Entpreneurial Management (EM04_03 ) Before starting up a small scale industry - 1

Management
04_3 – Before starting the project
Suhas Dutta

Syllabus coverage
• To understand what constitutes a business opportunity,
scanning the environment for opportunities, evaluation of
alternatives and selection based on personal competencies.
• An overview of the steps involved in starting a business
venture – location, clearances and permits required,
formalities, licensing and registration procedures
• Assessment of the market for the proposed project
• To understand the importance of financial, technical and social
feasibility of the project.
Content (c) Copyright 3nayan Consulting. All rights reserved, 2014 - 18.2

Today, we shall cover
• Product selection criteria
• Market survey, research
• Location selection
• Types of finance

Product selection criteria - internal
Area Description
Cost Compare cost of existing product / service with proposed product
/service
Finance Selection of products through basic, luxury, semi-luxury etc.
depends on the entrepreneur’s financial capacity
Experience
Differentiation Recommended that the selected product is differentiated from the
competitors
Support extended by functional
departments
Coordination of functional departments is necessary
Personal competencies

Product selection criteria - external
Area Description
Customers demand Identify and respond to customer demand, or create it
Competition Identify and do a SWOT for competitors
Suppliers Cautiousness required while selecting suppliers
Technology Need to be updated with technological advancements to have a
better product and efficient production process
Demographic factors Population, age, education of consumers
Economic factors Purchasing power, income, credit availability etc.
Political factors Helpful government, and stability of the government should be
considered for the product
Environmental factors Consider norms and regulations to not have products /services
which are detrimental to the environment
Social factors Produce products / services which do not negatively impact the
sentiments of the society

Market survey and research
• “the systematic gathering, recording and analysing of data
about problems relating to the marketing of goods and services”
Objectives of market research
Know the buyers Measure impact of
promotional efforts
Define probable market
Know consumer response Master external factors Estimate potential buying
power
Know market costs &
profits
Design & implement
marketing control
Estimate future sales

Marketing research areas
Consumer Motivation Market
SalesProductAdvertising & Promotion
PolicyDistributionPricing
Understanding Market
Research for Small Business

Market research

Steps for market research
Drafting Report
Interpreting the Data
Data analysis
Data collection
Sample designing
Developing a research design
Problem formulation
• Problem Formulation
oWhat set of problems are being
addressed?
oIt is one problem or a set of
them?
oWhich one is prioritised?

Drafting Report
Data analysis
Data collection
Sample designing
Problem formulation
• Developing a research design
oMaster plan or a model for
conducting the formal survey
oProvides a framework.
oThe steps are:
‐ Defining the objectives
‐ Planning and determining the
scope
‐ Developing alternative methods of
collection, analysis and
interpretation
‐ Time estimation
‐ Administrative set up
‐ Budgets
‐ Formulating the research proposal

Drafting Report
Data analysis
Data collection
Sample designing
Problem formulation
• Sample designing
oEssential to substantiate and
interpret data in a
representative, proportionate
and adequate way. Some of the
techniques are:
‐ Systematic sampling
‐ Stratified sampling
‐ Sequential sampling
‐ Convenience sampling
‐ Judgement sampling
‐ Random sampling
‐ Cluster sampling

Drafting Report
Data analysis
Data collection
Sample designing
Problem formulation
• Data collection
oComprehensive research
requires both primary and
secondary data.
oMay be collected by surveys,
observations or
experimentation.
‐ Primary data may be unpublished,
but latest and relevant to the
problem
‐ Secondary data may be published
or unpublished. Might not be latest,
but is unbiased.

Drafting Report
Data analysis
Data collection
Sample designing
Problem formulation
• Data analysis
oIs required to assimilate data
oMust be processed within
specified parameters, before
analysis

Drafting Report
Data analysis
Data collection
Sample designing
Problem formulation
• Interpreting the data
oCorrect interpretation
makes the research
meaningful and purposeful
oTechnical competence,
broad understanding and
intimate knowledge of the
problem at hand are
important

Drafting Report
Data analysis
Data collection
Sample designing
Problem formulation
• Drafting the report
oOf the types:
‐ Executive report
‐ Technical report
‐ Data report
‐ Popular report
oSummarizes all the
findings along with
recommendation

Methods and techniques of marketing research
Survey Observation Experimentation
Interviews
Projective
techniques
Methods
Techniques

Method - survey
• Refers to all methods of obtaining the needed information
through asking questions to the respondents.
Method Merits Demerits
Personal
Interviews
•Considered superior
•Maximum information collection
•Accuracy
•Supplementary information collection
possible
•Expensive
•Time consuming
•May be biased
Mail
Interviews
•Economical
•Time saving
•Covers a wide area
•More objective
•Possibly poor responses
•Inaccurate data
Telephonic
Interviews
•Economical
•Unbiased
•Best for collecting data from a specific
group
•Of limited use
•Possibility of no response
•Lack personal observations

Method - observation
• Is usually done by trained observers – intrusively or otherwise.
• Could be done by using:
oHidden cameras
oEye cameras
oCCTVs
oPsycho-galvanometers
oAudio meters etc.

Method - Experimentation
• Usually related to a product or a service of a company
oProduct testing
oPsychological techniques
oConsumer panels
oPilot marketing
oRoad shows etc.

Techniques
In – depth interview
• Not survey based
• Usually a free flowing conversation in a
free atmosphere
• Researcher may probe the sub
conscious mind, feelings, needs,
conflicts, fears, motives, attitudes,
habits and taboos of the respondents
Projective techniques
• Tests conducted wherein
respondents are required to project
their feelings, attitudes,
impressions, motives, reactions etc.
to a third individual.

Steps in setting up a venture
Industry
Selection
Viability /
Feasibility
Arranging know-
how
Prepare project
report
Selection /
Procurement of
premises
Apply to DI for
NOC, registration
and power
allotment
Apply for
Financing – fixed
assets, working
capital, export
finance
Apply to local body
for NOC and
permissions
Apply for Raw
materialQuota
Apply for power
connection
Place orders for
machinery
Recruit staff
Install machinery
Connect
machinery
Procure raw
materials
Trial run

Location

Selection of location
• Considerable emphasis required, to ensure it maximizes
operative efficiency
• Take note of zoning, land use regulations and environmental
issues
• Location of project often determined by government licensing
regulations
Selection of
region
Selection of
community
Selection of
exact site
Selection of
optimum site

Selection of region
Raw material •Should have adequate and continuous supply of raw material in geographical
proximity
•Should have relaxed quotas on raw material procurement
Motive power •Should have cheap and un-interrupted power
Market •Access to market, and nearness along with market behaviour
Transport •Availability of transportation facilities and suitable storage location near railway
stations, ports, airports etc.
Climate •Climate may be suitable for production, but not entirely fit for labour
Government
policy
•Tariff protection, incentives and subsidies etc

Selection of community
Labour •Skilled labour availability
Water •Adequate supply of water, and cheap
Waste disposal •Facilities required for treatment of effluents
Civic amenities •Schools, colleges and hospitals required in the vicinity for employees
Ecology &
environmental factors
•Norms need to be adhered to
•Extra efforts may earn carbon credit points
Political conditions •Stability required for industrial growth

Others
Exact site
• Topography
• Soil conditions
Optimum site
• Urban
• Rural
• Sub-urban

Financing

Types of finance
• Finance required for a period up to one year
• Includes borrowings for working capitalShort term
• Finance required for a period of one to five years
• Used for renovations, replacement and modificationsMedium term
• Finance required for five to twenty years
• For establishment of new ventures and investment on
fixed assets
Long term

Sources of finance
Internal sources
• Owners’ capital
• Deposit and loans given by others
• Personal loans taken by entrepreneurs
on LIC policies, PF, NSC’s
• Mortgage loans
External sources
• Borrowings from banks
• From specialized financial
institutions like IDBI, ICICI, IFCI etc
• From government and finance
corporations e.g. LIC, SFCs, HDFC,
HUDCO, NABARD and SIDBI

Further readings / viewings
• History of corporations

Assignments presentation

Next 3 weeks
• No class on 26th Sep, 3rd Oct and 10th Oct.
• Assignments will need to be done
oAssignment 3c
oAssignment 4a
• Presentation of work done so far. Assignments 03, and o4a on
17th October
• 25th September, monthly test
• Your current grades for the class will be sent out to the principal
at the end of this week

Entpreneurial Management (EM04_03 ) Before starting up a small scale industry - 1

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