting up a
Business
1 CO3 K2 MD2
4
1
CO3 K2 MD2
5
Identifying,
selecting a Good
Business
opportunity, Market
Survey and
Research
1
CO3 K2 MD2
&
MD4
6
Economic Feasibility
Assessment –
Preparation of
Preliminary Project
Reports
1
CO3 K2 MD2
7
Project Appraisal
1 CO3 K2 MD2
8 Sources of Information –
Classification of Needs and
Agencies.
2
CO3 K2 MD4
MODE OF DELIVERY:
MD 1. Chalk & Talk
MD 3. Video Lecture
MD 4. Seminar
MD 5. Field visit

UNIT 4 – FINANCING AND ACCOUNTING
S.
N
o.
Topic
Total
No.
Of
Periods
Proposed
Date Actual
Lecture
Date
Pertaini
ng
CO)
Taxono
my
Lev
el
Mode
of
Deliver
y
1
Need – Sources of
Finance
1
CO4 K2 MD2
2
Term Loans 1 CO4 K2 MD2
3
Capital Structure
1 CO4 K2 MD2
4
Financial Institution
1 CO4
K2 MD2
5 Management of working
Capital, Costing 1 CO4
K2 MD2
&
MD3
6 Break Even Analysis
2 CO4
7
Taxation – Income Tax
1
CO4
K2 MD2
8 Sales Tax 1 CO4 K2 MD2 &
MD3
MODE OF DELIVERY:
MD 1. Chalk & Talk
MD 3. Video Lecture
MD 4. Seminar
MD 5. Field visit

UNIT 5 – SUPPORT TO ENTREPRENEURS
S.
No
.
Topic
Total
No.
Of
Periods
Proposed
Date
Actual
Lecture
Date
Pertaini
ng
CO
Taxono
my
Leve
l
Mode of
Deliver
y
1 Sickness in small
Business –
Concept
1 CO5 K2 MD2
2 Sickness in small
Business-
Magnitude
1 CO5 K2 MD2
3 Causes and
Consequences &
Corrective
Measures
1
CO5 K2 MD5
4
Business
Incubators –
Government
Policy for Small
Scale Enterprises
1
CO5 K2 MD2
5 Growth Strategies in
small industry –
Expansion
1
CO5 K2 MD2
6
Growth Strategies in
small industry –
Diversification, Joint
Venture
2
CO6 K2 MD2
7 Growth Strategies in
small industry –
Merger and Sub
Contracting
2
CO6 K2 MD2 &
MD3
MODE OF DELIVERY:
MD 1. Chalk & Talk
MD 3. Video Lecture
MD 4. Seminar
MD 5. Field visit

16
12
8. ACTIVITY BASED LEARNING:
Exercise 1: The Defining Problems Exercise
Team Size : 3 to 5
Duration : 20 Minutes
Aim : Students to work on developing a sense for defining problems.
Steps :
The faculty show pictures that contain many potential issues.
The students are asked to define the issues they can see and what questions they
would ask or additional information they would want to help define the problems.
They always want to start with solutions, but the key is to get them to define the
problem better, which is half the work of solving the problem anyway.”
Exercise 2: The Business Thesis Exercise
Team Size : 3 to 5
Duration : 20 Minutes
Aim : Teams to articulate their value proposition and customer segment in
a concise way.
Steps :
Students to write a simple business thesis as that we use in our I-Corps program.
They can take the reference of an existing product of their choice.
Headings to be highlighted in the Agenda / Preface Page
Team Members have to share the topics of their choice focusing the product.
Consolidate the points in a structured manner for Submission.

9. LECTURE NOTES
UNIT V
SUPPORT TO ENTREPRENEURS
17
Micro, Small and Medium Enterprises have been playing a very important role
in the social and economic development of the country. They are considered as the
main indicator for the economic development of developing countries like India.
It has significantly contributed to the overall growth in terms of Gross
Domestic Product (GDP), employment generation, income distribution, rural
development, poverty eradication, exports and regional balance. It is one of the most
vital sectors of the Indian economy in terms of employment generation and providing
strong entrepreneurial base. It has estimated that in terms of value, the MSME sector
accounts for about 45% of manufacturing outputs and 40% of the total exports and
7% of the GDP in India.
There are over 6000 products ranging from tradition to high-tech items, which
are being manufactured by MSMEs in India. It is well known that the MSME sector
provides good opportunities for both self employment and wage employment. Further,
this has consistently registered a higher growth rate than the rest of the industrial
sector.
In spite of its importance, the MSMEs are beset with the problem of sickness.
An industrial unit may face a number of odds during its implementation and operation
stage because of a number of factors in the environment.
The sick industries are unable to utilize the production capacity or produced
goods and services. The sickness has been acute and adversely affecting production
and employment in the country besides other socio-economic repercussions,
So there is need to identify sickness in the initial stages and to initiate the
process of corrective measure and revive rehabilitation before the sickness assumes a
serious proportion. Ishu Garg and Suraj Walia in their work on ‘Micro, Small and
Medium Enterprises in post reform India: status and performance” have examined
that more than 1.04 lakhs units are with the problem of industrial sickness during
2008-09 accounting 0.36% in the total working enterprises of MSME sector.

They have concluded that the MSMEs are suffered with many severe problems,
which are mainly depending on the level of economic and social development of the
country.
Another study carried out by Goyal, Nitin Gupta and Neeta Gupta on “An overview of
sickness in Micro, Small and Medium Enterprises in India” shows that the number of sick
units in MSME sector has declined from 2.21 lakh in 1997-98 to 0.90 lakh in 2010-11.
The percentage of sick units among the MSMEs has declined from 2.46% to 0.29%
during this period.
Micro, Small and Medium Enterprises in India
For manufacturing sector, an enterprise is classified as follows:
 Micro Enterprise : Investment in plant and machinery does not exceed
twenty five lakh rupees
 Small Enterprise : Investment in plant and machinery is more than twenty
five lakh rupees but does not exceed.
 Medium Enterprise : Investment in plant and machinery is more than five
crore rupees but does not exceed ten crore rupees
In case, enterprise is engaged in providing or rendering of services, it is classified as
follows:
Micro Enterprise: Investment in equipment does not exceed ten lakh rupees
Small Enterprise : Investment in equipment is more than ten lakh rupees but
does not exceed two crore rupees
Medium Enterprise : Investment in equipment is more than two crore rupees
but does not exceed five crore rupees.

Table -1: Classification of MSME
(As per Micro, Small and Medium Enterprises Development Act, 2006)
Sickness/incipient sickness in MSMEs
Sickness in MSME sector is a cause of concern. The definition of sickness in MSME
sector has been undergoing changes over time. The Reserve Bank of India (RBI) has
appointed committees from time to time to look into this issue. The working group on
rehabilitation of sick units set by the RBI (Kohli Committee) has defined sickness as “a
small scale industrial unit is considered as sick when if any of the borrowable accounts of
the unit remains substandard for more than six months, i.e., principal or interest, in
respect of any of its borrowable accounts has remained overdue for a period exceeding
one year will remain unchanged even if the present period for classification of an account
as substandard is reduced in due course; or there is erosion in the net worth due to
accumulated losses to the extent of 50% of its not worth during the previous accounting
year, and the unit has been in commercial production for at least two years”. Investment

Sickness/incipient sickness in MSMEs
Sickness in MSME sector is a cause of concern. The definition of sickness in MSME
sector has been undergoing changes over time. The Reserve Bank of India (RBI) has
appointed committees from time to time to look into this issue. The working group on
rehabilitation of sick units set by the RBI (Kohli Committee) has defined sickness as “a
small scale industrial unit is considered as sick when if any of the borrowable accounts of
the unit remains substandard for more than six months, i.e., principal or interest, in
respect of any of its borrowable accounts has remained overdue for a period exceeding
one year will remain unchanged even if the present period for classification of an account
as substandard is reduced in due course; or there is erosion in the net worth due to
accumulated losses to the extent of 50% of its not worth during the previous accounting
year, and the unit has been in commercial production for at least two years”.
Criteria to identify sickness/incipient sickness:
Information on sickness and incipient sickness has been collected during Fourth All India
Census. In order to measure incipient sickness, continuous decline in gross output for
three consecutive years has been identified as a suitable indicator, whereas for measuring
sickness latest definition given by Kohli Committee has been used. The following criteria
have been adopted to identify sick/incipient units in the Fourth All India Census of MSME
sector.
Continuous decline in gross output compared to the previous two financial years. (Say A)
Delay in repayment of loan, taken from institutional sources, for more than 12 months.
(Say B) and
Erosion in net worth to the extent of 50% of the net worth during the previous
accounting year. (Say C)
Sickness/incipient sickness in MSME sector being a leading question, the
enumerators have been asked to elicit reasons from the entrepreneurs of units satisfying
at least one of the above criteria, as to why their unit has not been running satisfactorily.
Thus, (AUBUC) is a set of sick units which is derived algebraically as (AUBUC) =(A+B+C)
(AB + BC+ AC) + (ABC); where AB, BC and AC are the intersections of sets A & B, B& C
and C& A and ABC is the interaction sets A,B and C.

Number of sick units in MSME sector
Despite the appreciable performance of MSME sector and its significant contribution to the
Indian economy, the problem of industrial sickness is persisting in this sector. The MSME
sector in India is the worst hit. A number of MSMEs are either born in sick or stay in sick.
Industrial sickness is a continuing process with district stages taking some years to corrode
the health of a unit beyond cure. The earlier the detection of sickness, the earlier will be
the remedy for sickness. The number of sick units in MSME sector is presented in the table
No.2. It is clear from the table that the number of sick units among MSMEs has declined to
0.90 Lakh in 2010-11 from 1.77 Lakh in 2001-02. The percentage of sick units in total
MSMEs has also declined from 1.68% in 2001-02 to 0.29% in 2010-11.

Reasons for sickness/incipient sickness
The MSMEs have been suffering with many severe problems, which are
mainly depending on the level of economic and social development of the country. India as
a developing country is not an exceptional one to the above condition. There are unlimited
problems connected with MSMEs. The fourth All India Census of MSME sector has
identified major reasons for sickness/incipient sickness in MSME sector. The table No.3
shows the various reasons identified by Fourth All India Census of MSME sector for
sickness in MSMEs. It is clear from the table that lack of demand for product and shortage
of working capital are the main reasons for the sickness in MSMEs. Nearly 42% of the total
sick units have been suffering due to lack of demand for their product and more than 20%
of the total sick units have the problem of shortage of working capital.

Micro, Small and Medium Enterprises have emerged as a vibrant and
dynamic component of Indian Economy by virtue of their significant contribution to gross
domestic product, industrial production and exports. However, the most important
contribution of this sector is towards employment generation which is second only to
agriculture in India. In spite of its importance, this sector is beset with the problem of
sickness. In order to prevent the major sickness in MSME sector, new approaches like the
cluster approach or harnessing the power of industry associations should be encouraged.
Undoubtedly the MSME sector has enormous potential, and is a crucial aspect of the
Indian economy. However, it is essential on the part of the government to take careful
decisions and honest policy implementation to overcome the problems of the MSME sector.
BUSINESS INCUBATORS:
An organization designed to accelerate the growth and success
of entrepreneurial companies through an array of business support resources and services
that could include physical space, capital, coaching, common services, and networking
connections .
Business incubation programs are often sponsored by private companies or
municipal entities and public institutions, such as colleges and universities. Their goal is to
help create and grow young businesses by providing them with necessary support and
financial and technical services. There are approximately 900 business incubators
nationwide, according to the National Business Incubation Association.
Incubators provide numerous benefits to owners of startup businesses. Their
office and manufacturing space is offered at below-market rates, and their staff supplies
advice and much-needed expertise in developing business and marketing plans as well as
helping to fund fledgling businesses. Companies typically spend an average of two years in
a business incubator, during which time they often share telephone, secretarial office, and
production equipment expenses with other startup companies, in an effort to reduce
everyone's overhead and operational costs. Not all business incubators are alike, however,
so if you have a specialized idea for a business, try to find the incubator that best suits
your requirements. If you're interested in finding an incubator in your state, visit
the National Business Incubation Association's website.

Or get in touch with your local economic development agency, located in the phone book
under the listing for your state government. You can also call the information offices of
your local colleges and universities to see whether they have any business incubation
programs.
If an incubation program seems interesting to you, be prepared to submit a fleshed-out
business plan. The plan will be reviewed by a screening committee to determine whether
or not you meet the criteria for admission. Incubators carefully screen potential businesses
because their space, equipment, and finances are limited, and they want to be sure
they're choosing to nurture businesses with the best possible chance for success.
Some of the top most strategies used for the growth of small-scale enterprise are: 1.
Expansion 2. Diversification 3. Joint Venture 4. Mergers and Acquisitions 5. Sub-
Contracting and 6. Franchising.
1. Expansion:
Expansion is one of the forms of internal growth of business. It means enlargement or
increase in the same line of activity. Expansion is a natural growth of business enterprise
taking place in course of time. In case of expansion, the enterprise grows its own without
joining hands with any other enterprise. There are three common forms of business
expansion.
These are:
a. Expansion through Market Penetration:
It means the enterprise increases the sales of its existing product by enlarging the existing
market. In other words, market penetration means making deeper in roads in the existing
market. Various schemes are launched to penetrate into an existing market. The scheme
for exchanging an old scooter for new one introduced by LML, for example, is a form of
market penetration.
b. Expansion through Market Development:
It implies exploring new markets for the existing product. In order to increase the sale of
existing product, the enterprise makes searches for new customers.
c. Expansion through Product Development and/or Modification:
It implies developing or modifying the existing product to meet the requirements of the
customers. Introduction of plastic bottles for selling refined oil in addition to lose sales is
an example of product development /modification.

Advantages:
(i) Growth through expansion is natural and gradual.
(ii) Enterprise grows without making major changes in its organizational structure.
(iii) Expansion makes possible the effective utilization of existing resources of an
enterprise.
(iv) Gradual growth of enterprise becomes easily manageable by the enterprise.
(v) Expansion results in economies of large-scale operations.
Disadvantages:
(i) Growth being gradual is time consuming.
(ii) Expansion in the same line of product delimits enterprise growth making enterprise
unable to take advantages from new business opportunities.
(iii) The use of modem technology is limited due to the limited resources at the disposal of
enterprise. It weakens the competitive strength of the enterprise.
2. Diversification:
Diversification is the most common form of internal growth of business. As
mentioned above, expansion has its own limitations of business growth. Diversification is
evolved to overcome the limitations of business growth through expansion. A business
cannot grow beyond a certain point by concentrating on the existing product/market only.
In other words, it is not always possible for a business to grow beyond a certain point
through market penetration. This underlines the need for the adding the new products /
markets to the existing one. Such an approach to growth by adding new products to the
existing product line is called ‘diversification’.
In simple terms, diversification may be defined as a process of adding more
products/markets/services to the existing one. This is necessary because, according to
product ‘lifecycle concept’, every product has a definite life period. Like human beings,
product also dies/disappears from the market. Hence, the introduction of new products to
the basic product line becomes necessary to keep the business on.
The use of diversification as a growth strategy has been continuously on increase both in
the private and public sectors. In the private sectors, Kelvinator India Limited which was
originally a refrigerator manufacturer diversified its product line into mopeds.
Similarly, Larsen and Toubro (L&T), an engineering company, diversified into
cement. LIC’s diversification into mutual funds and SBI’s merchant banking are the
examples of diversification adopted by the public sector in India.

Advantages:
(i) Diversification helps an enterprise make more effective use of its resources.
(ii) Diversification also helps minimize risk involved in the business.
(iii) Diversification adds to the competitive strength of the business.
(iv) Diversification also enables an enterprise to tide over business fluctuations and, thus,
ensures smooth running of the business.
Disadvantages:
All is not good with diversification. It also suffers from certain disadvantages.
(i) Diversification involves business reorganization which requires additional resources.
Thus, diversification becomes a costly proposition.
(ii) It becomes difficult, is not impossible, to effectively manage and coordinate the diverse
business.
Types of Diversification:
There is no uniform type of diversification adopted by all enterprises. It
varies from enterprise to enterprise.
Usually, diversification is of four types:
a. Horizontal Diversification
b. Vertical Diversification
c. Concentric Diversification, and
d. Conglomerate Diversification
A brief description of these follows:
a. Horizontal Diversification:
In this type of diversification, the same type of product or market added to
the existing ones. Adding refrigerators to its original products of steel safes and locks by
Godrej is an example of Horizontal Diversification.
b. Vertical Diversification:
In this type of diversification, complementary products or services are added to the
existing product or service line of the enterprise. The new products or services serve
either as inputs or a customer for the firm’s own product. A T.V. manufacturer may start
producing picture tubes needed by it.
Similarly, a sugar mill may develop a sugarcane farm to supply raw material
or inputs for it. Setting up of retail shops by companies like Delhi Cloth Mills to sell its
fabrics is also vertical type of diversification.

c. Concentric Diversification:
In case of concentric type of diversification, an enterprise enters into the
business related to its present one in terms of technology, marketing or both. Nestle,
originally, a baby food producers entered into related products like ‘Tomato Ketchup’ and
‘Maggi Noodles’. Similarly, a tea company like Lipton may diversify into coffee.
d. Conglomerate Diversification:
This type of diversification is just contrary to concentric diversification. In this type of
growth strategy, an enterprise diversifies into the business that is not related to its existing
business neither in terms of technology nor marketing. JVG carrying on business in
newspaper and detergent cake and powder, Godrej manufacturing steel safes and shaving
cream are examples of conglomerate diversification.
3. Joint venture:
Joint venture is a type of external growth strategy adopted by business
firms. A joint venture could be considered as an entity resulting from a long-term
contractual agreement between two or more parties, to undertake mutually beneficial
economic activities, exercise joint control and contribute equity and share in the profits or
losses of the company.
The Reserve Bank of India (RBI) has defined joint venture in the technical
sense as: “a foreign concern formed, registered or incorporated in accordance with the
laws and regulations of the host country in which the India party makes a direct
investment, whether such investment amounts to a majority or minority shareholding.”
In simple terms, joint venture is a restricted or a temporary partnership between two or
more firms to undertake jointly to complete a specific venture. The parties which enter
into agreement are called co-ventures and this joint venture agreement will come to an
end on the completion of the work for which it was formed.
The co-ventures participate in the equality and operations of the venture/
business. The profits or losses are shared between the co-ventures in their agreed ratio
and in the absence of such agreement; the profits or losses are shared equally by the
parties. In general, joint venture is formed for the purpose of consigning the goods from
one place to another, undertaking contracts for construction works, underwriting of shares
or debentures of joint stock companies, etc.

Conditions for Joint Venture:
Joint venture may be useful to gain or access new business under some conditions, but
not confined to the following only:
(i) When an activity is uneconomical for an organization to do alone.
(ii) When the risk of business has to be shared and, therefore, is reduced for
the participating firm.
(iii) When the distinctive competency of two or more organizations can be
brought together.
(iv) When setting up of an organization requires surmounting hurdles such
as import quotas, tariffs, nationalistic-political interests and cultural
roadblocks.
It is seen from above mentioned conditions that joint ventures are effective business
growth strategy when the development costs have to be shared, business risk spread out
and different expertise’s combined to make effective use of available resources and create
synergy for outcomes.
Based on past experiences in the field of joint ventures, following five
triggers have been identified to make joint ventures effective and successful:
i. Technology:
The foreign partner involved in joint venture can bring with it high-level technology, on the
one hand, and the Indian counter partner provides good knowledge about the (local)
market, on the other. The recent joint ventures taken place in the field of telecom and
automobiles are such examples.
ii. Geography:
When India has to compete in the larger and global market and a foreign player is already
in a very commanding presence in the global market, this becomes a good trigger for
joining a joint venture. One such example is insurance players such as Prudential and
Standard Life having global presence. Thus, it becomes a good opportunity for the Indian
partner to join such global partner in the joint venture.
iii. Regulation:
Regulation becomes a trigger especially when a sector which was highly restricted and
closed sector for foreign partner for long period is now opened up. Here again, insurance

sector in India is one such example which was recently opened for foreign players. It is
due to this regulatory change the Indian partners like Bajaj and Indian Credit and
Investment Corporation of India (ICICI) joined foreign players in joint ventures in the
insurance sector.
iv. Sharing of Risk and Capital:
This includes capital-intensive sectors like heavy-engineering requiring highly sophisticated
technological expertise. In such cases, both the partners involved in joint venture share
risks and capital equally to effectively run the venture.
v. Intellectual Exchange:
Legal business could be such sector where both the partners gain intellectual advantage
irrespective of law on the entry of foreign law firms in one country.
Types of Joint Ventures:
Experience suggests that joint venture is especially useful for entering
international markets. As such, an Indian organization can enter a foreign market in a joint
venture with a foreign organization. Similarly, a foreign firm can also enter into a joint
venture with an Indian organization.
From the point of view of Indian organizations, the following five types of joint ventures
are possible to form:
a. Between two Indian organizations in one industry:
Example is a joint venture between National Thermal Power Corporation Ltd.
(NTPC) and the Indian railways for setting up a Rs. 5,352 crore thermal power plant at
Nabinagar in Bihar to meet the requirements of the rail network across the country.
b. Between two Indian organizations across different industries:
Example is a joint venture between Action Aid India (AAI) and Tata Institute
of Social Sciences (TISS) to offer degree courses for rural communities in India.
c. Between an Indian organization and a foreign organization in India:
Example is joint venture with 50:50 between DLF Ltd. and Nakheel, a large
property developer of the United Arab Emirates (UAE) for developing two integrated
townships in India.

d. Between an Indian organization and a foreign organization in a third foreign
country:
Example is a joint venture between Kirloskar Brothers Ltd. and SPP Pumps
Ltd., United Kingdom (UK) for catering to the European Union (EU) market.
e. Between an Indian organization and a foreign organization in a third country:
Example is a joint venture between Apollo Tyres of India and Continental AG
of Germany for setting up a tyre manufacturing joint venture in Malaysia.
Advantages:
(i) Joint venture reduces risk involved in business.
(ii) It helps increase competitive strength of the business.
(iii) It makes possible the use of advanced technology and knowhow not available within a
firm.
(iv) Joint venture provides the benefits of economy of scale by reducing production and
marketing costs, on the one hand, and by increasing sales volumes, on the other.
Disadvantages:
(i) In case of lack of proper understanding between the co-ventures, the functioning of
the business is adversely affected.
(ii) Excessive legal restrictions on foreign investments limit joining hands with foreign
firms.
(iii) Sometimes, more equity participation by one or more co-ventures creates conflicts
between them.
Reasons for Failure of Joint Ventures:
History of joint ventures reveals that there is a high probability of the joint ventures not
working to the advantage of India. Therefore, this is suggestive that Indian organizations
need to be on guard to save themselves from the disadvantages of joint venture
arrangements.
Research studies report that the following reasons more often than not lead joint ventures
to failure:
i. Change of Strategy:
India could cease to be interest of foreign organization for business alliance. For example,
this has already happened with some foreign organizations like Bell Canada where Asia
was considered as a market of no strategic significance.

ii. Regulatory Changes:
This is because of business laws in practice in the countries. For example, if
the limit of Foreign Direct Investment (FDI) is kept at a low level and has not been raised.
To quote, the FDI limit fixed at 26% for some time now made foreign partners hesitant to
form alliance in the Indian insurance sector.
iii. Success of Joint Venture:
Evidences are available to believe that if the joint venture is doing well, one
of the alliance partners demands for increasing its share/holding in the joint venture. If
not agreed by the other partner, joint venture arrangement comes to disband.
iv. Lack of Transparency:
In case one of the partners hides some facts or gives falsified facts, it causes
confrontation and conflicts between the parties. If the conflict is not resolved, it may lead
to break-up of business alliance. For example, the break-up of the Hutchison-Essar joint
venture is one where the lack of transparency has been one of the key reasons.
4.Mergers and Acquisitions (M&A)
Merger and acquisition are yet other forms of external growth strategy.
Merger means a combination of two or more existing enterprises into one. For the
enterprise which acquires another, it is called ‘acquisition.’ For the enterprise which is
acquired, it is called ‘merger.’ Thus, merger and acquisition are the two sides of the same
coin.
If both organizations dissolve their identity to create a new organization, it is
called consolidation. The other terms used for M&A are absorption, amalgamation, and
integration. M&A are more popularly known as takeovers. For more than three decades
after Independence, the normal route of growth was through licensing and setting up new
projects.
But the post- liberalization, since 1991, has witnessed an increasing use of
takeover strategies as the means or rapid growth. Mahindra & Mahindra’s takeover of a
German company Schoneweiss, Tata’s takeover of Corus, and PricewaterhouseCoopers’s
takeover of Mumbai-based taxation company RSM Ambit are illustrative examples of
mergers & acquisitions.

Reasons for Mergers and Acquisitions:
For a merger to take place, two enterprises or organizations have to act. One
is the buyer enterprise and the other is the seller. Both these t5^es of enterprises have a
set of reasons on the basis of which they merge.
Following are the illustrative ones:
Reasons for Buyer to Merge:
(i) To increase the value of the enterprise’s stock.
(ii) To increase the growth rate and make a good investment.
(iii) To improve the stability of its earnings and sales.
(iv) To balance, compete or diversify its product line.
(v) To reduce competition.
(vi) To acquire a needed resource quickly.
(vii) To avail tax concessions and benefits.
(viii) To take advantage of synergy.
Reasons for Seller to Merge:
(i) To increase the value of the owner’s stock and investment.
(ii) To increase the growth rate.
(iii) To acquire resources to stabilize resources.
(iv) To benefit from the tax legislation.
(v) To deal with top management succession problem.
Types of Mergers and Acquisitions:
Mergers and acquisitions can be classified into the following types:
a. Horizontal M&A:
Horizontal M&A take place when there is a combination of two or more organizations in
the same business, or organizations engaged in certain aspects of the production or
marketing processes. A footwear company combining with another footwear company is
one such example of horizontal M&A.
b. Vertical M&A:
In vertical M&A, two or more organizations, not necessarily in the same business, come
together to create complementarities either in terms of supply of materials (say material)
or marketing of goods and services (say outputs). For example, pharmaceutical company
combines with retail medical store.

c. Concentric M&A:
This refers to two or more organizations related to each other either in terms
of customer functions or alternative technologies combine together. For example, a
footwear company combines with a hosiery firm making socks.
d. Conglomerate M&A:
This is just opposite of concentric M&A. In this case, two or more
organizations not related to each other either in terms of customer functions or alternative
technologies. Combination between a pharmaceutical company and footwear company is
one such example.
Advantages:
(i) Provide benefits of economies of scale in terms of production and sales.
(ii) Facilitate better use of resources.
(iii) Enable sick enterprises to merger into the healthy ones.
(iv) Promote diversification in product line to take advantages of opportunities available in
the particular business.
Disadvantages:
(i) Larger scale operations often make co-ordination and control ineffective. This adversely
affects business performance as a whole.
(ii) Sometimes mergers and acquisitions lead to monopoly in the particular business.
Monopoly is not welcome in the interest of the society.
Important Issues Involved in Mergers and Acquisitions
Mergers and acquisitions are as much important are not so simple.
Meaningful mergers and acquisitions involve expertise in special areas such as accounting,
finance and legal matters and negotiations.
Following are some of the important strategic, financial, managerial, and legal issues
involved in mergers and acquisitions:
a. Strategic Issues:
These issues relate to the commonality of strategic interests between the buyer and seller
firms. The main objective of M&A is to create synergetic effects for the enterprises.
Therefore, the strategic advantages and distinctive competencies due to M&A for the
merging enterprises have to be duly examined and analysed.

It is also important to note that there has to be a fine match between the
objectives of the firms involved in M&A. For example, a merger should ideally lead to the
generation of sufficient strengths that would help the enterprise during the post-merger
duration to achieve its objectives in an effective and better manner.
b. Financial Issues:
There are three major financial issues involved in M&A.
These are:
(i) Valuation of the business and shares of the target firm;
(ii) Sources of financing for mergers; and
(iii) Taxation matters after M&A.
The valuation of the business of the target firm is a detailed and comprehensive
process that should take into account a range of factors including the tangible and
intangible assets, the industry profile of the firm and its prospects and the future earnings
and prospects of the target firm.
Similarly, the valuation of the shares in an M&A is equally complicated
process involving issues such as the stock exchange price of the shares of the target firm,
dividends paid, growth prospects of the firm, value of its assets, quality and integrity of
the top management, competitive conditions, opportunity costs in terms of investments
and market sentiments.
The second financial issue is of the sources of financing required for
enterprises involved in M&A. Several sources of funds available range from the acquiring
companies’ own funds or borrowed funds, raised through the issue of debentures, bonds,
deposits, external commercial borrowings, global depositary receipts, loans from Central or
State financial institutions or rehabilitation finance provide to sick industrial companies.
The third issue is of the taxation matters that are dealt with under the
relevant provisions of the Income Tax Act, 1961, and which are related to various technical
aspects such as the carrying forward or set-off of losses and unabsorbed depreciation,
capital gains, tax and amortization of expenses.
c.. Managerial Issues:
These issues relate to the umpteen problems of managing enterprises after the M&A has
taken place. It is important to note that the perception of how the management will take
place after M&A also matters and affects the process involved in it.

The usual experience is that the post M&A is characterized by changes in staff, specially
chief executives and top managers.
If there is an assurance that the merger will lead to a status quo, or that
‘professional management’ would be adopted, then the M&A process may take place
smoothly. On the contrary, if the M&A is perceived as threatening, it results in resistance
and opposition by the various groups.
This happens because the post-merger period poses uncertainty to the
managers of the merging organizations. The reason is that they feel insecure about their
job, status within the organization, and their earnings and promotional prospects.
The consequence of feeling threatened by the impending changes due to
M&A, the existing managers oppose change which, in turn, leads to low morale and
productivity and often resulting in mass exodus of managers from the organization.
d. Legal Issues:
These issues relate to the provisions made in law for the purpose of M&A. In
India, the provisions relating to M&A and other schemes are contained in Chapter V of the
Companies Act, 1956 and specifically, in Sections 391 to 395 of the Companies Act, 1956
and in the rules 67 to 87 of the Companies (Court) Rules, 1959.
The implementation of the strategies of M&A requires a thorough
understanding of relevant provisions. It is interesting to mention that the term ‘merger’ is
not used in the Companies Act; only the term ‘amalgamation’ is used in Section 394 of the
Act. The only section that deals with the transfer of shares (or takeover bids) is Section
385. Apart from the Companies Act and the MRTP Act, Section 72 A (I) of the Income Tax
Act, 1961 is also relevant for taxation purposes of amalgamated companies and provides
for carrying forward accumulated losses and unabsorbed depreciation of the amalgamating
company, i.e. M&A organizations.
How Mergers and Acquisitions take place?
M&A can take place in various ways. There is no specific and standard
procedure available for M&A to take place. However, based on experiences relating to
M&A, it is realized that following certain guidelines can be useful for M& As to take place
systematically.
The major steps include but are not limited to the following only:
a. Spell out the objective
b. Indicate how the objective would be achieved.

c. Assess managerial quality
d. Check the compatibility of business styles
e. Anticipate and solve problems early
f. Treat people with dignity and concern
5.Sub-Contracting:
What is Sub-Contracting System?
Sub-contracting system is a mutually beneficial commercial relationship
between the two companies. This is known as Ancilliarization in India and more generally
as ‘sub-contracting.’
Sub-contracting can be defined as follows:
A sub-contracting relationship exists when a company (called a contractor)
places an order with another company (called the sub-contractee) for the production of
parts, components, sub-assemblies or assemblies to be incorporated into a product sold by
the contractor. Such orders may include the processing transformation, or finishing of
material or part by the sub-contractor at the request of the contractor.
In practice, large-scale industries also not produce all goods on their own;
instead they rely on small-scale enterprises called sub-contractors for a great deal of
production. When the work assigned to small enterprises involves manufacturing works, it
is called ‘Industrial Sub-contracting.’ In the other cases, it is known as ‘Commercial Sub-
contracting.’ It is not unusual for Sub-contractors to work for more than one contractor.
Historical Background of Sub-Contracting:
Before we discuss the role of sub-contracting system in development of small
-scale enterprises, it seems pertinent to first trace out the evolution of subcontracting
system in the industrial world. Japan is considered the birth place of modem sub-
contracting system. In Japan, when military demand for machinery industry expended
enormously during 1930s, the large firm could not meet the ever huge orders. In 1938,
Mitsubishi Heavy Industry could not meet orders equivalent to over its two years’
production capacity, for example. Increasing production capacity of heavy machinery
industries had crucial importance in the Japanese economies.

As per the need of the hour, small enterprises and cottage industries shifted
their production to support the large machinery firms to meet their orders. In view of poor
technological knowledge of small enterprises, a new relationship known as Sub-contracting
System was introduced to make long-term and direct trade relations between small and
large industries, instead of floating and short -term relations mediated by the brokers.
Today, the key to so many small firms in Japan lies in this sub-contracting
system only. As a matter of fact, sub-contracting has become basic to the character of the
Japanese industries. 56 per cent of the small manufacturing companies (having less than
300 employees) are producing under sub-contracting system. In India, Subcontracting has
emerged in the name of ancillarsation or ‘ancillary units’.
We have only mentioned the historical background of sub-contracting system
in the industrial economy of Japan. The real role of sub-contracting can perhaps be clearly
seen by juxtaposing of its advantages and disadvantages to small-scale enterprises.
To this we turn in the following paragraphs:
Advantages:
Sub-contracting system bears the following advantages.
(i) It increases production in the fastest way without making many efforts,
(ii) The contractor can produce products without investing in plant and machinery.
(iii) Sub-contracting is particularly suitable to manufacture goods temporarily.
(iv) It enables the contractor to make use of technical and managerial abilities
of sub-contractors.
(v) Despite leading to dependence, sub-contracting ensures existence of Subcontractors
by providing them business.
(vi) Last but no means the least; sub-contracting makes the core firms more flexible in
their production.
Disadvantages:
However, sub-contracting has some disadvantages also. These are:
(i) It does not ensure the regular and uninterrupted supply of goods to the core firms,
i.e. contractors which adversely affect the functioning of the core firms.
(ii) Goods produced under Sub-contracting system are often qualitatively inferior.
(iii) Sub-contracting also delimits the expansion and diversification of the core firms.
(iv) A delay in payments, a common feature, by the contractor to the subcontractors
endangers the very survival of the latter.

Sub-contracting or Ancillarisation in India
In India, sub-contracting in the form of ancillarisation has been receiving
Government support since sixties. An ancillary unit is one which sells not less than 50% of
its manufactures to one or more industrial units, presumably large units. The Government
has been repeatedly advising public sector undertakings to ensure that a large number of
items are farmed out for manufacture by small-scale units.
In order to encourage sub-contracting system, an important development in
this area has been the establishment of sub-contracting exchanges at the Small Industries
Service Institutes (SISI’s) all over the country. These exchanges maintain up-to date
information on the unutilized capacities of the small-scale enterprises and the match these
with the requirement of the large-scale industries.
Thus, these exchanges ensure orders for the small-scale enterprises from
the large units. In China, the ancillary development is described as the ‘Dragon Dance’-
the head of the dragon symbolizing the parent unit and tail representing the ancillary
units.
In India, commercial Sub-contracting and inter-dependence between
localized communities of small enterprise is found in existence around specialized
industries. The diamond polishing and garments industries are such examples. In both
these industries, production is carried out in small firms or home-based putting out
systems, but the crucial functions such as supply of raw materials and selling the products
are performed by the large units.
There are also a large number of clusters of small enterprises engaged in
specialized industries – woolen garments, bicycles and parts, sewing machines and parts
in Ludhiana, sports goods in Jallandhar, locks in Aligarh, leather goods in Agra and Kanpur,
cotten hosiery in Delhi and Kolkata.
Thus, sub-contracting system makes possible to take advantage of flexibility
in production. At the same time, despite leading to dependence, it also ensures existence
of small enterprises. In the recent past, the concealed industrial sub-contracting has also
risen substantially in India. The pronounced rise in the employment share but not income
share of the unorganized sector is an indicator of such phenomenon.

The new policy document for small enterprises titled ‘Policy Measures for Strengthening
Small, Tiny and Village Enterprises 199V also makes a special mention of industrial sub-
contracting and contains special measures to promote it through equity participation by
others, presumably large, industrial units in small -scale enterprises not exceeding 24% of
the shareholding.
This measure is expected to boost ancillarisation. However, the product
reservation policy and continuous support to tiny enterprises would continue to constrain
ancillarisation process in the country. Yes, the extent to which the reform regime in India
is trying to create a competitive environment augurs well for boosting sub-contracting
system in the coming time in India.
6. Franchising:
In a sense, franchising is very much akin to branching. Franchising is a
system for selectively distributing goods or services through outlets owned by the retailer
or dealer. Basically a franchise is a patent or trademark license, entitling the holder to
market particular products or services under a brand name or trademark according to pre-
determined terms and conditions.
David D. Settz has defined franchising as a “Form of business ownership
created by contract whereby a company grants a buyer the rights to engage in selling or
distributing its products or services under a prescribed business format in exchange for
royalties or shares of profits. The buyer is called the ‘Franchisee’ the company that sells
rights to its business concept is called ‘Franchiser.’
Thus, franchising can simply be defined as a form of contractual
arrangement in which a retailer (franchisee) enters into an agreement with a producer
(franchisor) to sell the producer’s goods or services for a specified fee or commission.
Difference between Franchising, Distributorship and Agency:
In common parlance, franchising, distributorship and agency mean the same thing and are
often loosely used. However, they mean different things.
The two terms – distributorship and agency – have the more traditional forms of
distributing goods or services. Under these, the principal is not allowed to exert the real
control over the distributor or agent.
Here, the franchising differs from the distributorship and the agency in the sense that it
allows the franchisor to exercise a higher degree of control over the franchisee.

As a matter of fact, the franchisor has a right to say in all important matters like branding,
methodology and mergers.
Types of Franchising:
Franchising arrangements broadly classified into three types:
1. Product Franchising
2. Manufacturing Franchising
3. Business-Format Franchising
A brief description of these follows:
1. Product Franchising:
This is the earliest type of franchising. Under this, dealers were given the
right to distribute goods for a manufacturer. For this right, the dealer pays a fee for the
right to sell the trademarked goods of the producer. Product franchising was used, perhaps
for the first time, by the Singer Corporation during the 1800s to distribute its sewing
machines. This practice subsequently became popular in the petroleum and auto industries
also.
2. Manufacturing Franchising:
Under this arrangement, the franchisor (manufacturer) gives the dealer
(bottler) the exclusive right t’ produce and distribute the product in a particular area. This
type of franchising is commonly used in the soft-drink industry. Coca-Cola and Pepsi are
the popular examples of such type of franchising.
3. Business-format Franchising:
This is recent type of franchising and is the most popular one at present.
This is the type that most people today mean when they use the term franchising. In the
United States, this form accounts for nearly three-fourth of all franchised outlets.
Business-format franchising is an arrangement under which the franchisor offers a wide
range of services to the franchisee, including marketing, advertising, strategic planning,
training, production of operations manuals and standards and quality- control guidance.

As a matter of fact, the franchisor has a right to say in all important matters like branding,
methodology and mergers.
The International Franchise Association (IFA) of America has defined business
format franchising as follows:
“A franchise operation is a contractual relationship between the franchisor
and franchisee in which the franchisor offers or is obligated to maintain a continuing
interest in the business of the franchisee in such areas as knowhow and training; wherein
the franchisee operates under a common trade name, format and / or procedure owned or
controlled by the franchisor, and in which the franchisee has or will make a substantial
capital investment in his business from his own resources.”
Advantages:
Franchising arrangement is symbiotic one for the franchisor and the franchisee.
Following are, for example, the distinct advantages that franchising provides to the
franchisee:
(i) Franchising makes the task of getting started easier because the franchisee gets a
business format already market tested and founded to work. Hence, buying a franchisee is
so far safer than trying to start a business.
(ii) It reduces chances for failure. Here, significant to mention is that fewer than 10
percent of all franchise fail. In dramatic contrast with this is the fact that two out of every
five entrepreneurs who start on their own fall within three years, and eight out of every
ten fail within ten years.
(iii) A well-established franchisee brings with it the very important advantage of
recognition. Many new businesses experience lean months, or years, after start-up.
Obviously, the longer the period the business must experience it, the greater the chances
of failure. With the well-tested franchise, this period of agony may reduce to only weeks,
or perhaps just days.
(iv) Franchising may increase the franchisee’s purchasing power also. Because, being part
of a large and that too recognized organization means paying less for variety of things
such as supplies equipment, inventory services, insurance, and so on. It also can mean
getting better service from suppliers because of the importance of the organization
(franchisor) of you is part (franchisee).

(v) One gets the benefit of the franchisor’s research and development in improving the
product.
(vi) The franchisee has the protected or privileged rights to franchise within a given area.
(vii) The prospects of obtaining loan facilities from the bank are also improved. (viii) The
backing of a known trading name (franchisor) becomes quite helpful while negotiating for
good sites with setting agents or building owners.
Disadvantages:
Franchising is not an unmixed blessing. There are some disadvantages as
well associated with a franchise arrangement.
The main ones are listed as follows:
(i) Unlike entrepreneurs who start their own business, the franchisees find
no room or scope for enjoying their creativity. They have to work as per the given format.
One classic example of regimentation in franchising can be found in the McDonald’s
restaurant organization.
A McDonald’s franchise is given very little operational latitude; indeed, the
operations manual attends to such minor details as when to boil the bearings on the
potato slicer. The purpose of these restrictions is not to frustrate the franchisee, but to
ensure that each outlet is run in a uniform and correct manner.
(ii) A number of restrictions are also imposed upon the franchisees.
Restrictions may relate to remain confined to product line or a particular geographical
location only.
(iii) Franchisees usually do not have the right to sell their business to the
highest bidder or to leave it to a member of their family without approval from the
franchisor.
(iv) Though the franchisee can build up goodwill for his or her business by
his or her efforts, goodwill still remains the property of the franchisor.
(v) The franchisee may become subject to fail with the failure of the
franchisor.
(vi) Another disadvantage facing franchisees is that franchisors generally
reserve the option to buy back an outlet upon termination of the contract. Many
franchisees become vulnerable to this option. As such, they operate under the constant
fear of non-renewal of the franchise arrangement.

10. ASSIGNMENT ( in K2 Level)
43
S.No Questions
Blooms
Level
CO’S
1.
List out and explain in detail about the various
Government Policies applicable for Small Scale
Enterprises.
K2 CO5
2.
Explain the features of Joint Ventures with its
advantages and disadvantages.
K2 CO5
3.
Explain in detail about establishing a Business
Incubator.
K2 CO5
4.
What are the causes and consequences of
Sickness in small Business? Discuss the corrective
measures of it.
K1 CO5

S.No PART A Question with Answer
Blooms
Level
CO’S
1. Define Industrial Sickness.
The Sick Industrial Companies (special provisions) Act, (SICA),
1985 defines a sick industry as "an industrial company (being
a company registered for not less than seven years), which
has at the end of financial year accumulated losses equal to or
exceeding its entire net worth and has also suffered from cash
losses in such financial year
immediately preceding such financial year
K1
CO5
2. Brief the two causes for industrial sickness.
Internal (or) Endogenous Causes: relate to organization,
structure, production channel, distribution channel, technical
know-how, etc.
External (or) Exogenous Causes: Changes of Government POlicy,
lack and shortage of demand for the product are the cause of
external factors.
K1 CO5
3. Write any four internal causes of industrial sickness.
Poor management prevailing in the industry
Poor quality maintenance and production capacity
Poor utilization of capacity
Lack of managing strategies.
K1 CO5
4. What are the causes of slow growth of Industrial
Entrepreneurship in India?
Improper Policy
Change of government
Environment Factor etc.
K1 CO5
44
34
11. PART – A QUESTIONS & ANSWERS

S.No PART A Question with Answer Blooms
Level
CO’S
5. What are the important Government Policies?
 The generation of immediate employment opportunity with
relatively low investment.
 The promotion of more equitable distribution of national
income.
K1 CO5
6. What is BIFR?
The Board of Industrial and Financial Reconstruction (BIFR) is an
agency of the government of India, Part of the department of
financial service of the Ministry of Finance. Its objective is to
determine sickness of industrial companies and to assist in
reviving those that may be viable and shutting down the others.
K1 CO5
7. What are the stages of Growth?
Startup stage
Growth stage
Expansion stage
Maturity stage Decline stage
K2 CO5
8. State the growth strategies in small Industry.
 Market segmentation
 Leveraging partnerships
 Use checklists
 Acquisitions
 Become a leader in the industry.
Not every strategy will be right but some of these might offer an
opportunity.
K2 CO5
9. What are the three forms of Expansion?
Penetration Strategy
Market development strategy Product development strategy. K2 CO5
45

Level
CO’S
10. Define the term magnitude?
An order of magnitude is an exponential change of plus or minus
1 in the value of a quantity or unit. The term is generally used in
conjunction with the Power of 10.
K1 CO5
11. What are the three types of Diversification?
Backward Integration
Forward Integration Horizontal Integration
K1 CO5
12. Define Franchising.
A franchise is a form of business ownership created by contract
where by a company grants a buyer the rights to engage in
selling (or) distributing its products (or) services
under a prescribed business format in exchange for royalties (or)
shares of profits.
K2 CO5
13. What are the types of Franchising?
 Territorial Franchise
 Operating Franchise
 Mobile Franchise
 Distributorship
 Co-ownership
 Leasing
K2 CO5
14. What are the types of Franchiser?
 Manufacturers and wholesalers
Manufacturers and Retailers STUCOR
Wholesalers and Retailers Retailers and Retailers
K2 CO5

Level
CO’S
15 Define Joint Venture.
A joint venture is a strategic alliance where two (or) more
people (or) companies agree to contribute goods, services and
(or) capital to a common commercial enterprises.
K1 CO5
16 List any four content of joint venture agreement?
 The parties involved
 The objectives of the joint venture
 Financial contributions
Intellectual properly developed by the participant in the joint
venture.
K1 CO5
17 When companies do prefer joint ventures?
Joint ventures may involve companies in one (or) more countries.
International joint ventures in particular are becoming more
Popular, especially in capital-intensive industries such as oil and
gas exploration, mineral extraction, and metal processing. Joint
ventures become more attractive as a way to share risks and
costs and create scale
economies.
K2 CO5
18 What are the types of merger?
Horizontal Merger
Vertical Merger Conglomerate Merger K2 CO5
19 What is conglomerate merger?
Conglomerate merger is a type of combination which a firm
established in one industry
combines with another firm in another unrelated industry.
Such merger move for diversification of risk constitutes
the rational.
K2 CO5
20 What is Sub-Contracting?
Sub-contracting is a type of work contract that seeks out source
certain types of work to other companies. Sub-contracting is
done when the general contractor does not have the time (or)
skills to perform certain skills.
K2 CO5

S.No Questions
Blooms
Level
CO’S
1. Discuss about how expansion plans, Diversification
and ventures help the growth of the business in
auto sector
K2 CO5
2. Enumerate the government of India Policy for
small scale enterprises with examples.
K2 CO5
3. What is Diversification? Discuss the basis of
diversification in entrepreneurship
K2 CO5
4.
Explain joint venture and Merger
K1 CO5
5. Describe the government Policy for small scale
enterprises to support the entrepreneur
K2 CO5
6. Explain the concept of Industrial sickness and the
magnitude of sickness problem of SMEs (Small and
Medium Enterprises) in India during 10th plan
period
K4 CO5
7. Discuss the features of Sick Industrial Companies
Act 1985 and the measures taken and suggestions
of the Act
K2 CO5
8. Illustrate the cause and consequences of sickness
in small business. Suggest measures to overcome
such sickness
K2 CO5
9. What are the financial risks faced by a small
business? Discuss the reason for Bankruptcy and
remedial actions against them
K2 CO5
48
12. PART – B QUESTIONS

49
13. SUPPORTIVE ONLINE CERTIFICATION COURSES
S.No Title of the Course Link Academy
1.
Become a Financial
Analyst
https://www.linkedin.com/le
arning/paths/become-a-
financial-analyst?u=104
LinkedIn Learning
2.
Entrepreneurship
Essentials
https://online.hbs.edu/cours
es/entrepreneurship-
essentials/
Harvard Busines
School Online
3. Entrepreneurship
https://nptel.ac.in/courses/
110/106/110106141/
NPTEL
4.
Entrepreneurship
Essentials
https://nptel.ac.in/courses/
127/105/127105007/
NPTEL
5.
Entrepreneurship
Specialization
https://www.coursera.org/s
pecializations/wharton-
entrepreneurship
Coursera –
University of
Pensylvania

Case Study 1: University support systems for sustainable entrepreneurship: Insights
from explorative case studies.
Source: International Journal of Entrepreneurial Venturing. 10. 83. 10.1504/IJEV.2018.090983
Access Link:
https://www.researchgate.net/publication/324263737_University_support_systems_for_sustaina
ble_entrepreneurship_Insights_from_explorative_case_studies
Abstract: In recent years public policy has increasingly recognised the importance of
entrepreneurship for sustainable economic growth and solving fundamental challenges such as
climate change. It is emphasized that universities should play an important role in supporting
sustainable entrepreneurship by sensitizing and educating future sustainable entrepreneurs. Up
till now there has hardly been any research on university support systems for sustainable
entrepreneurship. We address this research gap with a qualitative multi-case study of four
universities in the USA and Germany, based on 41 good practice examples. Using an open
innovation concept, we developed a conceptual framework that is based on an interactive
paradigm and allows comprehensive support systems analysis. We identified top-down, bottom-
up and combined implementation strategies as well as integrative and additive approaches. The
framework is suitable for empirical investigations and supports future research. Our results
demonstrate the importance of the institutional framing of support activities and indicate that, in
comparison with other elements of the university support system, research on sustainable
entrepreneurship is lagging behind.
Case Study: 2: Lijjat Papad - Woman & Entrepreneurship - The Business Concept
Source :
https://www.icmrindia.org/casestudies/catalogue/Leadership%20and%20Entrepreneurship/Lijjat
%20Papad-Woman&Entrepreneurship-Leadership%20and%20Entrepreneurship-
Case%20Studies.htm
Abstract: SMGULP is run on sound, commercial principles. The main aim of the organization is
to provide self-employment opportunities to women. As most of the women working in SMGULP
come from disadvantaged sections of society, the organization seeks to inculcate feelings of self
confidence and self reliance in them. The member sisters share the profits among themselves in
a judicious manner. The organization believes that business has to be done with prudence…
14. REALTIME APPLICATIONS –CASE STUDIES

Case Study 3: Swiggy’s Delivery Model
Source: ICMR - IBS Center For Management Research
Access Link:
https://www.icmrindia.org/casestudies/catalogue/Leadership%20and%20Entrepreneurship/LDE
N148.htm
Abstract: The case study “Swiggy’s Delivery Model” discusses how online food delivery
company Swiggy used technology to power its delivery model. Swiggy was the brainchild of two
engineers who were staying away from home and were struggling to get good food delivered at
their doorstep. The duo worked on the idea of hassle-free food delivery, giving rise to Swiggy in
2014. Swiggy initially started taking online orders from customers in the Koramangala locality in
Bengaluru which housed some of the best restaurants in the city. It gradually expanded across
Bengaluru and other Indian cities like Delhi, Pune, Gurgaon, Hyderabad, and more. It launched
its mobile application in May 2015. The case describes how Swiggy created a system that
connected all the three partners in the delivery model – Delivery Executives (DEs), customers,
and restaurant partners – seamlessly. The case also discusses the challenges Swiggy
encountered when it began scaling up in 2016 and the initiatives such as just in time
assignment, next order assignment, and batching that it took to overcome the challenges. The
case concludes with Swiggy’s plans for the future such as diversifying into medicines and grocery
and the use of artificial intelligence technology (AI) for further scaling up and expansion.
Case Study 4: Elephant Pumps: Pump Aid's Business Solution to a Social Problem
Source :
https://www.icmrindia.org/casestudies/catalogue/Leadership%20and%20Entrepreneurship/LDE
N072.htmCase%20Studies.htm
Abstract: This case study is about Pump Aid, an organization that developed and installed a
low-cost pump called the Elephant Pump to tackle the problem of water scarcity in African
countries. Established in 1998, Pump Aid adopted an innovative approach to providing water and
sanitation solutions to communities in rural Africa by installing these cost-effective water pumps
and toilet systems. The Elephant Pumps were built using local materials and were based on the
rope and washer pump technology. As the pump handle was turned, water was drawn up by
plastic washers attached to a rope. The pump could lift water from up to 50 meters deep and
produced one liter of water every second. The pedal powered mechanism also made pumping
water fun as children played on the pumps.

15.CONTENT BEYOND SYLLABUS
1. OYO-From a Startup to a Global Hotel Chain
Introduction
In April 2019, “On Your Own” Hotels and Rooms (OYO), an aggregator of unbranded
hotels and bed and breakfasts (B&B) in India, attracted an investment of around Rs 10.55
to Rs 14.05 billion from Airbnb Inc ., (Airbnb). As per the OYO-Airbnb deal, OYO’s 10,000
villas and homes in India, the UAE, and other markets, would be listed on the Airbnb
platform, expanding OYO’s international reach while strengthening Airbnb’s presence in
Asia.
In February 2019, OYO also marked its entry into Japan with its new service, “OYO LIFE”.
OYO launched its Japan operations through a joint venture with Yahoo! Inc. The
investment in Japan was aimed at bringing OYO’s housing rental product to the country.
The service, OYO LIFE, went live in March 2019 with over 1,000 residential units across
Tokyo enrolling for the service...
The Beginning
In early 2000s, Ritesh Agarwal (Agarwal), a teenager, started selling SIM cards for pocket
money in the small town of Rayagada in the eastern Indian state of Odisha. Like his elder
engineer siblings, Agarwal was an IIT aspirant and he enrolled at Bansal Tutorials in Kota,
Rajasthan, in 2009, to prepare for the IIT entrance examination. While at Kota, Agarwal
often made weekend trips to Delhi by train and attended entrepreneurial conclaves held
there. In Delhi, he was fascinated by entrepreneurs like Rahul Bhatia, Co-founder and Non-
Executive Director of IndiGo Airlines, Siddhartha Lal (son of Vikram Lal), CEO at Eicher
Motors, and many others and the range of consumer products their companies offered.
Coming across these entrepreneurs woke up the entrepreneurial instincts in Agarwal and
he aspired to come up with his own brand of product some day.
Domestic expansion and remodeling of OYO
In August 2014, OYO raised Rs 40 million from Lightspeed Venture Partners (LSVP) and
DSG Consumer Partners, at a pre-money valuation . By the end of 2014, it had expanded
its presence to 350 plus hotels and more than 4,000 rooms in 20 cities like Delhi, Gurgaon,
Noida, Bengaluru, Mumbai, Pune, Goa, Jaipur, Hyderabad, and more. In March 2015, OYO
raised a total of another Rs 1.76 billion from LVSP and Sequoia Capital . With its expansion
into multiple cities, OYO launched its mobile application (OYO App) in April 2015 through
Google Inc.’s (Google) “Play Store”…ororPayPal (9 USD).

Partnerships and acquisitions
OYO established a partnership with travel website Yatra.com in October 2017, to widen its
access to customers. In February 2018, OYO partnered with MakeMyTrip Ltd. and
GoIbibo. Under the partnership, OYO’s chain of hotels were listed and were available for
booking on both the websites.
Global expansion
In 2016, OYO marked its entry into the Southeast Asian market by launching in Malaysia.
Commenting upon the launch, Agarwal said in 2016, “Malaysia is our first port-of-call
given the attractive characteristics of the market such as higher-than-average mobile
penetration and a large internet population. Unbranded hotel room supply accounts for a
majority share of hotel supply worldwide. OYO’s model is suitable for markets with large
share of unbranded budget supply such as South-east Asia, Africa and South America”.
Technology to enhance customer experience
OYO had been investing heavily in technology to make sure of the accuracy of its
services. There was a huge disconnect between demand and supply of quality living
space, forcing travelers and city-dwellers to compromise on location, comfort, and pricing.
Agarwal said, “OYO is using technology and talent to fix this socio-economic problem.”(We
are focusing on this) so that people and property are in perfect equilibrium.
Business Performance
By March 2018, OYO was operating in 8,500 exclusive hotels and 75,000 rooms across its
verticals in India, Malaysia, and Nepal. Post the change in its business model, OYO
witnessed a surge in its bookings. An analyst at OYO opined,.. THE JOURNEY AHEAD
As of 2019, OYO aimed to emerge as the world’s largest hotel brand, overtaking Marriott,
by adding over a million rooms globally in four to five years (2023) . China had
approximately 35 million unbranded rooms (as of FY 2018) and Agarwal saw in that a big
opportunity to scale up further. India, in comparison, had only 4.3 million unbranded
rooms.

16. ASSESSMENT SCHEDULE
Unit Test I :
Unit Test II :
Internal Assessment Test I :
Internal Assessment Test II :
Model Examination :

17.PRESCRIBED TEXT BOOKS &REFERENCE BOOKS
TEXT BOOK:
1. Khanka. S.S., “Entrepreneurial Development” S.Chand & Co. Ltd., Ram Nagar,
New Delhi, 2013.
2. Donald F Kuratko, “Entreprenuership – Theory, Process and Practice”,
9th Edition, Cengage Learning, 2014.
REFERENCES:
1. Hisrich R D, Peters M P, “Entrepreneurship” 8th Edition, Tata McGraw-Hill, 2013.
2. Mathew J Manimala, "Enterprenuership theory at cross roads: paradigms and
praxis” 2nd Edition Dream tech, 2005.
3. Rajeev Roy, "Entrepreneurship" 2nd Edition, Oxford University Press, 2011.
4. EDII “Faulty and External Experts –
A Hand Book for New Entrepreneurs Publishers: Entrepreneurship
Development”, Institute of India, Ahmadabad, 1986.

18. MINI PROJECT SUGGESTIONS (Supports for ED)
1. MSME Market Development Assistance
Office of the Development Commissioner (MSME) has launched this scheme to help
SMEs and small retailers get more attention at international trade fairs and exhibitions.
Companies registered with Directorate of Industries/District Industries Centre can get
up to 100% reimbursement on air-fares and cost of placing their stalls in such
fairs/exhibitions, all over the world.
This scheme is not specific to any industry and applicable to SMEs, retailers, and
startups. For more information, please visit here.
2. Credit Linked Capital Subsidy for Technology Upgradation
Office of the Development Commissioner (MSME) has launched this Government
scheme to help manufacturers, SMEs, and agri-startups to upgrade their existing
machines and technologies.
In case any SMEs registered with State Directorate of Industries have upgraded their
machines, plants with state of the art technology, then they can apply for this grant,
and receive funds to compensate their expenses.
Applicable Industries: Khadi, Village or Coir industry, Manufacturing, Small Scale
Industry, SMEs: For more information, please visit here.
3. Atal Incubation Centres (AIC)
Headed by Atal Innovation Mission, AIC aims to promote innovation and
entrepreneurship in India. Approved startups can get funding up toRs 10 crore for a
maximum period of 5 years, to cover capital and operational expenses.
Industries Applicable: AI, AR/VR, Automobiles, Telecom, Healthcare, Aeronautics,
Aviation, Chemicals, Nano-Tech, Pets, Animals, IT, Computers, Design, Non-Renewable
Energy, Social Impact, Food and more. For more information, please visit here.
4. Bridge Loan Against MNRE Capital Subsidy
Launched by Indian Renewable Energy Development Agency (IREDA), Bridge Loan
Against MNRE Capital Subsidy aims to promote startups engaged in renewable energy
ideas such as biomass power and small hydropower projects. Up to 80% of the project
cost will be funded by IREDA, and the minimum funding allocated shall be Rs 20 lakh.
Applicable Industries: Renewable Energy startups and companies: For more
information, please visit here.

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Educational Institutions. If you have received this document through email in error, please notify the
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