Entrepreneurship and

Management

Entrepreneurship and

Management

S. NagendraDean(Programmes)

School of Management for Infrastructure and Development Strategies-India(An extension center of Visvesvaraya Technological University)

Bangalore

Manjunath V. SAssistant Professor

MBA DepartmentNitte Meenakshi Institute of Technology

Yelahanka, Bangalore

Sanguine Technical PublishersBangalore - 560016

2008

Price:Rs. US$

9 7 8 8 1 8 8 8 4 9 5 3 7

ISBN 978 81 88849 53 7

Title: Entrepreneurship and ManagementS. Nagendra, Manjunath V. S

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Dedicated to our parents

Late Dr M. B. Somashekharappa Shri. N.V. Subba Rao & & Smt. S. Vimala Smt. Lakshmidevamma (Parents of Prof. S. Nagendra) (Parents of V.S. Manjunath)

Foreword

One of our country’s greatest strengths, as seen today, is our young population. While the rest of the world is growing older, India has grown younger and this is a strategic advantage that has to be leveraged if we have to fulfi l our dream of becoming a global economic power. Professional Education, therefore, becomes the tool by which the aspirations of this young India, termed popularly in the media as”Youngistan”, can be given a shape and channelized towards economic progress.

Visvesvaraya Technological University has recognized that the fi eld of engineering and technology off ers high potential opportunities to our “Youngistan” to become entrepreneurs. To groom the engineering students and to build awareness amongst them about available opportunities, VTU has introduced the subject of “Management and Entrepreneurship” in the curriculum. A very thorough job has been done in setting up the scope of this subject and in identifying the class-room inputs that require to be provided.

Th is book has made an attempt to give a thorough overview of the course “Management and Entrepreneurship” for undergraduate Engineering students. Keeping the interests of students, an attempt has been made to present the basic concepts of Management and Entrepreneurship, along with examples and illustrations. Th is book covers the basic concepts of Management, and the functions of Management like planning, organizing, staffi ng, directing and controlling. Th e book also includes basic concepts of entrepreneurship, skills required for an eff ective entrepreneur, as well as the diff erent concepts of Micro, Medium and small enterprises, the general schemes provided by the government to assist the entrepreneurs, and skills required for preparing a project report.

It also covers the mini case studies of success achieved by Indian entrepreneurs, illustrations from Indian organizations and live examples enumerating theoretical concepts so as to make knowledge assimilation more absorbing.

Dr. N.R. ShettyFormer Vice Chancellor, Bangalore University

President, Indian Society for Technical Education,New Delhi

Preface

Management and Entrepreneurship are two fascinating subjects. Every day we fi nd some new developments taking place in both these areas. Th e more one reads about these subjects, the more absorbing it becomes. It has been clearly established that the managerial skills and the entrepreneurial skills play a pivotal role in an individual’s performance and success. Th ough these subjects have been part of Management education, it is only a few technological universities who have introduced these subjects of Management and Entrepreneurship for engineering students. Preparing an engineer, rather a performing engineer, would not be complete without the knowledge of Management and Entrepreneurship. Keeping the interests of engineering students, an attempt has been made to present the basic concepts of Management and Entrepreneurship, along with examples and illustrations. Th is book covers the basic concepts of Management, and the functions of Management like planning, organizing, staffi ng, directing and controlling. Th e book also covers basic concepts of entrepreneurship, skills required for an eff ective entrepreneur, the diff erent concepts of Micro, Medium and small enterprises, the general schemes available for entrepreneurs, and skills required for preparing a project report.

We are confi dent that this book will help students to acquire the basic knowledge of Management and Entrepreneurship and make them better performers.

We are grateful to all our friends for helping and shaping this book. We sincerely acknowledge Dr. N.R. Shetty, Director, NMIT, for his constant support and also for writing forward for this book. We also sincerely acknowledge Dr. H.C. Nagaraj, Principal, NMIT, Prof. Bhaskar Rao, Director, MINDS, Prof. L.P. Rajan, HOD, MBA Department, NMIT, Mr. CNB Rajesh, PESCE, Prof. Jaya Balan, MINDS, Smt. Prathima Bhat, BMSCE, Smt. Sona, and all our colleagues. We are grateful to our families who encouraged us in this endeavour – Smt. Sujatha Nagendra, Smt. K. Radha Manjunath, Ms Vindhyashree Nagendra, and Ms Sneha Manjunath.

We express our sincere gratitude to Mr. Subramanian R for taking care of the editing part of the book and the type setting team of M/s. Sigma Business Process, Chennai for typesetting the text in a nice format.

Finally we thank Mr. Lal M Prasad of Sanguine Technical Publishers, not only for bringing out this book but for his ever smiling friendly attitude.

S. Nagendra V. S. Manjunath

Contents

PART-A

1. INTRODUCTION TO MANAGEMENT

1.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . 31.2 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 41.3 Nature of Management . . . . . . . . . . . . . . . . . . . 61.4 Characteristics of Management . . . . . . . . . . . . . . . . 71.5 Levels of Management . . . . . . . . . . . . . . . . . . . 71.6 Managerial Skills . . . . . . . . . . . . . . . . . . . . . 91.7 Functions of Managers . . . . . . . . . . . . . . . . . . 121.8 Is Management a Science or an Art? . . . . . . . . . . . . 141.9 Roles of Management . . . . . . . . . . . . . . . . . . 181.10 Development of Management Thought . . . . . . . . . . . . 191.11 Functional Areas of Management . . . . . . . . . . . . . . 301.12 Scope of Management . . . . . . . . . . . . . . . . . . 30 Summary . . . . . . . . . . . . . . . . . . . . . . . 31 Review Questions . . . . . . . . . . . . . . . . . . . . 32

2. PLANNING

2.1 Introduction . . . . . . . . . . . . . . . . . . . . . . 352.2 Key Features of Planning . . . . . . . . . . . . . . . . . 352.3 The Nature of Planning . . . . . . . . . . . . . . . . . . 362.4 Principles of Planning . . . . . . . . . . . . . . . . . . 372.5 Steps in Planning . . . . . . . . . . . . . . . . . . . . 392.6 Classification of Plans . . . . . . . . . . . . . . . . . . 422.7 Types of Plans . . . . . . . . . . . . . . . . . . . . . 452.8 Importance of Planning . . . . . . . . . . . . . . . . . . 542.9 Limitations of Planning . . . . . . . . . . . . . . . . . . 542.10 Hierarchy of Plans . . . . . . . . . . . . . . . . . . . . 542.11 Decision Making . . . . . . . . . . . . . . . . . . . . 55 Summary . . . . . . . . . . . . . . . . . . . . . . . 59 Review Questions . . . . . . . . . . . . . . . . . . . . 61

3. ORGNIZING AND STAFFING

3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . 633.2 What is an Organization? . . . . . . . . . . . . . . . . . 653.3 Purpose of an Organization . . . . . . . . . . . . . . . . 653.4 Nature of an Organization . . . . . . . . . . . . . . . . 653.5 Types of Organizations . . . . . . . . . . . . . . . . . . 663.6 Organizing . . . . . . . . . . . . . . . . . . . . . . . 673.7 Principles of Organization . . . . . . . . . . . . . . . . . 683.8 Organization Chart . . . . . . . . . . . . . . . . . . . 693.9 Classification of Organization . . . . . . . . . . . . . . . 693.10 Departmentation . . . . . . . . . . . . . . . . . . . . 743.11 Span of Control . . . . . . . . . . . . . . . . . . . . . 813.12 Authority and Responsibility . . . . . . . . . . . . . . . . 823.13 Delegation of Authority . . . . . . . . . . . . . . . . . . 833.14 Centralization and Decentralization . . . . . . . . . . . . . 833.15 Management by Objectives (MBO) . . . . . . . . . . . . . 853.16 Management by Exception . . . . . . . . . . . . . . . . 863.17 Staffing . . . . . . . . . . . . . . . . . . . . . . . . 863.18 Human Resource Planning . . . . . . . . . . . . . . . . 873.19 Recruitment . . . . . . . . . . . . . . . . . . . . . . 873.20 Selection . . . . . . . . . . . . . . . . . . . . . . . 91 Summary . . . . . . . . . . . . . . . . . . . . . . . 93 Review Questions . . . . . . . . . . . . . . . . . . . . 94

4. DIRECTING AND CONTROLLING

4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . 974.2 Definition of Directing . . . . . . . . . . . . . . . . . . 984.3 Leadership . . . . . . . . . . . . . . . . . . . . . . . 984.4 Managers and Leaders . . . . . . . . . . . . . . . . . . 1014.5 Leadership Styles . . . . . . . . . . . . . . . . . . . . 1024.6 Qualities of Good Leaders. . . . . . . . . . . . . . . . . 1054.7 Leadership Theories . . . . . . . . . . . . . . . . . . . 1064.8 Charismatic Leadership . . . . . . . . . . . . . . . . . 1124.9 Transactional and Transformation Leaders . . . . . . . . . . 1134.10 Motivation . . . . . . . . . . . . . . . . . . . . . . . 1144.11 Communication . . . . . . . . . . . . . . . . . . . . . 121

4.12 Coordination . . . . . . . . . . . . . . . . . . . . . . 1304.13 Controlling . . . . . . . . . . . . . . . . . . . . . . 132 Summary . . . . . . . . . . . . . . . . . . . . . . . 138 Review Questions . . . . . . . . . . . . . . . . . . . . 141

PART-B

5. ENTREPRENEURSHIP

5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . 1455.2 Importance of Entrepreneurship . . . . . . . . . . . . . . 1465.3 The Concept of Entrepreneurship . . . . . . . . . . . . . . 1465.4 Entrepreneur . . . . . . . . . . . . . . . . . . . . . . 1475.5 Characteristics of an Entrepreneur . . . . . . . . . . . . . 1485.6 Types of Entrepreneurs . . . . . . . . . . . . . . . . . . 1525.7 Importance of an Entrepreneur . . . . . . . . . . . . . . . 1535.8 Entrepreneur Process . . . . . . . . . . . . . . . . . . 1575.9 Role of Entrepreneurs in Economic Development . . . . . . . 1625.10 Problems Faced by Entrepreneurs . . . . . . . . . . . . . 1635.11 The Scope of Entrepreneurship in India . . . . . . . . . . . 1655.12 Intrapreneur . . . . . . . . . . . . . . . . . . . . . . 166 Summary . . . . . . . . . . . . . . . . . . . . . . . 166 Review Questions . . . . . . . . . . . . . . . . . . . . 167

6. SMALL SCALE INDUSTRY

6.1 Introduction . . . . . . . . . . . . . . . . . . . . . . 1696.2 Definition of Small Scale Industry . . . . . . . . . . . . . . 1696.3 Characteristics of Small Scale Industries . . . . . . . . . . . 1726.4 Need of Small Scale Industries: . . . . . . . . . . . . . . 1746.5 Objectives of Small Scale Industries . . . . . . . . . . . . . 1776.6 Advantages of Small Scale Industries . . . . . . . . . . . . 1786.7 Scope of Small Scale Industries . . . . . . . . . . . . . . 1786.8 Steps in Setting up a Small Scale Industry . . . . . . . . . . 1796.9 SSI Registration . . . . . . . . . . . . . . . . . . . . 1846.10 Industrial Policy towards SSI . . . . . . . . . . . . . . . . 1866.11 Impact of globalization on SSI in India . . . . . . . . . . . . 192

6.12 Impact of WTO on SSIs. . . . . . . . . . . . . . . . . . 1936.13 Institutional Support to SSI . . . . . . . . . . . . . . . . 193 Summary . . . . . . . . . . . . . . . . . . . . . . . 200 Review Questions . . . . . . . . . . . . . . . . . . . 201

7. SUPPORTING AGENCIES AND INSTITUTIONAL SUPPORT

7.1 Introduction . . . . . . . . . . . . . . . . . . . . . . 2037.2 State Schemes . . . . . . . . . . . . . . . . . . . . . 2037.3 National Schemes . . . . . . . . . . . . . . . . . . . . 231 Summary . . . . . . . . . . . . . . . . . . . . . . . 245 Review Questions . . . . . . . . . . . . . . . . . . . . 246

8. PREPARATION OF PROJECT

8.1 Introduction . . . . . . . . . . . . . . . . . . . . . . 2478.2 What is a Project? . . . . . . . . . . . . . . . . . . . . 2488.3 Control Variables in a project . . . . . . . . . . . . . . . 2488.4 Project Life Cycle . . . . . . . . . . . . . . . . . . . . 2498.5 Project Management . . . . . . . . . . . . . . . . . . . 2498.6 Project Report . . . . . . . . . . . . . . . . . . . . . 2508.7 Project Identification . . . . . . . . . . . . . . . . . . . 2528.8 Project Selection . . . . . . . . . . . . . . . . . . . . 2538.9 Components of Project Report: . . . . . . . . . . . . . . 2548.10 Formulation of a Project . . . . . . . . . . . . . . . . . 2648.11 Project Report—An Outline . . . . . . . . . . . . . . . . 2648.12 Planning Commission Guidelines for Project Report Preparation . . 2698.13 Project Appraisal . . . . . . . . . . . . . . . . . . . . 2698.14 Project Feasibility Study . . . . . . . . . . . . . . . . . 2708.15 Project network Analysis . . . . . . . . . . . . . . . . . 2738.16 Errors in a Project Report . . . . . . . . . . . . . . . . . 2768.17 Model Project Report for Manufacturing of Home Furnishing Fabric 277 Summary . . . . . . . . . . . . . . . . . . . . . . . 290 Review Questions . . . . . . . . . . . . . . . . . . . . 291

Bibliography . . . . . . . . . . . . . . . . . . . . . 293

Index . . . . . . . . . . . . . . . . . . . . . . . . . 295

Part A

Introductionto Management

Learning Objectives

Understand the meaning and nature of Management Define the terms Organization and Administration Understand the concepts of Productivity, Efficiency and Effectiveness Debate whether Management is a Science or an Art Examine Management as a Profession Understand Basic characteristics of Management Describe the scope and functional areas of Management Describe the various roles of Management Describe various levels of Management and skills needed for managers Understand how Management thought evolved Describe various approaches to Management

1

1.1 INTRODUCTION

The concept of management is very old and has universal application in all types of organizations. It is practiced in one form or another, in all organizations since many centuries. Building great monuments like China wall, Taj Mahal, or great

ancient temples around the world involved management of huge amount of resources and thus people behind them were experts in resource planning and utilization. Thus management was in practice during even in the olden days even though it was not academically taught. But with industrialization and growth of business organizations, Management has become a very popular discipline and now it is life blood of every organization. Management is critical element in the growth of an organization and economic development of any country.

Organizations cannot achieve their objectives eff ortlessly. They are achieved through meticulous planning and systematic eff ort. Several activities are to be performed in a cohesive way and with coordination of several people. It is not a simple job. It is the management which is behind all these systematic activities. Management not only ensures that these objectives are achieved, but also helps in eff ective utilization of all the resources –men, machines, materials, and money.

CHA

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4 Entrepreneurship and Management

1.2 DEFINITIONS

1.2.1 Definition of Management • Management is the art of gett ing things done through people. Managers achieve

organizational goals by enabling others to perform the necessary tasks by eff ectively identifying right person for right task.

• Management is the process of planning, organizing, leading, and controlling the eff orts of the organization members and using all organizational resources to achieve related organizational goals.

• Management is the process of working with and through others to achieve organizational goals in a changing environment.

• Management is the process of coordinating work activities so that they are completed effi ciently and eff ectively with and through others.

• The process represents the ongoing functions or primary activities of managers namely – planning, organizing, leading, and controlling.

• Coordinating the activities of others is what distinguishes a managerial position from the non managerial one.

• To manage is to forecast and to plan, to organize, to command, to coordinate and to control – Henry Fayol.

• Management is the eff ective utilization of human and material resources to achieve the enterprise objectives – William F.Glueck.

• Management involves effi cient and eff ective completion of organizational work activities.

1.2.2 EfficiencyEffi ciency refers to gett ing the most output from the least amount of inputs. Because managers have to deal with scarce resources or inputs like people, money, machines, materials, etc, they are concerned with effi cient use of resources. Hence effi ciency is a central element in the process of management that balances the amount of resources used to achieve an objective against what was actually accomplished. Effi ciency can be achieved by reducing lead time, reducing rejection rates, inventories etc. Thus effi ciency is referred as doing things right.

1.2.3 EffectivenessEff ectiveness is the central element in the process of management that entails achieving the stated organizational objectives. Thus eff ectiveness is doing right things. It is concerned with the ends or att ainment of goals.

Chapter 1: Introduction to Management 5

Eff ectiveness refers to ends or att ainment of objectives, where as effi ciency refers to means or how objectives are achieved. The following illustration explains how one can be effi cient and eff ective. While Russians proved to be both, Americans could achieve the goal, but failed to be effi cient.

When NASA began the launch of astronauts into space, they found out that pens would not work at zero gravity because ink simply does not fl ow down to the writing surface. To solve this problem, it took them one decade and $ 12 million. They developed a pen that worked at zero gravity, upside down, under water, on practically any surface including crystal and in a temperature range from below freezing to over 300 degrees C.

And what did Russians do….? They used a pencil.Think for a while – “How to make a pen work at zero gravity” was the problem for the Americans, where

as for the Russians it was “fi nding a writing device that could work at zero gravity”.

1.2.4 Balancing Efficiency and EffectivenessManagement is concerned not only with gett ing activities completed and meeting organizational objectives (eff ectiveness), but also doing with as effi ciently as possible. Thus both effi ciency and eff ectiveness must be balanced. In successful organizations, high effi ciency and high eff ectiveness go hand in hand. Poor management is often due to both ineffi ciency and ineff ectiveness.

1.2.5 OrganizationAn organization is a deliberate arrangement of people to accomplish some specifi c purpose. Organization is a structure or a mechanism consisting a group of people who are interrelated and interdependent with each other and who work collectively together to achieve some common objectives.

Organization has distinct purpose. This purpose is expressed in terms of goals of the organization. Organization is composed of people and it develops a deliberate structure so that their members can do work.

1.2.6 AdministrationAdministration involves sett ing up of policies and procedures. It is a policy making function. It is done at top level management and lower level management is responsible for execution of policies and operations. Thus administration is a branch of management.

1.2.7 Universality of ManagementManagement is needed in all types and sizes of organizations, at all organizational levels, in all organizational functional areas. This is known as universality of management. Figure 1.1 illustrates why management is called universal.

6 Entrepreneurship and Management

All Organizational Areas

Manufacturing,Accounting,

Finance,Human Resource, etc.

All OrganizationalLevel

Bottom Top

Management is needed in

All Types of Organizations

Profit Non-Profit

All sizes of Organization

Bottom Top

Figure 1.1 Universal nature of management

1.3 NATURE OF MANAGEMENT

From the various definitions of the management the nature of Management can be explained by following features:

• All the managers carry out the managerial functions of planning, organizing, staffi ng, leading, and controlling.

• Management applies to any kind of organization. • It applies to managers at all organizational levels. • The aim of all managers is same: to create a surplus. • Managing is concerned with productivity, which implies eff ectiveness and

effi ciency.

Chapter 1: Introduction to Management 7

1.4 C ARACTERISTICS OF MANAGEMENT • Management is intangible and it can not be seen, but its presence can be felt by

eff orts in the production, sales and revenues. • Management is universal and it is applicable to all sizes and forms of

organizations. • Management is a group activity and it involves gett ing things done with and

through others. • Management is goal oriented and all actions of management are directed at

achieving specifi c goals. • Management is science as well as an art. • Management is emerging as a profession. • Management is multidisciplinary and it has contributions from Psychology,

Sociology, anthropology, etc.

1.5 LEVELS OF MANAGEMENT

All business organizations irrespective of their size, have many managerial positions in their structure. These positions are created through the process of delegation of authority from top to lower levels. Each position is marked

with authority and responsibility to perform specific role and task. These managerial positions lying in the chain of command may be classified into various levels of management. They are

• Top level Management • Middle level Management • Lower level Management

The diff erent levels of Management are depicted in Figure 1.2.

1.5.1 Top Level ManagementIt is the highest level in the managerial hierarchy and the ultimate source of authority in the organization is associated with it. Top level managers are accountable to owners and all stake holders of the organization and responsible for overall management of the organization. Managing Director, Board of Directors, Chairman, President, Vice president, Vice chairman, General Managers, etc constitute top level management.Major functions of top level management are: • To make corporate plans for the entire organization. • To decide upon matt ers which are vital for survival like profi tability, and growth

of the organization.

8 Entrepreneurship and Management

Top level

Management

Middle level

Management

Bottom level

Management

Figure 1.2 Levels of management

• To allocate resources for various projects and departments. • To set goals. • To design structure of the organization. • To frame policies. • To provide leadership. • To exercise control. • To direct middle and lower levels of management.

1.5.2 Middle Level ManagementSome of the managerial positions are created at the middle level of management in order to fi ll the gap which exists between functional and operational level. Middle level management consists of departmental managers, deputy managers, administrative offi cers, etc. They are also the link between top and lower level managers. They are responsible for achieving departmental goals. The important functions of middle level managers are – • To prepare departmental plans within framework of corporate plans given by

top level management.

Chapter 1: Introduction to Management 9

• To establish departmental goals. • To decide about means of achieving these goals. • To monitor lower level managers by coordinating their activities.

1.5.3 Lower Level Management or Supervisory Level of Management

The lowest point in the managerial hierarchy is represented by lower level management. This level consists of supervisors, inspectors, section offi cers, etc. They are in touch with core group of workers such as operators. They issue orders and instructions to them, educate and train them, and supervise their activities. Supervisors are known as backbone of the organization as they are responsible for gett ing the work accomplished thorough the people at operational level. The important functions of lower level management are: • To get the things done by the core group of workers at the operational level. • To prepare the plans for their activities. • To issue orders and instructions. • To guide and assist workers. • To motivate workers.

1.6 MANAGERIAL SKILLS

Managers perform variety of activities which are complex and different skills are needed to perform these activities. A skill is an individual’s ability to translate knowledge into action. In order to be able to successfully discharge

his or her roles, a manager should possess three major skills called technical skills, human relation skills and conceptual skills. a. Technical skills: Technical skills include knowledge and profi ciency in

performing activities involving methods, processes and procedures. It is the knowledge related to specialized fi eld such as engineering, computers, accounting, manufacturing etc. These skills are more important at lower level of management since these managers deal directly with people doing technical activities and they need to instruct, direct and supervise them.

b. Human relation skills: Human relation skills involve the ability to work well with people both individually and in groups. Because managers deal directly with people, the skill is very important. Managers with good human relation skills would be able to get the best out their people. Human relation skills include:

Entrepreneurship And Management

Publisher : Sanguine Publishers ISBN : 9788188849537 Author : S Nagendra And VS Manjunath

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