IGNOU : BCOM : BCOS 185 - Entreprenuership ( NOTES FOR FREE )

 

Commerce ePathshala NOTES

Important Questions & Answers

IGNOU : BCOM

BCOS 185 - ENTREPRENUERSHIP

 

 

Q – State the Role of Entrepreneurship in Economic Development of a Nation.

Ans. role of entrepreneurship in economic development of a nation can be discussed as follows:

· Creation and distribution of wealth: they mobilise resources which otherwise would remain idle, earn money and distribute it to society in the form of rent such as interest to capital (Investor’s rent) Salaries and wages to human resources, rent to other inputs of factors of production

· Employment generation: entrepreneurs while establishing and managing their enterprises generate and provide employment to people in the society.

· Balanced regional growth and development: Entrepreneurs locate their businesses even in remote and less developed area this leads to growth in industry and other businesses which further brings improvement and development in infrastructure such as rail, road, airports, electricity, water, schools, hospitals holds etc. That is why entrepreneurship is called as growth accelerator.

· Contribution in GDP: Enterprises, especially MSMES contributes significantly in the GDP of India. More business units use more resources, resultantly National Income, and per capita income also increases.

· Increase in standard of living: by bringing in innovation entrepreneurs make huge contribution in improving the standard of living. For example, mobile phone services are so less that each and every household, irrespective of their economic status, is using mobile phone services now a days which was affordable nearly two decades ago.

· Increase in international trade: In the want of getting access to the bigger market, enterprises cross boundaries when they feel that domestic market is covered and saturated and they want to expand further. They make their reach in foreign market. This increases the export of the country.

 

 

Q – State the Characteristics of an Entrepreneurs.

Ans. Characteristics of an Entrepreneur

Definition of an entrepreneur is not permanent, we can only understand and keep on defining the term by learning more about different types of entrepreneurs, what do they do, why do they do and how do they do. Given below are the characteristics found usually in entrepreneur:

·       They are visionaries and agile.

·       They are innovative and creative.

·       They try to solve a problem.

·       They are passionate about their business and work.

·       They are the risk takers and have the appetite for taking calculated risk

·       They have perseverance and resilience

·       They are determined and have ability to overcome hardship.

·       They are the leaders.

·       They are focused and action oriented

·       They are accountable and responsible.

·       They have the ability to sense the environment and convert adversity or problem into an opportunity by providing solution to it.

 

 

Q – Comment on - “Innovation is the key factor for effective entrepreneurial success”.

Ans. The rates of start-up failures are much more than successes. Innovation is the key factor for effective entrepreneurial success. Innovation is the application of knowledge to produce new knowledge. What defines an entrepreneur is their attitude to change: ‘the entrepreneur always searches for change, responds to it and exploits it as an opportunity’. To exploit change, entrepreneur innovates (Drucker 2014). Channels and sources of innovation and its commercial acceptability lies in the better understanding of the whole system or ecosystem. It is pertinent to understand innovation, its sources and its linkages with prevailing entrepreneurial ecosystem being the key factor in growth of start-up firms. Innovation has an anchor role to find solutions for problems we face in our day to day life as individual, society, states or any stakeholder of interest. Various known researchers in economics literature put innovation as a default conditions for growth of effective entrepreneurship. Schumpeter defined an entrepreneur as an innovator. In his words, “The entrepreneur in an advanced economy is an individual who introduces something new in the economy-a method of production not yet tested by experience in the branch of manufacturing, a product with which consumers are not yet familiar, a new source of raw material or of new markets and the like”.

Hence, entrepreneurs are mostly actors who create innovation to find solutions. The innovation, creativity and risk bearing are an integral part of being an entrepreneur. It involves the ability to create and conceptualize something new, which can consist of anything from a new product to a new distribution system to method for developing a new organizational structure. Entrepreneurship centers on novelty and the generation of variety in the marketplace and means that the processes of innovation are at work. Innovation can take various forms like new product introduction, new services, new methods of operation and production, exploration of new markets, re-imagination of business models, reorganization of industry structure through disruptive strategies etc.

Innovation can happen through multiple ways. They are: -

-        Invention: Invention means development of a new product, service or process, also termed as radical innovations.

-        Duplication: Duplication means replication of existing product, tweaked to create a new look, feel or utility. This is also called as incremental innovation.

-        Extension: Extension is augmentation in existing product, service or idea to stretch the scope of usage or utility.

-        Synthesis: Lastly, the creation of new item or service based on collage of existing multiple innovations, concepts and elements.

 

 

Q – State the Ecosystem Challenges in Entrepreneurship.

Ans. ECOSYSTEM CHALLENGES

Though entrepreneurship and entrepreneurial ecosystem are a necessity for the growth of trade and economy and the overall progress of the nation, yet there are many barriers that hamper their growth. The challenges are:

1. Policy Barriers: The area of concern include regulatory or policy barriers, identified by bureaucratic red tape, tax compliance burdens, regulatory requirements and policy indecisiveness and weaknesses in the overall business environment.

2. Access to technology and Intellectual Property Rights issues: Access to technology, patent and copyright issues, are some of the other problems plaguing entrepreneurs, in addition to problems caused by lack of access to markets, effective transport, communication and supply chain and distribution systems, cultural and social barriers and weak or inefficient judicial process.

3. Intrinsic challenges: The challenges can also be categorised as intrinsic and extrinsic. The intrinsic reasons consist of factors like societal bias towards specific groups/communities, illiteracy and lack of capability, limited family backing, etc.

4. Extrinsic Challenges: The extrinsic factors include organizational challenges such as access to financing and investment, natural resources, limited market or access to potential market, human resource etc. There are also environmental factors that form part of the extrinsic factors and they can be categorised into socio-cultural factors like beliefs, attitudes and values of a society towards the subject of entrepreneurship are known as the entrepreneurial culture of that society. In addition to this are regulatory factors and government licensing and policies and associated factors like bribery, corruption etc.

Since no single person own the ecosystem as there are multiple stakeholders of varied types, their goals also vary depending on the nature of their role and scope in the system. Hence, we cannot say that entrepreneurial success or job creation is the only goal for states to develop a conducive entrepreneurial ecosystem. For government it may be state revenues and job creation. For financial institutions it may be their own profitability and growth. For larger corporates, it may be their own sustainability and to assure new technology solutions in their targeted markets or for their clients which are getting developed, tested and tried in various technology incubation centers or accelerator sites. Hence multiple stakeholders must benefit in order for an entrepreneurship ecosystem to be self-sustaining.

 

 

Q – Describe the recent trends in women Entrepreneurship.

Ans. Recent Trends in Women Entrepreneurship

With the raising awareness and support from government, institutions and individuals, face of women entrepreneurship development is witnessing positive and encouraging trends. Let us discuss that.

One of the common reasons for women to take up entrepreneurship is to lead an independent life with self-confidence and self-respect. Other reasons include aspiration for economic independence, management and technical literacy, family support, economic necessity, community influence, NGO influence, family business and government support. Growing literacy and professional skills of women in technical, vocational, industrial, commercial etc., drives women to take risks with confidence and set up businesses. They are also motivated to acquire specialised education so as to qualify themselves to be self-employed in some kind of trade, occupation, vocation or business. For example many women after becoming professionally qualifiedin medical sciences, engineering, etc. set up their own clinics or set up to provide services. They acquire training in the areas of weaving, stitching, grooming etc. and set up their own business. Sometimes family circumstances create reasons for females to carry on businesses and many times they spin off new entities or scale legacy businesses to new heights. Similarly, there are lot of women entrepreneurs in smaller towns or even in bigger cities who independently or mostly in groups set up cottage firms and produce products which require competencies they already have like snack items, pickles, packed food, parlors, etc.

 

 

Q – State the Features of Social Entrepreneurs.

Ans. Features of Social Entrepreneurs

1. Social entrepreneurs are change agents in the social sector.

2. Social entrepreneurs pursue social value in addition to the private value.

3. They identify new opportunities to explore possibilities of service for the society and planet.

4. They pursue innovation to find solutions to existing unsolved social problems.

5. They adapt their capability models and organizational structures to respond to the social challenges.

6. They are open to new insights in their endeavor for new solutions and fulfill their vision.

7. Social entrepreneurs also exhibit a heightened sense of accountability to the intended audience of their services and solutions.

8. The target beneficiaries of such enterprises could be mostly people in lowest base of pyramid, discriminated communities, ecologically important constituencies important for overall sustainability, orphans, old age people, economically weaker and sick people, physically challenged and so on.

9. Types of innovations deployed include new products/services, new methods of production, new markets, new inputs or new organizational forms.

 

 

Q – State the importance of Rural Entrepreneurship.

Ans. Importance of Rural Entrepreneurs

Rural entrepreneurs play a vital role in the overall economic development of the country. The growth and development of rural industries facilitate self-employment, results in wider dispersal of economic and industrial activities and helps in the maximum utilisation of locally available raw materials and labour. Following are some of the important role which rural industries play in ameliorating the socio-economic conditions of the rural people in particular and the country in general:

1. Generates Employment Opportunities: Rural entrepreneurs play a vital role in generating employment opportunities in the rural areas where there is already disguised and seasonal unemployment. They make use of surplus labour which is abundant in Indian rural areas.

2. Earning Foreign Exchange: A rural entrepreneur helps in protecting and promoting arts and crafts and preserves the rich heritage of rural India. They also helps to foreign exchange as Indian handicrafts are famous all over the world.

3. Developing Rural Youth: Rural entrepreneurship helps and provokes rural youths to stand away from crowd and not become an addition to the que of unemployed people. As rural entrepreneurs they may give employment to others and work for the growth and development of their village.

4. Improved Standard of Living: By generating employment opportunities in rural areas will also increase the earnings of the people of these areas thereby increasing the standard of living of the people of rural areas.

5. Balanced Regional Growth: Rural entrepreneurs also facilitates in promoting balanced regional growth in India. These day industries are being set up in these areas, which will lead to development of these areas. The establishment of industries helps in raising income or raises the standard of living of the people of these areas with respect to urban areas. Thus, the balanced regional growth may be promoted.

6. Checking Migration: Rural entrepreneurship also helps in checking migration activities of people from rural to urban areas in search for work as the work will already be available in their areas with the development of rural entrepreneurship.

 

 

Q – Comment on the Following.

1. Ecopreneurship

2. techno Entrepreneurship

Ans. 1. Ecopreneurship

It means entrepreneurial processes where entrepreneur ventures into producing goods and services which focus on environmental benefits like recyclable products to depletion of natural resources, greener products which save energy consumption, services that care for pollution, animal life, trees, flora and fauna and so on. These entrepreneurs set up businesses that solve environmental problems or operate sustainably. Schuyler, Gwen (1998) defines ecopreneurs as “entrepreneurs whose business efforts are not only driven by profit, but also by a concern for the environment.” It is also known as environmental entrepreneurship and eco-capitalism. It is becoming more widespread as a new market-based approach to identifying opportunities for improving environmental quality and capitalizing upon them in the private sector for profit. There is growing trend globally towards society and state wanting goods and services producers to be more responsible towards ecological challenges. In many states in India there is ban on use of plastic bags and encouragement for use of ecofriendly products and adoption of environment friendly processes. Hence, there is a growing market segment which creates opportunities for commercial entities to sustain economically as well as address ecological concerns.

TECHNO ENTREPRENEURSHIP

Techno-entrepreneurs use technologies as core of their business model and capture economic value by offering better solutions for existing problems or solutions for unresolved problems. It requires identification of opportunities, capabilities, mobilization of resources and engagement with right market segment through right channels to capture value. Since technology advances is happening at a rapid pace and many technologies keep disrupting, the biggest challenge for techno entrepreneurs is dealing with this uncertainty. Hence techno entrepreneurs should be able to anticipate changes and have the agility to respond in time.

 

 

Q – What are Entrepreneurial Competencies ?

Ans. entrepreneurial competencies are:

1. A set of abilities and skills that are required to be in a budding entrepreneur for success of the venture. They may possess these skills and abilities or acquire these.

2. Set of skills and abilities that encourage them to take initiative and be creative and innovative.

3. Ability to develop, organise and manage a business venture that is established by the entrepreneur.

4. Ability to foresee risks, analyse them and take calculated risk.

5. Abilities and skills to negotiate network and make effective communication.

6. Interpersonal skills and hunger for achievement, affiliation and power.

7. Ability and skill to sense the environment and identify an opportunity which is workable and profitable.

8. Leadership skills, problem solving attitude and strength to manage risk.

 

 

Q – Sate the benefits & Challenges of Innovative Competency.

Ans. Benefits of Innovative Competency:

Having innovative competency offers the following benefits to the enterprise:

1. Mostly, an innovative competency across functions and processes helps entrepreneurs to perform better in a competitive situation.

2. It helps to sustain because innovative competencies across functions gives a larger scope for enterprise to sustain based on innovation.

3. In a highly competitive market situation, competitors need to consistently differentiate to retain, penetrate and scale. Hence, it becomes important to have innovative competency to offer something different.

4. To sustain in the global market one must make strategic and innovative moves.

5. Innovation is important and critical to ensure smooth running of organisations due to evolving work place dynamics.

6. As you are aware that the tastes and preferences of customers keep on changing, therefore, innovation facilitates in satisfying the consumers in new ways.

It has been observed that many technology start-ups flop because of the lack of innovative competencies in managing commercial success or business governance or partnership management, and other aspects of running an enterprise in spite of their competencies to find an innovative product or service.

Challenges of Innovative Competency:

It is true that innovation is important but it also has certain challenges and risks associated with it.

1. Technological failure is one of the major challenges of innovation. To overcome this challenge, it is important for the entrepreneurs to carry out number of trials for the new product before it is implemented.

2. The other risk is the financial burden on the business enterprise. Innovation comes with a cost. Usually an innovative product gives the returns in the long run, therefore the enterprise face a major challenge of finance. The enterprises, therefore, are required to assess their financial position before taking up any innovative procedure.

3. The other challenge is the market failure. It is very much possible that an innovative product despite many trials does not give the returns as expected. Redundancy is another challenge for an innovative product. The market changes constantly with new technology coming up every now and then. By the time the innovative product is launched in the market, it becomes redundant due to technological upgradation. Therefore, it is imperative for the entrepreneurs to keep abreast with the technology to avoid such risks.

4. Lack of structural and financial capacity of implementation is another challenge for entrepreneurs. This challenge is usually for the start-ups as they do not have a sound base. In this case they can look for the partners who are sound. Organisational risks are associated with innovation.

5. Sometimes the entrepreneurs tend to focus all its attention on the innovation. This hinders day to day activities of their enterprise. Therefore, it is important for entrepreneurs to have separate innovation centres so that the daily activities of the enterprise are not hindered.

6. There are unforeseen risks associated which are unprecedented like political events etc. The entrepreneurs need to have a contingency plan for the same rather than being over ambitious.

The challenges are definitely a part and parcel of a business venture but when overcome, these turn into opportunities. Innovation does help the entrepreneurs in many ways. Innovation does provide name and recognition to the innovating entrepreneurs.

 

 

Q – What do you mean Business Leadership ? State It’s Importance.

Ans. BUSINESS LEADERSHIP

As mentioned above, entrepreneurs should have leadership competency to lead their teams effectively. Focus on managerial competency for entrepreneurs have been there since long. However there is sufficient evidence to show that leadership competence differentiates scale of success. Business leadership is defined as the ability of an individual, group or organization to "lead", influence or guide other individuals, teams, or entire organizations to achieve the shared goals.

Entrepreneurs should have ability to inspire and convince others. They need to carry a persona and conviction about the enterprise strength to achieve the set goals. That should have ability to transfer this conviction across the enterprise members to have the necessary motivation required to face uncertainties and challenges.

Entrepreneurs, besides other qualities, resources and good business plan, should be able to lead their teams. They should take up the challenges where the entire team is supportive of the initiatives taken by the leader and can put their trust in their leader.

Characteristics of Business Leadership:

Business leadership has the following characteristics:

1. It is a continuous process whereby the entrepreneur influences, guides and directs the behaviours of his team, employees and key partners.

2. The entrepreneur is able to influence his team and partners behaviour at work due to the quality of his own behaviour as leader.

3. The purpose of business leadership is to get willing cooperation of the work group in the achievement of specified goals.

4. The success of a entrepreneur as leader depends on the acceptance of his leadership by the team, employees and partners.

5. Business leadership requires that while group goals are pursued, individual goals are also achieved.

 

 

Q – State the Importance of Communication.

Ans. Importance of Communication:

Communication plays a very important role in the success of a business enterprise which has been discussed below:

1. In early stages of venture funding, investors allow very less time to make investor pitches where entrepreneur have to communicate their entire business proposal in a smaller time slot sometimes in few minutes. Hence, articulation of the proposal in fewer slides requires smartest skills of communication to attract the investor’s interest.

2. Similarly, while negotiating agreements with the partners, communication skills can make a big difference. Right selection of words, responses, body language and articulation can help make deals more favourable.

3. It facilitates putting the right organizational structure in place by allocation of roles and responsibilities communicated in a manner which is convincing, appreciating and gives sense of ownership.

4. Effective communication contributes a great deal to higher efficiency in job performance. It ensures willing cooperation of others due to the close understanding of ideas and instructions established through communication. Indeed a direct relationship exists between the effectiveness of communication and efficiency in an organization.

5. Successful entrepreneurs follow good branding practices as a long term strategy for growth and sustainability. Communication competency is the key ingredient to develop good public relations or desirable brand influence for the organization. Branding covers all aspects of business enterprise. The branding promise needs to be followed through action in terms of efforts, product attributes and processes of the organisation to stick to the promise made. Hence, external and internal communication needs to be in synergy to have compelling brand effect and secure a positive attitude towards the enterprise products and services.

6. Communication is also key competency within the competency grid and most of the other competencies have dependencies on this competence. For example, leadership competence, negotiation skills and interpersonal skills are dependent on communication competency.

 

 

Q – State the Effective communication for success of an enterprise.

Ans. Effective Communication for Success of an Enterprise:

The principles or guidelines to making communications effective are of a general nature, operationally speaking, a number of more specific suggestions can be made to ensure the effectiveness of communications.

1. Regulating the flow of communications: Planning communication should involve determining the priority of messages to be communicated so that entrepreneurs may concentrate on more important messages of high priority. Similarly, incoming communication should be edited and condensed, if possible, to reduce the chances of overlooking or ignoring important messages received.

2. Feedback: Along with each communication there is need for feedback, that is, communication of the response or reaction to the initial message. Feedback may include the receiver’s acceptance and understanding of the message, his action or behavioural response, and the result achieved. Two way communications is thus considered to be more helpful in establishing mutual understanding than one-way communication.

3. Language of the message: Use of appropriate language is essential for effective communication. While preparing the message, the sender must keep in view the climate, as well as the ability of receiver to interpret the message accurately. Abstract ideas should be explained and vague expressions avoided. He must keep in view tire semantic problem, that is, the possibility of particular words having more than one meaning. Experimental studies have shown that oral communication accompanied by its written version is more effective in bringing about the desired response.

4. Importance of listening carefully: Listening to verbal messages carefully implies an active process. Half-hearted attention to the communication is often the cause of misunderstanding and confusion. An entrepreneur has to be patient, mentally composed, and avoid distractions while receiving the message. He should be in a position to concentrate on the message and seek clarification, if necessary. On the other hand, the sender of the message must also be prepared to listen to what the receiver has to say, and respond to his questions, if any.

5. Restraint over emotion: Strong feelings and emotional stress on the part of either the sender or receiver of messages are serious handicaps in the communication process. To avoid any negative impact of emotion on the content of the message, the sender may defer the communication for some-time or consult to exercise restraint over his psychological feelings to avoid misinterpreting the message and to be able to respond to it with a composed mind.

6. Non-verbal signals of compliance: Verbal messages are generally accepted orally by the receiver. But whether action will follow the acceptance of the message is not certain. It is, therefore, suggested that in the case of verbal communication the sender should observe the action of the receiver to ascertain whether the actions are in conformity with the intent and understanding of the message.

7. Mutual trust and faith: No amount of seriousness of the parties involved can make the process of communication effective unless there is mutual trust and faith between them. Entrepreneurs have to cooperate for the purpose so that individuals feel free to make suggestions and correct each other’s views without misunderstanding.

 

 

Q – State the techniques for Idea Generation.

Ans. TECHNIQUES OF IDEA GENERATION

Idea generation is described as the process of creating, developing an abstract concrete or visual ideas and anyone can participate in generating new ideas. Let us learn the techniques of idea generation.

1. Brainstorming: Brainstorming is a creative problem-solving technique and also an informal approach to business ideas generation. It encourages people to come up with thoughts and ideas that can, at first, seem a bit crazy. The sustainable sincere effort is required for the conversion of crazy idea into real business opportunities. Some of these ideas can be crafted into original, creative solutions to a problem, while others can spark even more ideas. The objective of brainstorming is to come up with as many ideas as possible and therefore, during brainstorming sessions, there is no criticism, rewards or judgements. For more successful results, brainstorming should be conducted with the help of experts.

2. Brain Writing: Brain writing group activity. It is a kind of written brainstorming. Unlike brainstorming, which is verbal and where the ideas are being generated spontaneously, brain writing give more time to the participants to generate ideas. Brain writing is silent technique where the group of people (usually six) are required to write minimum three ideas on special forms or cards which are circulated to each participant for a pre duration.

3. Focus Groups: Focus groups have been used for a variety of purposes and have widely used for idea generation. The group is lead depth discussion. The group usually consists of 8 group, the role of moderator is very much important the group towards the generation of fresh ideas for new product development. For example, a focus group created by a car manufacturer to discuss about the possible improvements in the existing model of its cars. Focus generation but also in idea screening.

4. Mind mapping: Mind maps are an idea generation strategy to produce ideas effectively by association. It is a powerful graphical technique which is used to translate whatever is running into the minds into a visual picture. The process of mind-mapping involves penning down a central theme and coming out with new and associated ideas that branch out from the central idea. These branches form a connected nodal structure.

5. SCAMPER: SCAMPER is an activity-based thinking process that helps to generate diverse ideas. SCAMPER is an acronym which stands for: S-Substitute; C-Combine; AAdapt; M-Modify; P-Put to another use; E-Eliminate; R-Rearrange. Substitute means thinking about substituting different parts of the product or its processing for something else. Combine means thinking about combining different products’ features or processes in order to develop completely new product. Adapt signifies adapting different measures according to the situation. Modify signifies modifying features, physical qualities, size or price of existing product. Put to another use means using the existing product for some another problem or as a by product. Eliminate signifies eliminating non-essential components and reducing time/efforts and cost. Rearrange means rearranging the components or using different order.

6. Problem Inventory Analysis: Problem Inventory analysis though seems similar to focus group method, yet it is somewhat different from the latter in the sense that it not only generates the ideas, but also identifies the problems the product faces. The procedure involves two steps: One, providing consumers a list of specific problems in a general product category. Two identifying and discussing the products in the category that suffers from the specific problems. This method is found relatively more effective for the reason that it is easier to relate known products to a set of suggested problems and then arrive at a new product idea.

7. Free Association: Free association is a method of developing new idea through a chain or a cycle of word association. The process involves a word relating to the problem being written down, then another and another. Free association contains elements of several other idea-generating techniques and depends on a mental ‘stream of consciousness’ and network of associations that are of two types: 

·       First is Serial association which starts with a trigger, you record the flow of ideas that come to mind, each idea triggering the next, ultimately reaching a potentially useful one.

·       The second is Centred association, (which is close to classical brainstorming) prompts you to generate multiple associations to the original trigger so that you ‘delve’ into a particular area of associations.

 

 

Q – Describe the New Product Development Process.

Ans. Entrepreneurs need to be concerned with formally evaluating an idea throughout its evolution. Care must be taken to be sure that idea can be the basis for a new venture. This can be done through careful evaluation that results into go or no-go decision at each of the stages of the product planning and development process. The new product development is done through following stages:

1.     STAGE 1 - Idea generation

The new product development process starts with idea generation. Idea generation refers to the systematic search for new-product ideas. Typically, a company generates hundreds of ideas, maybe even thousands, to find a handful of good ones in the end. Two sources of new ideas can be identified:

Internal idea sources: The company finds new ideas internally. That means R&D, but also contributions from employees.

External idea sources: The company finds new ideas externally. This refers to all kinds of external sources, e.g. distributors and suppliers, but also competitors. The most important external source are customers, because the new product development process should focus on creating customer value.

Various examples exists in the market place where observations made by the entrepreneur both inside the country and outside the country with the focus on customers have helped them in idea generation. For example, the entrepreneur Kishore Biyani of Future Group when entered into the business could foresee that consumers of today are looking for casual wears and therefore, started offering denim jeans in the market.

2.     STAGE 2 - Idea Screening

The next step in the new product development process is idea screening. Idea screening means nothing else than filtering the ideas to pick out good ones. In other words, all ideas generated are screened to spot good ones and drop poor ones as soon as possible. While the purpose of idea generation was to create a large number of ideas, the purpose of the succeeding stages is to reduce that number. The reason is that product development costs may increase substantially in the later stages. Therefore, the company would like to go ahead with only those product ideas that will turn into profitable products. Dropping the poor ideas as soon as possible is, consequently, of crucial importance.

 

3.     STAGE 3 - Concept Development and testing

Today, it is increasingly common for companies to run some small concept test in a real marketing setting. The product concept is a synthesis or a description of a product idea that reflects the core element of the proposed product. Marketing tries to have the most accurate and detailed product concept possible in order to get accurate reactions from target buyers. Those reactions can then be used to inform the final product, the marketing mix, and the business analysis. New tools leveraging technology for product development are available that support the rapid development of prototypes which can be tested with potential buyers.

4.     STAGE 4 - Marketing strategy

At this stage, a marketing strategy will be created for the selected concept. Marketing strategy is created in three steps. These steps are:

·       Identify in which market will the new product concept can be sold, how much profit is targeted from new product concept and what are its planned value proposition, sales and market share for the first few years.

·       Identify the price at which new product concept will be sold, how will it be distributed in the market and what will be the marketing budget for the first year and so on.

·       Identify how much new product concept will be sold in the long term, how much profit is targeted from long-term sale and what will be long-term marketing mix strategy.

This stage is very crucial because as Napoleon said that “Wars are not won in the battle field rather on the piece of paper. Similarly, the entrepreneur is required to craft marketing strategy for the business concept finalised and then go for its implementation so that more or less the success is guaranteed.

5.     STAGE 5 - Technical and Marketing Development

A product that has passed the screening and business analysis stages is ready for technical and marketing development. Technical development processes vary greatly according to the type of product. For a product with a complex manufacturing process, there is a lab phase to create specifications and an equally complex phase to develop the manufacturing process. For a service offering, there may be new processes requiring new employee skills or the delivery of new equipment. These are only two of many possible examples, but in every case the company must define both what the product is and how will it be delivered to many buyers.

While the technical development is under way, the marketing department is testing the early product with target customers to find the best possible marketing mix. Ideally, marketing uses product prototypes or early production models to understand and capture customer responses and to identify how best to present the product to the market. Through this process, product marketing must prepare a complete marketing plan—one that starts with a statement of objectives and ends with a coherent picture of product distribution, promotion, and pricing integrated into a plan of marketing action.

6.     STAGE 6 - Test Marketing and Validation

Test marketing is the final stage before commercialization. The objective is to test all the variables in the marketing plan including elements of the product. Test marketing represents an actual launching of the total marketing program, done on a limited basis. Initial product testing and test marketing are not the same. Product testing is totally initiated by the producer. He or She selects the sample of people, provides the consumer with the test product, and offers the consumer some sort of incentive to participate. In product testing, there are two types of tests which are conducted called alpha and beta testing. In alpha testing, the product is subject to checking of the product’s standards/ specifications and is done in the laboratory. In Beta testing, the product is put to test in a simulated situation. If the product passes through all the tests when the product is made available for actual use that shows that product is free from all technical problems because of which the product may fail in the market place. For example, in case of car the car is subject to alpha testing, by checking the controls on the apparatuses in the laboratory and once the whole car is ready then the speed of the car, RPM of the engine, breaking power, etc. is all an outcome of simulation test called beta testing and a sticker is placed on the car titled “PDI done” i.e. pre delivery inspection completed.

Test marketing on the other hand, is distinguished by the fact that the test group represents the full market, the consumer must make a purchase decision and pay for the product, and the test product must compete with the existing products in the actual marketing environment. For these and other reasons, a market test is an accurate simulation of the broader market and serves as a method for reducing risk. It should enhance the new product’s probability of success and allow for final adjustment in the marketing mix before the product is introduced on a large scale. In case of test marketing, once the product is finalised, a small geographical area is identified for the target market and in that area the product is sampled to the consumers to use the product. After a week or so their feedback is obtained to find out the shortcomings in the product reported by the consumers. These shortcomings are then removed in the laboratory and once no further problems are expressed by the consumers at the time of using the product, it is assumed that now the product is fit for final launching and commercialization.

7.      STAGE 7 – Commercialization

The first thing to be done at this stage is determining the time when new product concept will be commercialized or introduced to the market. Then, at which scale or capacity, new product concept will be introduced to the market formally i.e., at a small scale such as a city, medium scale such as a region, or at a big scale such as the national market, or the international market. Usually, most businesses prefer to introduce new products into the market at small or medium scales and expand the market in the process as introduction of new product at a big scale requires more capital, confidence and capacity which only few businesses have. This stage requires patience on the part of the entrepreneur and is the beginning of the recovery of the investment made by the entrepreneur in the form of return from the sale of the product.

 

 

Q – Explain the Following –

1.     SWOT ANALYSIS

2.     PESTLE ANALYSIS

3.     QUEST ANALYSIS

Ans.

1.      SWOT ANALYSIS

SWOT (strengths, weaknesses, opportunities, and threats) analysis is a framework used to evaluate a company's competitive position and to develop strategic planning. SWOT analysis assesses internal and external factors, as well as current and future potential.

A SWOT analysis is designed to facilitate a realistic, fact-based, data-driven look at the strengths and weaknesses of an organization, initiatives, or within its industry. The organization needs to keep the analysis accurate by avoiding pre-conceived beliefs or gray areas and instead focusing on real-life contexts. Companies should use it as a guide and not necessarily as a prescription.

SWOT Question and Checklist

We can conduct the SWOT analysis by answering the group of similar questions (depending on the context or nature of the problems you would like to solve) for each of the four components:

Strengths

• Identify skills and capabilities that you have.
• What can you do particularly well, relative to rivals?
• What do analysts consider to be your strengths?
• What resources do you have?
• Is your brand or reputation strong?

Weaknesses

• What do rivals do better than you?
• What do you do poorly?
• What generates the most customer dissatisfaction and complaints?
• What generates the most employee dissatisfaction and complaints?
• What processes and activities can you improve?

Opportunities

• Where can you apply your strengths?
• How are your customers and their needs changing?
• How is technology changing your business?
• Are there new markets for your strengths? (e.g. foreign)
• Are there new ways of producing your products?
• Are your rivals' customers dissatisfied?

Threats

• Are customers able to meet their needs with alternative products?
• Are customers needs changing away from your product?
• What are your competitors developing?
• Are your rivals improving their product offerings or prices?

 

2.     PESTLE ANALYSIS

PESTLE or PESTEL Analysis is a tool which helps companies have a ten thousand foot view of the macro environment it is operating in. PESTEL is an acronym and the letters stand for Political, Economic, Social, Technological, Environmental and Legal. Also, this framework helps to keep track of all the changes happening in the environment.

Moreover, this framework has undergone many changes and also has many variations. Previously it was only PEST analysis. Then the legal environment was included later. At the present time, a debate is going on about including Ethics in the framework.

Factors of PESTEL Analysis

Political

These include factors that affect the extent and the impact of the government on the economy of a country. For example, the laws, taxation policies, monetary policies, etc are all a part of the political environment. Additionally, some political factors to consider are as follows:

·        The political stability of the country

·        Political ideologies of the government

·        Taxation policies

·        Regulatory practices and governing bodies

·        Term of the government and any expected changes in the future

·        Influential political leaders and their ideas

Economic

Economic factors have a huge effect on the firm and its success. Some of the factors to consider when monitoring the economic environment are as follows:

·        Economic growth

·        The current phase of the Trade Cycle (Expansion, Depression, etc)

·        Inflation rates

·        Unemployment Rates

·        Current Interest Rates prevailing in the economy

·        Important factors of the specific industry

·        Consumer Spending potential

 

Social

Everything that goes on in a society greatly affects the organisation. Therefore, it is important to analyse social factors while studying the social environment. For example,

·        Demographics of the market

·        Consumer Buying Patterns

·        Religious and Cultural factors

·        State and influence of the media

·        Lifestyle trends in place at the time

 

Technological

The changes in the technological environment can be either an opportunity or a threat to the firm. Hence, some technological factors to look for are:

·        New production technology

·        Manufacturing technology (increase in output, lowering of production cost, etc.)

·        New innovations

·        Intellectual Property, Patents, etc.

·        Maturity of technology

 

Legal

This refers to the laws made by the government that the company has to follow in order to continue its operations. For example,

·        Business Laws

·        Environment Laws and guides

·        Health and safety guidelines

·        International Trade Agreements and Treaties

·        Regional/Local Laws and Circulars

 

Environmental

These factors affect industries and their ability to function smoothly. For example, such factors are:

·        Environmental Issues

·        Energy/Power Consumption

·        Insurance Policies

·        Safe Waste Disposal

·        Dealing with hazardous material

 

3.     QUEST

QUEST is an acronym for Quick Environment Scanning Technique. This method uses scenario’s Building for environmental analysis:

1. Managers make observations about major events and trends in the environment.

2. They speculate on wide range of issues that are likely to affect the future of the organisation.

3. A report is prepared summarizing the issues and their implications to the firms two or three scenarios.

4. The report of scenarios is required by strategy part based on which they identify feasible options.

 

 

Q – State the Challenges faced by Start-ups in India.

Ans. CHALLENGES FACED BY START-UPs

Startups are exploding everywhere at the moment like never before. Some of these companies are able to make a significant impact on the global stage, while others ultimately fail. Founders have witnessed time and time again that the road ahead is not easy. In this section, we will discuss the main challenges faced by start-ups.

1. Lack of Financial Resources: Availability of finance is critical for the start-ups and is always a problem to get sufficient amounts. Startups are often considered as high-risk loan areas and therefore banks are often skeptical to provide them loans. Most of startups start working with their own funds but the requirement starts increasing as the business progresses. Scaling of business requires timely infusion of capital. Proper cash management is critical for the success of the startups.

2. Poor Revenue Generation: Several start-ups fail due to poor revenue generation as the business grows. As the operations increase, expenses grow with reduced revenues forcing startups to concentrate on the funding aspect, thus, diluting the focus on the fundamentals of business. Hence, revenue generation is critical. The challenge is not to generate enough capital but also to expand and sustain the growth.

3. Lack of Skilled Personnel: Start-ups normally start with a team consisting of trusted members with complementary skill sets. Usually, each member is specialized in a specific area of operations. But as the start-up grows, the team may struggle to manage the operations effectively. Thus, it is essential to recruit the right employees, not having the right people sometimes could break the startup.

4. Ineffective Marketing Plan: Many Start-ups fail due to flawed marketing strategy. The environment for a start-up is usually more difficult than for an established firm due to uniqueness of the product. Thus, the startup has to build everything from scratch.

5. Lack of Mentorship: Lack of proper guidance and mentorship is one of the biggest problems that exist in the Indian startup ecosystem. Most of start-ups have brilliant ideas and/or products, but have little or no industry, business and market experience to get the products to the market. It is a proven example that a brilliant idea works only if executed promptly. Lack of adequate mentoring/ guidance is the biggest challenge among startups. 6. Poor Business Plan: A lot of new businesses fail within the first year because of inadequate planning. The startups might have innovative ideas, but if their business plans lack perspective, they are destined to fail. Or, they need to constantly redesign them in order to succeed.

7. Fierce Competition: Startups face stiff competition from established companies that dominate the market and make it difficult for new entrants to succeed. In addition, there is no shortage of companies with innovative ideas that are launched constantly. If a startup isn't able to differentiate itself from the crowd for long, it will be swallowed up by the competition.

 

 

Q – Describe the measures to support Startups.

Ans. MEASURES TO SUPPORT START-UPs

In spite of challenges and problems that start-ups are facing, Indian markets provide a plethora of opportunities for startups, which have great potential to create jobs and promote growth. Several startups have established themselves in India, and related ecosystems have flourished. The support required for fostering the start-up culture is spread across several dimensions, which are discussed below:

1. Providing infrastructure facility: One measure of assisting start-ups is providing workspace. These can include providing office space and some basic facilities such as computers, printers, Wi-Fi, hardware, and software that start-ups need for product development, lab facilities, etc. Incubators provide subsidized physical space to new businesses in return for monthly rent during the early phases of their operations.

2. Financial assistance: Fund raising is the most challenging part of starting a business. A number of programs and policies have been introduced by the government of India to ensure loans are easily accessible to startups such as the Credit Guarantee Scheme and Stand-Up Loans. Start-ups have a wide range of financing options available, including funding by family members, friends, loans, grants, angel investors, venture capitalists, crowd funding, etc.

3. Mentoring Support: Startups, especially the first generation of entrepreneurs, may lack the necessary knowledge or connections to build a successful business. Therefore, startups may seek advice from mentors who can assist with practical issues and provide support. Mentors may offer assistance to start-ups who have little experience or knowledge by using their industry experience, expertise, and specialised knowledge. Mentors may also offer one-on-one advice to startups.

4. Promoting Research and Development: In the early stages of a company, research and development are the most challenging. It is essential for startups to invest in research and development, especially if they are dealing with technology. There are several government schemes designed to encourage and assist entrepreneurs in their research and development activities, such as Promoting Innovations in Individuals, Startups and MSMEs (PRISM) scheme, Atal Innovation Mission, the establishment of innovation centers and research parks, etc.

5. Providing Business Support Services : The startup support organizations have a pool of service providers with expertise in HR, marketing, accounting, and legal areas that can offer valuable advice and services to start-ups for smooth functioning. These organizations also helps the start-ups to collaborate with various ecosystem partners. In order to encourage startups to collaborate with ecosystem partners, the government has created a portal called ‘Start-Up India Hub’. The portal allows the start-ups registered on it to connect with government entities, investors, banks, incubators, accelerators, legal partners, consultants, universities, and R&D institutions on a single platform.

6. Regulatory support: Entrepreneurs often believe start-up companies face many legal and regulatory hurdles as they strive to establish themselves. These obstacles consume their time and resources that could otherwise be utilized for innovation. The government has therefore relaxed various regulations in order to ease the regulatory burden on startups. Start-ups can avail the benefit of self-certification. By filling an online form, they can have their start-up formally registered without paying any fee. Unlike other business enterprises they are exempted from prior experience/turnover criteria which is required for government procurement and thus can apply for government tenders. As long as they get a certification from the Inter-Ministerial Board, they are exempted from paying income tax for 3 years. They are also exempt from capital gains taxes.

7. Protection to Intellectual Property Rights: Frequently, we hear that one company has claimed the right to an invention owned by another company. While one company developed an innovative technology, a similar product was launched by another company before it was patented. Thus, it is imperative to protect Intellectual Property [IP]. Initiatives such as the Start-Up Intellectual Property Protection (SIPP) facilitate the filing of Patents, Trademarks, and Designs by innovative start-ups and their protection.

8. Global Tie-ups: Startups find it difficult to enter the international markets and keep up with the international competition. Through the government's Start-up India initiative, the Indian startup ecosystem was made more connected to the global start-up ecosystem. G2G partnership, participation in international forums and hosting global events have all been instrumental in achieving these goals. These factors have made it easier for startups to expand internationally.

Over the last five years, new systems and policies of the Government have been put in place to strengthen the start-up ecosystem in the country. The interventions being deployed by the Government are fostering innovation driven entrepreneurial climate in the country.

 

 

Q – State the factors affecting selecting/Choice of source of Funds.

Ans. FACTORS DETERMINING THE SELECTION / CHOICE OF SOURCE OF FUNDS

As we know that every business requires finance towards meeting its various financial needs. On the basis of duration, the financing sources may be categorized as short term sources, medium term financing sources and long term financing sources. Similarly, there are various types of institutions and organizations offering finance for different durations and for various purposes as well. It is also important to note here that raising finance also involves some cost which varies as per the duration for which the finance is raised and also the type of organization/ institution through which the financing is to be done. Hence, the source of finance should be selected very carefully. The following are some of the important factors which play an important role in the choice of a suitable source of finance:

i.                 The most important factors which affects the choice of source of finance is the cost factor and a good finance manager or entrepreneur should always try to raise funds from such sources where the cost of capital is low.

ii.               The other factor affecting selection of financing source is the financial stability of the company along-with the image of the company.

iii.             The time period for which the finance is required will also affect / determine which source of finance should be selected. For example, if the business organization wants finance for the purpose of buying fixed assets then the company should go and choose long term financing sources of funds.

iv.             The form and ownership structure of the business organization is also an important factor which determines the choice of sources of funds. For example it is the company structure which can use issue of shares and debentures as a source of fund.

v.               Risk factor is also important in determining the choice of source of fund as there are some sources of funds which include more risk in raising funds for the business.

vi.             Simplicity and ease of raising finance is another important determinant in deciding source of funds. Entrepreneurs / finance managers will look for ease of raising finance which means looking for the complexity level involved in financing along-with the legal formalities need to be performed in raising finance. For example, raising finance through IPO and by issuing shares and debentures may involve more legal formalities and complexities as compared to other sources of finance.

 

 

Q – Comment on the Following-

1.     Angel Investor

2.     IPO (Initial Public Offerings)

3.     Lease Financing

 

Ans.

1. Angel Inestor

Generally, an angel investor is referred to as an individual who is ready to provide funding for such kind of start-ups, which are not able to get funding from any other institutions / sources of finance. These angel investors generally provide fund in exchange for an ownership stake in the start-up. It is also to be noted that in most cases, angel investors have been found as the last option for start-ups that don’t qualify for bank financing and may be too small to have interest in a venture capital (VC) firm.

The main advantage of the financing through angel investor is that they can provide the seed capital for the business. They may provide a good source of finance when the other investors and lenders have denied funding the new venture based on their evaluation of the proposed opportunity for which the fund is required. The other advantage of angel investors is that they are good source for financing private sector business organizations / companies.

This source of fund is very much useful for creative and innovative business ideas. However, if we see the disadvantage of the angel investor, we can say that in this method of financing the owner has to sacrifice some portion of the ownership in the business.

2. IPO (Initial Public Offerings)

When a company which is previously unlisted in the stock market offers its shares for sale to the general public is known as IPO (Initial Public Offerings). To raise money through IPO may require the following:

·       Consistently good growth rate of the company

·       A good record of earnings through business operations

·       A good entrepreneurial / management team along-with the experienced and strong board of directors in the company.

The advantage of IPO is that through this, a business organization can raise adequate finance particularly for its expansion and growth needs. Regarding disadvantage of IPO kind of source of fund is towards dilution of funder’s ownership along-with the loss of control to some extent in the company. It increases cost of capital in raising funds because of several legal expenses involved in filing and reporting of various details of the company.

 

4.     Lease Financing

Lease Financing Lease financing can be generally used for such kind of assets which becomes obsolete quickly. A lease can be understood as a contract between two parties, where one party allows or gives right to use some specific assets in return for a periodic payment that may be referred as lease rent. The owner of the assets is known as ‘lessor’ while the other party which will be using the assets is referred as ‘lessee’. The various terms and conditions to use the said assets are mentioned in the contract done between ‘lessor’ and ‘lessee’.

Advantages: The advantages of Lease Financing are as follows:

i.                 The main advantage of lease financing as a source of finance is that it helps the ‘lessee’ to get asset with a lower investment in the said asset.

ii.               It is also easy and involves only a little bit legal formalities like making contract between the parties.

iii.             Financing assets through this method may be helpful in ensuring good availability of cash for other business operations. In this source of finance, the asset would be acquired through lease finance and only some amount of cash is to be invested in getting that asset.

Disadvantages/Limitations: The disadvantages of Lease Financing are as follows:

i.                 The main limitation of this method is that lease agreement may impose some kind of restrictions on using the asset which is taken through lease finance. Similarly, restrictions may also be imposed towards any kind of modifications in the said asset.

ii.               It also increases the payout obligations of the firm as the firm need to pay the rental amount periodically.

iii.             The ‘lessor’ remains the owner for the asset which is acquired through lease finance.

 

 

Q – State the Importance of Non-Financial Resources.

Ans. Imortance of Non-Financial Resources.

1. Offer valuable advice: Non-financial resources in the form of vendors, suppliers, or mentors helps in expanding the knowledge of the entrepreneur by sharing their viewpoints and prior experience. For example, if an entrepreneur is thinking of exporting some products, he/she may get some valuable advice from people who have prior experience in the field.

2. Offer different perspective: The non-financial resources helps entrepreneurs look at problems and situations from perspectives that they would not have thought of on their own. For example, a new business owner may not look at the opportunities or threats present in the environment but experts, mentors and other people dealing in the same business line may help him/her scan the environment.

3. Helps in developing and improving skills: When entrepreneurs takes guidance from an expert or mentor, participate in industry events and meet new people who have expertise and prior experience, it helps them to develop their business skills. For example, if suppliers are complaining that they are not able to understand the directions given by the entrepreneur, business mentor or an expert may help him/her improve their communication skills.

4. Helps in expanding network: Mentors, experts or participation in industry events helps an entrepreneur in making contacts who can help him/her to make the business more successful. In business, it is very popularly said that network is equal to networth. These mentors, professional experts and co-founders help the entrepreneur (budding entrepreneurs) in getting connected to the influential and important alliances in the industry.

5. Helps in problem-solving: Mentors and co-founders can be a boon for the new ventures. Their expertise and experience in the area is very important for the business. They may facilitate in dealing with the troubles.

6. Helps budding entrepreneurs in innovation: Early stage enterprises may have high potential ideas. If they are not able to mobilise the required support to develop and refine their innovation, they may end up in failure. In the economies like ours, where lowincome market provides a huge potential for business, there is no much invention and intervention. Investors are also apprehensive and sceptical to take risk by investing in the business enterprises targeting these markets. Therefore, non-financial resources become essential for the budding entrepreneurs.

7. Helps in understanding trends of the industry: The non-financial resources help the entrepreneur in analysing and understanding the market and make them aware of the latest trends or technology in the industry.

8. Helps in effective decision making: Mentors, cofounders and professional experts extend their guidance in effective decision making and formulating strategies for the business. Their experience and expertise in the diverse field are very useful in analysing the market and making policies for the business. These non–financial resources enable the budding entrepreneurs for long-term preparedness for investment, profit and perpetual social impact.

It is important to keep in mind that nothing comes for free. So identifying and using these resources is very tricky. Therefore, entering into contracts while accessing these nonfinancial resources makes much more sense.

 

 

Q – What are MSMEs ? State the role of MSMEs in Economic Development.

Ans. The Micro Small & Medium Enterprises (MSMEs) are defined in India under the MSMED Act 2006.

Micro, Small and Medium Sized Enterprises (MSME) have different definitions across countries and organizations, based on variables such as number of employees, turnover, investment in assets, or a combination of these. According to the World Bank, Micro, Small and Medium Enterprises (MSMEs) have been defined in terms of numbers of employees. In micro enterprises: 1–9 employees; small: 10–49 employees; and medium: 50–249 employees.

The MSMED Act, 2006 defines the Micro, Small and Medium Enterprises based on:

1. The investment in plant and machinery for those engaged in manufacturing or production, processing or preservation of goods and,

2. The investment in equipment for enterprises engaged in providing or rendering of services.

On 26.06.2020, a new composite criterion of classification for manufacturing and service units was notified which came into effect on 1st July, 2020. The MSMEs are now classified according to a composite criterion that includes both their investment and sales turnover.

 

Role of MSMEs in Economic Development:

Employment opportunities: MSMEs create employment opportunities for people at large at comparatively lower cost of capital. In the economy like ours where unemployment and underemployment pose a big challenge. MSMEs are crucial for us as government alone cannot provide employment opportunities to the people.

Optimum utilisation of resources: MSMEs make proper and optimum utilisation of the local resources available such as land and building, human resources, raw materials etc. in the society which may remain idle otherwise.

Balanced regional growth: Micro and small enterprises are scattered across the length and breadth of the country which enables balanced regional growth.

Rural Development: MSMEs contribution in the rural areas has been tremendous. It uses local available resources that lead to socio-economic development of rural areas.

MSMEs have also contributed in the development of handicraft industry, labour intensive industries, and export sector. It also helped in the empowerment of local people, have made India self-sufficient through emphasise on the production and use of swadeshi products, have increased rural-urban interaction and self-employment.

Considering the role of MSMEs in economic development of our nation, government is paying great attention to MSMEs. To assist the MSMEs and help them to scale up, the Ministry of Micro, Small and Medium Enterprises (M/o MSME) was formed in 2007 by merging the Ministry of Small Scale Industries and the Ministry of Agro and Rural Industries.

With a view to boost the development of small enterprises in the country, the Government of India has enacted Micro Small and Medium Enterprises Development (MSMED) Act, 2006. Through MSMED Act, 2006 the Government aims to facilitate the growth of these enterprises as well as boost their competitiveness.

 

 

Q – Describe the role of government in development of MSMEs.

Ans. ROLE OF GOVERNMENT IN DEVELOPMENT OF MSMEs

The State Governments are primarily responsible for promoting and developing MSMEs. The Government of India, however, supplements state efforts through a variety of initiatives. The Ministry of Micro, Small & Medium Enterprises (M/o MSME), which envisions a more progressive MSME sector by promoting growth and development of the sector, has been created by the Government of India in recognition of the role MSMEs play in the Indian economy.

A number of statutory and non-statutory bodies work under the aegis of the Ministry of MSME. These include: the Khadi and Village Industries Commission (KVIC), The Coir Board, National Small Industries Corporation (NSIC), National Institute for Micro, Small and Medium Enterprises (NIMSME) and Mahatma Gandhi Institute for Rural Industrialisation (MGIRI).The Ministry of MSME, as well as its organizations, are responsible for supporting States that endeavour to promote entrepreneurship, employment and livelihood opportunities. It also aims at improving the competitiveness of MSMEs in a changing economic environment.

The Government, Ministry of MSME and its various organizations frame and implement various policies and programmes in order to provide following facilities to these enterprise:

·       access to adequate credit from banks and financial institutions;

·       support for technology upgradation and modernization;

·       well-developed infrastructure facilities;

·       state-of-the-art testing and certification facilities;

·       familiarity with modern managerial practices;

·       training programmes for entrepreneurship and skill development;

·       assistance with product development, design intervention, and packaging;

·       welfare support to artisans and workers;

·       support for better access to both domestic and export markets; and

·       cluster-based assistance to assist units and their collectives in strengthening capacity building.

 

 

Q – State the Role of MSMEs In Entrepreneurship Development.

Ans. Over the years, MSMEs sector has emerged as an effervescent and active sector across all the economies, especially in developing economies. Its contribution in socio-economic development of a nation is such that it is widely and popularly called as engine of economic growth. This is giving flip to entrepreneurship development as well as they are innovative in nature and respond timely and effectively to the changing market scenario. They are complimentary to the large industries. Let us now discuss the role of MSMEs in entrepreneurship development.

Promotes Entrepreneurial opportunities : MSMEs provide real platform to the budding entrepreneurs. Pools of entrepreneurs are created by MSMEs who are considered to be the catalyst of socio-economic growth and development of a nation.

Promotes Entrepreneurial culture : MSMEs nurture entrepreneurial culture. It creates supportive environment and take various initiatives ranging from implementing a receptive regulatory environment to establishing access to technology and finance. This makes the environment conducive for the aspiring and budding entrepreneurs.

Commercialise inventions: We all use mobile phones (smart phones now a days). You must be aware of the fact that telephonic conversation was invented long back in the year 1876 by Alexander Graham Bell. He was not only an inventor but also an entrepreneur as he launched the Bell Telephone Company in 1877. Since then, face of phone has witnessed huge improvements through technological and other innovations. From fixed dial phones to smart phones we have enjoyed varied services. Can you imagine who undertook all these improvements? Yes, you are right! Various telecommunication companies are responsible to offer these services. Unless the inventions are commercialised it is of no use to the society. This commercialisation encourages innovations from time to time.

Encourages and exploit innovation: MSMEs help in creating entrepreneurial culture through business innovation. As the saying goes money begets money, similarly, an entrepreneur encourages others to become an entrepreneur. Many companies support their ancillary units in its establishment and expansion. Innovation and entrepreneurship go hand in hand.

Facilitate and complement large industries: MSMEs are considered to be complementary to the large industries. Many large enterprises depend on MSMEs for supply of necessary raw materials for the production of goods and services, and they also make use of these small firms in distributing their final output.

Boost in Service sector: MSMEs are immensely contributing in service sector. Its contribution in service sector is more vis-a-vis manufacturing sector. There can be seen a huge prospect of entrepreneurship development in service based MSMEs.

 

 

Q – State the Challenges of Family Business in India.

Ans. CHALLENGES OF FAMILY BUSINESSES IN INDIA

In India, many businesses that are now public companies were once family businesses. These family businesses have grown tremendously with the passage of time. However, things are always not rosy. While family business gets many advantages, they face certain challenges also. Let us discuss these challenges below:

1. Innovation for a competitive advantage: The business environment today is very competitive. To survive and grow in this competitive environment it becomes very important to innovate and give unique value proposition to the customers. To innovate, the business goals have to be broadened and new strategies are to be formulated. This may mean that businesses may have to leave the age-old style of functioning. But family businesses may remain confined to their age-old practices and not invest in research and development.

2. Limited Talent: In family business owners and managers are by and large the family members. Members of the family may not necessarily be talented and capable of taking the company’s legacy forward. Attracting right talent from outside the family is crucial and retaining them is even more important.

3. Lack of Succession Planning: There is lack of efficient succession planning, mentoring and developing the next generation of successors and leaders. Family businesses have to give proper attention to this issue.

4. Technology Needs: With the changing environment and rapid technological developments, the business need to adapt to the new technological advancements or bring in new, if need be. This may mean that they may have to part with the older business models which have been passed on to the present generation.

5. Sibling Rivalry: Sibling Rivalry is something that needs no explanations. All the heirs of the family get share in the business. Some may do well and flourish further, some may not. This often creates rivalry and pulling down each other is started even at the cost of organisational resources. This rivalry, if remains unsolved, may lead to split in the family business.

6. Internal Conflict: Interest of the family members of family business is varied. This may disturb business harmony. Handling this internal conflict is very difficult. If it is not handled properly, this may lead to failure of the business.

7. Biased Decision-Making: There is always a possibility that decisions in the family business may be biased for non-family members and employees of the business. The family members may try to impress upon their own ideas on the other members.

8. Too Much Emotional Attachment with Business: It is always said that one should always be passionate about the business but not be emotional as it may interfere with the tough decisions which might have to be taken for the growth of business

9. Unclear Roles and Responsibilities: There is often a lack of proper documentation which defines the roles and responsibilities of the members of the family in family business organisation. This may lead to chaos and mismanagement.

10. Lack of Professionalism: Professional business cultures are the result of formal processes, which include setting clear goals and enforcing rules, as well as hiring and promoting employees based on their potential to contribute. However, in many family businesses, the informal structure and culture may cause confusion among roles, lead to lack of talent, and make it impossible for values, ethics, and philosophies to be defined.

11. Limited Finance: Family businesses have limited financing options since they cannot raise large amounts of capital on their own, and external financing options may not be attractive to them as outside debt may lead to significant influence over the company. For family businesses, determining where and how to get the capital and resources needed to grow can be a challenge.