Chapter-4

Role of Entrepreneur and Entrepreneurial Development

Entrepreneur:

Definition:

Is one who has strong desire to start a Business enterprise Is a person who undertakes a commercial or Productive venture Is one who

Innovates a venture

Promotes a venture

Rises to the occasion

Assembles the other forces of production

Sets the business group Is a purposeful activity involved in

Initiative

Promoting

Manufacturing

economic activities for the

Production of wealth

Distribution of wealth Entrepreneur Qualities:

An entrepreneur should posses the following qualities to succeed in business

Firm determination

Fore sightedness

Shrewed thinking

Creativiteness

Risk taking ability

Business ethics Clarity of views

Relative approach

Leadership

Tactfulness

Energetic & hard working

Successful Entrepreneurship:

To become a successful Entrepreneur, one should have

Regular information related to

Buyers

Consumers

Distributors

Dealers

Retailers

Transporters In addition to above to get successful entrepreneurship the following points should be kept in mind

An aspirant entrepreneur should have the attitude of

Satisfying the needs of customers

Quality achievement and its maintenance

An aspirant entrepreneur should have

Innovative ideas Improving productivity attitude The attitude of motivating people Time management

Role of an Entrepreneur:Role In Society:

An entrepreneur as owner of the enterprise, plays a very crucial role in the development of enterprise as well as society

The role of economic progress of a nation depends upon its rate of innovation

Hence entrepreneurship talent in the population leads to economic growth An entrepreneur contributes to the economic development through

capital formation

Improvement in per capita income

Employment generation

Balanced regional development

Improved productivity

New technologies

New products

New services

Entrepreneur Expectations:

An entrepreneur expects to achieve the following by the way of starting a business

Sprit of service to the society

correct assessment of societys needs

Zeal of facing the challenges

Better management of resources Commitment and total movement

Contribution to national economy

Creative thinking

To stand as a successful example or role model

Entrepreneurship Vs Management:

A manager (Technocrat) is one who

Enters the field of business with a pre concept of management principles

Entrepreneur may be from among any educated unemployed persons who

Enters the field of business with a strong desire of self employment Entrepreneurship Vs Management:Entrepreneurial styleManagement style

1. Lack of knowledge in the field of business1.Sufficient knowledge in the relevant field of business

2. Fairly strong ambition2.Ambition level is normal

3. Need not consult anybody.3.Has to consult for executing a decision

4. Motivated by profits4.Motivated by goals and rewards

5. Lack of knowledge5.Sufficient knowledge

6. Adequate training is required6.Training not required

7. Depends on technical personnel7.Commands the technical personnel

8. Cannot analyze the problem8.Analyzes the problem and solves it

9. Quality is inconsistent9.Quality is consistent

10. Adopts thumb rules10.Adopt scientific management

Risks & Rewards of Entrepreneurship:

Are broadly related to

1. Financial aspects

2. Career aspects

3. Personal aspects1. Financial aspects:Risks related to finance:

Lack of experience in assessing fixed and working capital

Excess purchase of raw materials

Over estimated labor

Suffering from finance

Failure in getting credit from financial institutions

Rewards related to finance:

Standing capacity

Achieving targets

Self sufficiency

Possibility for expansion 2. Career aspects:Risks related to Career:

Losing chances for employment elsewhere

He/She may not be interacting with other industrialists

Rewards related to Career

Continuance of the unit

Modernization of the unit

Assurance from the Government3. Personal aspects:Risks related to personal aspects:

Shyness and inhibition

Poor decision making

Lack of family and community support

lack of managerial skills

Lack of morale and confidence

Dependency on others

Rewards related to personal aspects:

Dynamism

Shrewedness

Self confidence

Independent Thinking

Surprising and encouraging other aspirantsSmall Scale Industries (SSI)Definition:

An industrial undertaking having

Investments in fixed assets upto one crore rupees

Held on ownership

Held on lease basis

Held on hire purchase basisAn industrial unit

Employing less than 50 persons if using power

Employing less than 100 persons without using power

With a capital investment not exceeding rupees one crore

An undertaking with an investment on plant and

machinery of not more than rupees one crore Ancillary Industries (AU)Definition:

Are those small scale industries which are engaged in the manufacture of

Parts

Components

Sub-assembly of parts

Tooling etc.

for supply against

known demand

Anticipated demand

of one or more large industries.

Tiny Units:Definition:

A tiny industry is one in which investment on plant and machinery does not exceed Rs 25 lakhs.Small Scale Service & Business Enterprises (SSSBEs)Definition:

An Industry related services and business enterprise, is one in which the investment on fixed assets (excluding land and building) will not exceed Rs 10 lakhs

Performance of Small Scale Industries The performance of SSI will reflect on the following areas:

Employment.

Production.

Exports.

List of items reserved for Small Scale IndustriesThe following items are reserved for manufacturing in SSI:

Food and Allied Industries

Textile products including Hosieries

Artificial Silk/Man-Made Fiber Hosieries

Wood and Wood products

Paper products

Leather and leather products including foot wear

Rubber products

Plastic products

Injection Moulding Thermo plastic products.

Chemical and chemical products laboratories

Natural essential oils

Glass and ceramics

Roofing Tiles

Flooring Tiles.

Mechanical Engineering transport equipment.

Electrical machines, appliances and apparatus including electronics

Mathematical And Survey Instruments

Sports Goods

Stationery Items

Clocks And Watches

Others

Small Scale Industry

Advantages:

It provides better and quick employment

It is labour intensive and capital saving

Highly Sophisticated Machines are not needed It attracts small savings and diverts them to productive channels

It provides economic development by rapid industrialization

It provides check on monopoly

It reduces imbalance of income and properties

Small Scale Industry

Regulations:

Environmental Regulations

Foreign Exchange Regulations

Income Tax Regulation Quality Standards

The Factories Act

The Industrial Establishment act

The Minimum Wages Act

Employees Provident Fund Act Workmen's Compensation Act

Employees state Insurance Act

Trade Union Act

The Air and Water Pollution Act

Environmental Protection Act.

The Industrial Dispute Act.

Delayed Payment Act.

Registrations:

Small scale and ancillary units should seek registration with the Director of Industries (DIC) of the Concerned state government

Benefits Of Registration

The registration scheme has no statutory requirement

But units get registered, would normally avail some

Benefits

Incentives

Support given either by the central or by the state government The regime of incentives offered by the central government

Credit prescription (priority sector lending)

Differential rates of Interest

Excise Exemption scheme

Exemption under Direct Tax Laws

Statutory support such as reservations and interest on Delayed Payment Act States / UTs have their own packages of facilities and incentives for small scale industries, such as.

Development of Industrial Estates

Tax Subsidies

Power tariff Subsidies

Capital Investment SubsidiesTypes of Registrations:Registration of S.S.I. is done in two stages:

1. Provisional registration

2. Permanent registration

1. Provisional registration certificate

This is given for the pre-operative periods and enables the units to obtain,

The term loans

Working capitals

Facilities for accommodation

Tax Subsidies

Power tariff Subsidies

Capital Investment Subsidies

2. Permanent registration certificate Enables the unit to get the following incentives/concessions

Excise duty exemptions

Income tax exemptions and sales tax exemptions as per

state government policy

Incentives and concessions in power tariffPromotion

To promote upcoming entrepreneurs, the Government of India have formulated policies and schemes to promote small scale industries

The policies and schemes can be summarized under the headings of

General

Priority sectors

Funding and financial

Modernization and training

Policies

Policy of reservation

Items reserved for manufacturing

Trade policy-imports & exports

Price & purchase preference policy

Labour policies

Rehabilitation of sick units

General schemes

Single window scheme

Industrial estates

National awards for outstanding SSI entrepreneurs

National awards for quality products in small scale sectors

Policies on priority sectors like

Tiny sectors Cottage Industries Village Industries Handicrafts Khadi Handlooms Development of backward areas Prime Ministers Rojgar Yozana Self Employment scheme for educated unemployed Assistance to SC/St entrepreneurs Policies related to Funding & Finance

Policy of financial support

Policy of priority credit

Equity participation

OTC Exchange (over the counter) Excise exemption scheme, Tax Holiday

Venture capital

National Equity Fund Scheme

Other SIDBI Schemes

NSIC Schemes

Policies related to modernization & training Quality certification schemes (ISO 9000).

Policy of technology up gradation

Technology Bureau of small enterprises

Policy for development of information technologies

Schemes related to modernization & training Technology Development Fund Schemes

Testing Center

Integrated Infrastructure Development

Training Infrastructure

Growth Center

Technology Development & Modernizations

Self employment schemes

Self-employment schemes are developed by both central and

state governments for the promotion of small scale industries

Some of the self- employment schemes:

Prime Ministers Rojgar Yojana (PMRY)

Under the scheme

One can start industry/business venture with project cost upto Rs 1 lakh 95% project cost will be financed by banks To get loan, candidates age shall be between 18-35 years Beneficiary has to repay the loan within 3 to 7 years

Some of the self employment schemes:

National equity fund scheme

The main objective of this scheme

Is to provide equity type of support to small entrepreneurs tiny or small sector Soft loan is provided for a maximum 15% of project cost within a ceiling of Rs 75,000/- per project

Refinance scheme for modernizationThe main objective of this scheme is

To encourage SSIs to over come the backlog of modernization To adopt improved and updated technology Modernization includes replacement or renovation of plant

and machinery

Some of the Self employment schemes:Single window scheme This scheme is eligible for new units whose project cost does not exceed Rs 10 lakhs

Under this scheme Rs 5 lakhs working capital loan is granted

Permissible term loan for fixed assets can also be provided

Self employment scheme for ex-servicemen Separate self employment schemes are designed exclusively for ex-servicemen candidates

Ex:- Arms to farms introduced in 2005

Self employment for physically handicapped Self employment schemes are designed exclusively for physically handicapped candidate

Site Selection

One of the important aspects of project planning is the

location of site for the plant

An ideal location of site is one where

Unit cost of production is minimum

Distribution cost is minimum

Volume of sales will be more

Abundant availability of skilled workers

Sufficient water availability etc

Factors influencing site selection:Site characteristics

Selection of site depends on:

Contour of site

Soil structure (clayey, sandy, rocky etc.)

Access to rail, road and river

Possibility of future expansion

Cost of site

Risk Involved in Site characteristics

History of floods in surrounding area

Past occurrence of earthquakes etc

Distance from industrial installations

Fire hazards in surrounding areas

Risks of wars

Ex:- Reliance industries situated at Jamnagar in

Gujarat

Availability of supplies

Availability of raw materials from the source at the shortest distance

Availability of raw material from the existing or future suppliers

Availability of substitute material Availability of

Electrical power

Fuel

Cost of

Electrical power

Fuel

Availability of water source Cost of unit of water at siteAspects of waste disposal

Facilities for discharging or depositing waste

Restrictions if any in waste disposal

Local regulations

Labour aspects

Availability of skilled and unskilled labour in the proposed area

Stability of labour rates

Nature of local labour

Aspects of transportation

Facilities for transportation such as railway stations, ports etc

Emergency air travel facility

Facilities for transportation of water, fuel etc Some general factors who can be considered for the selection of site:

Cultural aspects

Rules and regulations of panchayat

Rules and regulations of municipal corporation

Concessions and incentives available

Law of taxation

Government laws

Plant Layout

Definition:

Is the optimum arrangement of different facility including

Men

Machine

Equipment

Material A technique of locating different machines and plant services within the factory so that the greatest possible output of high quality at the lowest possible total cost can be available

Objectives of Plant Layout: Overall simplification of production process in terms of

Equipment utilization

Minimization of delays

Minimization of manufacturing time

Better provision for maintenance

Overall integration of resources

Men

Material

Machines

Saving in floor space with less congestion

To provide better working conditions

Provide safety

Avoids hazards

Minimization of material handling cost

To aim for

Improved morale

worker convenience

Worker satisfaction

To aim for higher productivity

To reduce the waiting time for semi-finished products

To aim for higher flexibility and adaptability to changing conditions

Factors affecting:

Types of industry

Involving synthetic process (Ex:- Cement industry) Involving analytical process (Ex:- petroleum refineries) Involving extraction process (Ex:- Iron & steel making) Involving conditioning process (Ex:- Jute Industry)

Types of Product

Heavy or light

Liquid or solid

Large or small

Volume of production

Job production

Batch production

Mass production

Volume of people

Workers

Managers Method or process

Material handling

Store room provision

Tool room provision

Principles of Plant Layout:

According to Muther, there are six basic principles for best layout

Principle of overall integration

Where integration of all resources is present

Principle of minimum distance

The distance between men and materials should move between operations

Principle of flow

Flow of all materials should be smooth and uninterruptive

Principle of cubic space

Effective utilization of all available space

Principle of satisfaction and safety

The working conditions should be

Pleasant

Satisfying

Safer

Principle of flexibility

Ability to get arranged at

Minimum cost

Least inconvenience

Types of Plant LayoutThere are three types

Product or line layout

Process or functional layout

Fixed position layout

1. Product or line layout This type of layout is preferred for continuous or mass production

All the machines and equipment are arranged according to the sequence of operations

The raw material enters at one end and leaves the other end as a finished product

Only one type of product is produced

This is layout is highly suitable for continuous or mass production industries like cars, bearings, fasteners etc.

Ex:-

Cars

Bearings

Fastener

Production or line layout advantages:

Low cost material handling due to straight and short path

Smooth flow of materials, free from bottle necks

Better utilization of men and machines

Effective inspection of work

Lower cost of manufacturing per unit

Disadvantages:

Break down of one machine leads to complete stoppage of work

It is difficult to increase production beyond the capacities of the production lines

All machines in the arrangement cannot be used to their maximum capacity

Product change cannot be possible

Process defect is difficult to identify hence, rejection rate will be more

2. Process layout (function layout):

It is characterized by keeping similar machines or similar operations at one location

Ex:- Lathe machines will be at one place

All milling machines at another place etc

This type of layout is generally employed for industries engaged in

Job order production

Non-repetitive kind of manufacturing

This layout is very suitable where low volume of production is required

Ex:- Manufacture of grinding wheels

Manufacture of refrigerators

Process layout advantages:

The layout is flexible, hence it can be easily modified according to our requirement

High degree of machine utilization

Change in product design and volume can be easily adopted

Any break down of one machine does not affect production

Better utilization of the available equipment

There is greater scope for expansion

Better product quality

This layout can be utilized for many products

Disadvantages Handling and back-tracking of materials is too much.

For the same amount of production, process layout needs more space.

Total production cycle time is more, due to long distances and waiting.

Production control becomes difficult.

Work in process inventory is large.

3. Fixed position layout: In this type of layout, the materials, major components remains in fixed position, while men, machinery and tools and other supporting equipment are brought to the product location.

The cost of movement of men, materials and machinery is cheaper than the cost of moving the product, which is bulky.

This type of layout is used in ship building, air craft manufacturing, big pressure vessel fabrication, satellites, etc.

Advantages of Fixed position layout: It involves least movement of materials.

Capital investment on layout is minimum

Production cost becomes less.

There is maximum flexibility for all sorts of changes in product and process.

Transporting cost of bulky products is avoided.

Disadvantages of Fixed position layout: High skilled workers are required.

Complicated jigs and fixtures are required.

More time is required to move machines and tools to reach the product.

It involves high equipment handling costs.

Need For Planned And Coordinated Effort An entrepreneur should take expert opinion of industrialists, bankers, professional consultants for planning and managing their enterprise

An entrepreneur should be aware of

Scope for new products

Assistance available from various agencies

Marketing facilities

Procedure for registration of the firm

Details of raw material and machinery

Follow up and institutional supportVarious organizations and institutions have been set-up for the promotion support of the entrepreneurs especially in the areas of

Technical

Financial

Managerial

Marketing

Infrastructure

Supporting Institutions

National level institutions

State level institutions

National level institutions Small Industries Development Organization (SIDO)

National Small Industries Corporation (NSIC)

National institute for entrepreneurship and small business

Central Institute of Tool Design (CITD)

Small Industries Service Institute (SISI)

Entrepreneurship Development Institute of India (EDII)

State Level Institutions Directorate of Industries

District Industries Centre (DIC)

A.P Industrial Development Corporation

A.P State Small Industries Development Corporation (APSSIDC).

A.P Industrial Infrastructure Corporation (APIIC).

Services provided by National Level InstitutionsSmall industries development organization (SIDO)SIDO provides services like:

Entrepreneurship development programmes

Management training

Skill development

Preparation of product profiles

Market supports

Plant modernization

Three national awards/year for out standing SSI entrepreneur in the country.

National Small Industries Corporation Limited (NSIC)NSIC provides services like

Machinery and equipment purchase and lease

Financial assistance

Assistance for procurement of raw material

Marketing assistance

Government stores purchase

Technology transfer centers

Export programmers.

National Institute Of Small Industries Extension And Training (NISIET)NISIET Trains

Entrepreneurs

Managers/Officers of the govt.

Research and consultancy for SSI.

Services Rendered by State Level InstitutionsDirectorate Of IndustriesThe main function is

Promotion and development of the small industries sector.

District industries centre (DIC)The main functions are

Economic investigation of local resources

Supply of machinery and equipment

Provision of raw materials

Marketing.

A.P state industries development corporation (APSSIDC)The main functions are:

Supply of machinery

Raw materials

Marketing assistance

Seed capital assistance

Construction of industries estates.

A.P Industrial Infrastructure Corporation (APIIC)APIIC helps in providing infrastructure like

Industrial estates

Sheds

Internal roads

Power

Water

Financial assistance Financial assistance and credit facilities assistance to SSI units are available with the following institutions and banks.

Industrial development banks

Commercial banks

Investment corporations.

The financial assistance is provided for purchase of

Raw materials

Machinery and equipment

Construction of factory premises

And also to meet the needs of

Working capital.

Schemes of Financial Organization Bills discounting

Refinance scheme for rehabilitation and modernization of small enterprise

Seed capital scheme

Working capital scheme

Special finance schemes for artisans, SC/ST/PH and women entrepreneurs.

Financial Institutions1. Small Industries Development Bank Of India (SIDBI)

2. National Small Industries Corporation (NSIC)

3. Industrial Finance Corporation Of India (IFCI)

4. Industrial Credit and Investment Corporation of India (ICICI )

5. National Bank for Agriculture and Rural Development (NABARD)

6. Life Insurance Corporation of India (LIC)

7. Unit Trust of India (UTI)

8. A.P State Financial Corporation (APSFC)

9. Commercial Banks.