setup new enterprise

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EntrepreneurshipIn political economics, entrepreneurship is a process of identifying and starting a businessventure, sourcing and organizing the required resources and taking both the risks and rewardsassociated with the venture.

Definitions and Approaches

1.

Economic Approach :Economists like Richard Cantillon, Adam Smith, J.B. Say, Carl Menger, and Joseph Schumpeterhave explained the concept of entrepreneurship from the economic point of view. According tothe economic approach entrepreneurship is the process of initiating a new venture by organizingthe resources required and accepting the risk involved therein. Entrepreneurship and ultimatelyeconomic development takes place when the economic condition is favorable. An entrepreneurbuys the factors of production at a certain price, converts them into products and sells them at anuncertain price. Thus, economists have emphasized two main aspects, viz. innovation and riskbearing. The entrepreneurs create new things, use new technology, and find new sources of rawmaterial, source of new markets and so on. By the innovation function entrepreneurs makeavailable new products to the people and help to raise their standard of living.

2.

Sociological Approach :Sociologists have emphasized the impact of social system, ethics, values, customs, andperception on entrepreneurship. They hold that entrepreneurship flourishes in those societies,which recognize the services

Of entrepreneurs, respect them and give approval to the business and wealth creation. Accordingto them entrepreneur represents societys model personality.

3. Psychological Approach :

According to the psychological approach entrepreneurship is influenced by factors like highachievement, motive, self-reliance, creativity, and desire to regain the lost status. Thepsychological approach is developed by Macmilan and Hansen.

4. Modern Approach :

The modern approach states that entrepreneurs have to function under adverse conditions. Thereis a scarcity of labour, shortage of capital and uncertain market. Hence they require possessingorganizing skills, innovative ability, decision making ability, risk bearing capacity.

Definition of Entrepreneurship:

Let us now study select definitions of entrepreneurship:

Higgins B :

Entrepreneurship is the function of seeking investment and production opportunity, organizingan enterprise to undertake a new production, process, raising capital, hiring labour, arranging thesupply of raw materials, finding site, introducing new techniques and commodities, discoveringnew sources of raw materials, and selecting top managers of day-to-day operations of the

enterprise. Joseph Schumpeter :

Entrepreneurship essentially consists in doing things that are not generally done in the ordinarycourse of business routine.

4. Peter Drucker:

Entrepreneurship occurs when resources are redirected to progressive opportunities not used toensure administrative efficiency. Entrepreneurship is not natural; it is not creative. It is work.Entrepreneurship requires entrepreneurial management.
http://en.wikipedia.org/wiki/Political_economicshttp://en.wikipedia.org/wiki/Political_economics


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4. John Kao:

Entrepreneurship is an attempt to create value through recognition of business opportunity, themanagement of risk taking appropriate to the opportunity and through the communicative andmanagerial skills to mobilize human, financial and material resources.

Theories of Entrepreneurship:

Various authorities have developed various theories of entrepreneurship. Let us now discusssome important theories of entrepreneurship.

1. Schumpeters Theory of Innovation:

Joseph Schumpeter in 1934 has developed the famous innovative theory of entrepreneurship.Schumpeter has tried to establish correlation between the economic activity and economicdevelopment of a country. According to him the innovation function of entrepreneurs isresponsible for the rapid economic development of any country. Schumpeter states thatentrepreneur is basically an innovator who introduces

New combinations as mentioned below:

Organizing

Decision-making

Managing Dynamic process

Innovative

Risk-bearing

Accepting

Challenges

Entrepreneurship

a) Introduction of a new good which consumers are not yet familiar or a new quality of a good.

b) Introduction of new technology of production

c) Opening a new market

d) Discovering a new source of raw materiale) Carrying out a new form of organization either creating a monopoly position or breaking up ofa monopoly position in the industry.

Schumpeter made a distinction between an innovator and an inventor. The inventor discoversnew materials and new methods. Whereas the innovator utilizes these inventions and discoveriesin order to make new combinations. He further states that an individual is an entrepreneur onlywhen he carries out new combinations and ceases to be an entrepreneur, the moment he runs theestablished business. In other words innovation is the main function of entrepreneur and not themaintenance of the enterprise.

Critical evaluation:

Schumpeters theory of innovation has been criticized on the following grounds.

i) Schumpeter has given undue emphasis on the innovative function entrepreneurs and hasignored the other equally important functions viz. risk taking and organizing.

ii) Schumpeters theory holds goods to developed countries only. In underdeveloped and

developing countries there is a scarcity of innovative entrepreneurs.

iii) Schumpeter does not consider individuals running the established enterprises asentrepreneurs.

iv) Schumpeters theory neglects the role of small entrepreneurs in economic development. It

stresses on establishment of large enterprises based on new combinations of production.


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v) According to Schumpeter, there is no separate class of entrepreneurs i a society.

vi) Schumpeters theory fails to give satisfactory answer to questions like why some countries

have more entrepreneurship talent than others. In spite of the above criticism Schumpeterstheory is regarded as a milestone in the development of entrepreneurship theories.

2) Mc-Clelands Need Achievement Theory:

This theory of entrepreneurship is developed by David Mc-Cleland. David Mc-Cleland and hiscolleagues studied the motives responsible for entrepreneurs development and concluded thathigh achievement motive induces an individual towards entrepreneurship. Mc-Cleland states thatindividuals with high need achievement will be motivated to become entrepreneur. It is atendency to strive for excellence, ones performance, achieving high levels of success for thesake of personal accomplishment and not for the sake of just monetary rewards. The motive ofhi-achievement guides the actions of people and induces them towards entrepreneurship. Peoplewith high need achievement motive are more likely succeed as entrepreneurs.

Mc-Cleland further states that it is possible to inculcate the need for achievement motive in aperson. Deliberate efforts are required to be made from the childhood of a person. If the child isgiven training with emphasis on standards of excellence, maternal warmth, self-reliance and low

father domination the child can afterwards become an entrepreneur. Mc-Cleland identified twomain characteristics of entrepreneurship viz. doing things in a new and better way and takingdecision under uncertainty, parents can bring up their children in a particular manner which helpsto raise the level of achievement motivation.

Thus Mc-Clelands theory gives emphasis on psychological factors entrepreneurshipdevelopment. Such persons excel in their pursuit not for the sake of monetory rewards or gainingsocial prestige but for the sake of an inner feeling of personal accomplishment.

Importance of Entrepreneurship:

Entrepreneurship being an intangible factor is the moving force and development is the

consequence. It has an important role in the context of a developing nation like India which is

confronted with major socio-economic problems. Entrepreneurship can play an important rolenot only in the industrial sector of a country but in the farm and service sectors also.

India is being attacked by baffling problems of over population, unemployment, under-

employment, poverty and the like. Entrepreneurship is consistently equated with the

establishment and management of small business enterprises and setting up these units is the

solution to these baffling problems.

Concentration of economic power, regional imbalances, exploitation by monopolists, and many

other giant problems find their solutions in the development of small scale industry which is

another name of entrepreneurship in the developing countries. Mahatma Gandhi also asserted thesame, entrepreneur ship has not grown much in India but it is gaining importance fast. The

factors which retard the success of entrepreneurship in India are inadequate infrastructural

facilities, shortage of capital, technical knowledge, and transport, absence of cheap and good

quality raw material and shortage of power etc. The government has been taking significant steps

to encourage entrepreneurship as entrepreneurship is the only solution to various problems of

developing countries. Entrepreneurship caught strong waves during the last three decades and


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became a worldwide movement spreading across countries, regardless of their level of

development. Even in Europe and United States, revival of small business has been seen for

more than a decade. Constant change and innovations are simply a necessity of entrepreneurship

and is becoming essential to survive in a global economy. An American magazine 'The

Economist' (1999) recently put it, "Innovation has become the industrial religion of the late 20th

Century." It is being increasingly realized that' day's managers and businessmen need not only

managerial skills but entrepreneurial skills as well. Entrepreneurship needs to be demystified and

transformed into a skill by teaching and practicing. Skill of entrepreneurship knows how to turn

an ordinary corporation, managed in a routine manner, into an entrepreneurial organization.

People within the organization can be trained to:

(i) Detect the opportunities

(ii) Pursue the opportunities and rewarded

(iii) To lessen the consequences of failing.

Features of Entrepreneurship:

Entrepreneurship is the tendency of a person to organize the business of his own and to run it

profitably, using various traits like leadership, decision making, innovation, managerial caliber

etc. Entrepreneurship is a set of activities performed by an entrepreneur. In a way, entrepreneur

precedes entrepreneurship. The main features of entrepreneurship are as follow:

(i)Economic Activity:

Although classical economists like Adam Smith and Richard Cantillon and many others didn't

recognize entrepreneurship as an economic activity but since last few decades entrepreneurship

is catching up and is primarily becoming an economic function because it involves creation and

operation of an enterprise.

Schumpeter's argument was that all important changes in the economy are set off by an

entrepreneur and then these changes slowly work themselves through economic system, in the

form of a business cycle.

(ii) Innovative Activity:

According to Schumpeter, entrepreneurship is essentially a creative and an innovative activity.There are five ways of being innovative.

(a) The introduction of a new good.

(b) The introduction of a new method of production.

(c) Opening of a new market.


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(d) The conquest of a new source of supply of raw-material.

(e) The creation of a new organization of an industry.

Schumpeter's entrepreneur combines already existing materials and thereby produces something

novel and innovative. It is only at that very moment when someone actually puts together such acombination that he is engaged in entrepreneurship. He suggests that it is very useful to study the

constitutive parts of entrepreneurship, different motives that drive the entrepreneur and the main

types of innovative behavior that entrepreneurship may result in.

Entrepreneurs tend to tackle the unknown; they do things in new and different ways' they weave

old ideas into new patterns; they offer more solutions than exercises. However, just to be

innovative is not enough unless that innovation is carried into production to benefit consumers.

(iii)A Function of High Achievement:

McClelland identified two features of entrepreneurship, (a) doing things in a different and betterway; (b) decision making under uncertainty. People having high need for achievement are more

likely to succeed as entrepreneurs. Psychological theories assert that people's capacity for

entrepreneurship is decisively influenced by the way they are socialized as children.

David McClelland stressed that entrepreneurs are highly motivated by challenging and

competitive work situations.

(iv)Creative and Purposeful Activity:

Entrepreneurship is virtually a creative and purposeful activity. Entrepreneurship is a creative

response to the changing environment. Earning profit may not be the sole objective butintroduction of something creative and new is the purpose of entrepreneurship. The benefit of

this creativity must be enjoyed by people at large.

(v) Entrepreneurship as an Organizing Function:

As J.B. Say says: The entrepreneurs function is to combine the productive factors, to bring them

together. According to him, an entrepreneur is one, who combines the land of one, the labour of

another, and capital of yet another, and thus, produces a product. By selling the product in the

market, he pays interest on capital, rent on land, wages to laborers and what remains is his profit.

Thus, J.B. Say clearly distinguishes between the role of a capitalist as a financer and theentrepreneur as an organizer.

Marshall also advocated the significance of organization among the services of special class of

business undertakers.

(vi) Entrepreneurship: A function of Risk-Bearing: Richard Cantillon, an Irishman living in

France, defined entrepreneur who buys factors of production with a view to sell it at uncertain


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prices in future. Cantillon concerned of an entrepreneur as a bearer of non-insurable risk. Thus,

Cantillon introduces elements of direction and speculation into the function of entrepreneurship.

Entrepreneurship is a dynamic and multi-dimensional concept. It is both an art as well science. It

is more an art than science. In short, Entrepreneurship is what entrepreneurs do.

The Importance of Entrepreneurship for Jobs, People and a Better SocietyEntrepreneurs likely contributed to that morning cup of coffee you enjoyed or the new app youdownloaded to your Smartphone. But entrepreneurship does more than just add extraconveniences to our lives. Entrepreneurs invented the traffic light, and they developed theartificial heart. If you want to give entrepreneurship a try, learn the basics with A YoungEntrepreneurs Guide to Start and Grow a Business. Through the course, youll findentrepreneurship refers to the willingness to start and run a business venture and the risksassociated with it. Young, small and innovative companies are examples of entrepreneurship.

Two years ago, President Barack Obama designated November as National EntrepreneurshipMonth because it is such an important force in the global economy. In his research, economist

David B. Audretsch found that entrepreneurship is a vital contributor to economic growth andprosperity.

The United States and countries across the world have recognized this and are pouring moreresources into supporting entrepreneurs and teaching entrepreneurship. In 2012, the White Houselaunched Startup America to celebrate and accelerate the growth of entrepreneurship and pledged$2 billion over the course of five years to support entrepreneurship in underserved communitiesand young companies. Enspire EU is a project looking to foster entrepreneurship across theEuropean Union.

Job Creation

Its tough to land a job, but entrepreneurs make it easier. Entrepreneurs create jobs for

themselves, but often they need more than just their skill set and personal initiative to transform

their idea to a consumer product or service. Take Microsoft. In 1975, Bill Gates and Paul Allenstarted their small software company with dreams of changing the way we use computers. Theysucceeded but not without a great deal of help. Today, Microsoft employs over 100,000 peopleworldwide.

Together entrepreneurial companies add even more jobs to the economy. A 2013 report by theEwing Marion Kauffman Foundation found that companies less than a year old with fewer than 5employees have created about 1 million jobs every year for the last three decades. Those withfive to nine employees add about half a million every year. The Kauffman Foundation is anorganization dedicated to advancing education and entrepreneurship through its research andinitiatives. The National Employment Report found in June that businesses with fewer than 50employees created 45 percent of all jobs.

Are you discouraged by the job hunt? Or have a business idea you want to develop? Considerstarting your own company, but get some advice first fromBecome a Startup Founder.

Personal Growth

Entrepreneurship has created millions of good jobs. In a startup workplace, jobs often call forcreativity and collaboration, leading to personal development. Those exposed toentrepreneurship have higher confidence and greater independence. Not bound by the hierarchy
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and restrictions of large corporations, young entrepreneurs can take on greater responsibility,work flexible schedules and use creative solutions to problem solve.

The freedom associated with entrepreneurship comes with certain challenges. Entrepreneursoften work long hours and risk their personal assets in developing their business. Try the course21 Critical Lessons for Entrepreneurs if you dare to become an entrepreneur and learn to

maximize the benefits of entrepreneurial work.Social Good

Within the last decade more and more entrepreneurs are focusing their work on resolving socialproblems. Whether its poverty or climate change, these important issues deserve the efforts ofthese eager entrepreneurs, and their work will benefit society not just through the jobs they createor the sleek product they deliver, but by the people they help. Bangladeshi economist and NobelPeace Prize winner Muhammad Yunus used entrepreneurship to help the poor of his country.

In the 1970s, he began giving out micro-loans to basket weavers. He set up Grameen Bank in1983 and continued his practice of micro-lending to others in poverty. The small loans with lowinterest rates inspired many recipients work their way out of poverty. Today, more than 58 othercountries have used these principles to help their poor.

Meaning of Enterprise

A business, also known as an enterprise or a firm, is an organization involved in the trade of

goods, services, or both to consumers.[1] Businesses are prevalent in capitalist economies, where

most of them are privately owned and provide goods and services to customers in exchange of

other goods, services, or money. Businesses may also be not-for-profit or state-owned. A

business owned by multiple individuals may be referred to as a company.

The etymology of "business" stems from the idea of being busy, and implies socially valuable

and rewarding work. A business can mean a particular organization or a more generalized usage

refers to an entire market sector, i.e. "the music business". Compound forms such as agribusinessrepresent subsets of the word's broader meaning, which encompasses all the activity by all the

suppliers of goods and services.

Types of enterprise

There are several types of enterprise, each one distinguished by its legal ownership, including:

Private enterprise

Sole traders

Sole traders are the life-blood of a market economy. Sole traders are common in retailing and

local services like plumbing and catering. With local services demand limited, so the scope for

expansion is also limited. The sole trader owns the assets of the business, makes all the business

decisions, bears all the risks, and, of course, retains all the profits.
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Partnerships

Partnerships are owned, and usually managed, by a small number of partners, each of whom can

specialize in a particular aspect of the business. Decisions will be jointly arrived at, and the risks

and rewards will be spread between the partners. In certain types of partnership, not all partners

bear equal risks, and some partners may have a limited liability for debts incurred by thebusinesses. Partnerships are common in professional and financial services such as:

Solicitors

Accountants

Estate agents

Private Limited Companies (Ltd)

Limited companies are legally incorporated firms, which meanthat they have their own legal

identity, and are owned by shareholders who have limited liability for the firms debts. Unlike

sole traders and ordinary partnerships, limited, or joint-stock companies, are set up to take

advantage of the principle of limited liability.

The rapid development of limited companies in the 18th Century provided a stimulus to the

growth of private enterprise and the spread of free-market capitalism. This was because limited

liability encouraged ordinary individuals to part their savings, and so provide finance for small or

growing enterprises, without the risk of losing any more than the initial outlay. Today, private

limited companies are common in all areas of economic activity in all sectors of the economy;

from screenwriters and film producers, to restaurants and hotels.

In a limited company, shareholders appoint directors to take the key business decisions, thoughoften the directors are also shareholders. Directors make decisions collectively as members of the

Board of Directors.

Most of the significant risk taking is made by the Board of Directors, though day-to-day

decision-making is devolved to professional managers.

Public Limited Companies (plc)

Like private limited companies, public limited companies are also legally incorporated and are

owned by shareholders who have limited liability for the firms debts, the difference being that

public companies are allowed to sell shares to the general public.

To enable them to go public, and list their shares on the stock exchange they must satisfy

strict criteria laid down by law covering the liquidity of the business, publication of financial

accounts, and number of previous years trading.


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The regulations governing public limited companies in the UK are increasingly complex, and

this partly explains the recent trend towards de-listing and returning to private limited status.

The main advantage of being a plc is that it is much easier to raise funds because shares can be

offered for sale to any member of the public. Shares can also be re-sold to other members of the

public via stock exchanges, so it is easy for investors to regain their liquidity.

Despite the tough regulations, most large firms prefer to remain plc, or their equivalent in other

countries.

Public enterprises

Public Corporations

Public corporations, such as the British Broadcasting Corporation (BBC), are organizations

owned by the state. They are funded in a number of ways, including:

Government grants and subsidies

License fees

Charges for supplying their service

A Board of Governors rather than a Board of Directors usually control public corporations. If

their income is greater than their costs they make a surplus rather than a profit.

Widespread privatization between 1980 and 2000 led to a reduction in the number of public

corporations. Despite being owned by the state, public corporations are frequently managed

along commercial lines, as in the case of the BBC.

Not-for-profit organizations

In addition to public corporations, many other organizations are not established to make a profit,

though they may earn revenue and be run on commercial lines.

Examples of not-for-profit organizations include Network Rail, charities like Oxfam,

universities, and government sponsored organizations like the Office of National Statistics.

Do firms need entrepreneurs?

According to the neo-Classical economists, entrepreneurs are not needed in perfectly competitivemarkets. This is because in perfectly competitive markets, all participants have perfect

knowledge and economic transactions have no risk attached.

However, in the real world of imperfect markets, entrepreneurs can exploit their knowledge and

generate a profit by so doing.


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Basic steps to start an Enterprise?

Starting a business means setting up a new business enterprise. This initiation is also known as

the promotion of business.

How to start a business

Promotion of business is done by a Promoter or an Entrepreneur.

The Promoter has to take some steps to start a new business enterprise. Promotion of business is

not an easy job. One mistake will cause many difficulties for the new business. Therefore, the

promoter must be able to take good decisions. He must have technical knowledge about the

business. He must be a hard-working and energetic. After setting up the new business, the

promoter gives it to the owners or shareholders and directors. The promoter charges a

commission for his services. He is paid cash or in shares.


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1. Discover a business opportunity:

The Promoter first finds out a business opportunity. He can get this information from

newspapers, magazines, market surveys, research, etc.

A business opportunity may be to:

Start a new business,

Expand or diversify the existing (old) business,

Purchase another company,

Enter a joint venture or foreign collaboration, etc.

All business opportunities look very good in the beginning. However, the Promoter must

investigate the business opportunity very carefully. He must find out whether it is profitable or

not. He must study the competition, future prospectus of the business, demand and supplyposition, availability of raw materials, etc. He must start the business only if he is fully satisfied.

2. Size of business:

The promoter has to decide about the size of the business unit. He has to decide whether the

business unit will be a small, medium-one or large size. The size of the business depends on

many factors such as economics of scale, future demand, finance, etc. He must see that there is

optimum utilization of resources and maximum profit.

3. Form of business ownership:

The promoter must decide about the form of business ownership. The forms of business

ownership are sole trader, partnership firm, private company, public company and co-operative

society. The form of ownership depends on many factors such as size of business, finance, tax,

extent of liability, etc.

4. Location of business:

The promoter must decide about the location of the business unit. He must consider factors like

availability of land, electricity, water, nearness to market, transportation, scope for expansion,

and so on. Unscientific location affects the efficiency of business. It increases the cost ofproduction and decreases the profitability. Therefore, immense care must be taken while

selecting the region, location and site for the business unit.

5. Capital needs:

Finance is the life-line of a business. As a result, the promoter has to decide about business

capital requirements and also find out different sources of finance.


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While starting a new business the promoter has to decide on:

The financial needs of the business. That is, short-term and long-term capital requirements.

Sources of finance like shares, debentures, loans from banks and other financial institutions.

Cost of collecting finance and the returns on capital invested.

The capital structure and appropriate time for collecting finance. Sources of working capital.

6. Organization of physical facilities:

Physical facilities mean the resources used to convert raw-materials into finished products.

Promoter has to decide about the machines and equipment to be used, the process of production

and the skilled and unskilled workers required to perform jobs. He must get the best-quality raw

materials, machines and workers. So that he can produce good quality goods.

7. Layout:

Layout means an arrangement of physical facilities like machines, equipment and workers that

are required for manufacturing goods.

Plant layout is a scientific and systematic arrangement of machines and equipment within the

factory.

A good layout ensures minimum wastage, better use of available space; minimize production

loss, safety and security of workers. It also increases the profits of the business. So the promoter

must have a good plant layout.

8. Organizational structure:

A proper organizational structure is needed to conduct business smoothly and efficiently. The

business is divided, according to functions, into departments. After making departments, the

employees are assigned their duties and shouldered important responsibilities. This results into a

superior-subordinate relationship between them. Organization structure is a pattern of

relationships, and it is necessary to fix responsibilities on the employees.

9. Manpower requirements:

Business enterprise requires skilled and semi-skilled workers to do factory and clerical jobs. The

success of any organization depends upon selecting a right man for the right job. The Promoter

must use scientific methods for selection and training manpower (personnel) and match the right

person with right job.


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10. Registration:

Registering a new business is a very important step. Registration is not compulsory but is

beneficial to business due to the following main reasons:

It gives a legal entity and status to the business, and so it can enforce its legal rights.

A registered business gets all government assistance and incentives.

A registered business can get licenses to import raw-material.

In short, after the registration, a business legally comes into existence and can enjoy its all legal

rights.

11. Starting the business:

After registration, the promoter can launch (start) the business. He brings together the physical

facilities, starts the production process, recruits labour, produces and distributes goods. Ifeverything goes well, then the business runs smoothly and starts making profit.

12. Tax planning:

The promoter has to decide about the tax liability. Tax liability should not be avoided, but it can

be minimized by better management. Tax planning does not mean non-payment of tax. It means

to minimize the taxes and the effect of the taxes on the business. Therefore, tax planning

influences the promoter's decision about location, size, form and profitability of the business.

Five Rules for Building the Next Big Enterprise Startup

1. Money is sexy, and enterprise startups are where the money is. In early 2000s to 2008,

there was a lot of consumer software. But what happened in the last 4-5 years has been a shift to

more enterprise businesses being started. Yes you can build a little consumer app really easily,

but its really hard to actually make any money off them. In enterprise its tough to get going, but

ultimately you can get really big in that space enterprise is spending hundreds of billions in

the US alone and now its entering the cloud.

2. Your users are your best salespeople. If you decide you want to go after the enterprise

market, traditionally you built big enterprise sales teams. Big sales guys with million-dollar

salaries and huge targets. It used to be that IT would mandate software and everyone would haveto use it. Now the buyer is the user we expect the same experience from the enterprise

software as we do with consumer apps. Rather then IT being the main buyer, they are responding

to the organization. At Huddle, one customer we closed last month, they have 1,000 seats; they

grew from 25 seats to 1,000 in 6 months. You dont hire those sales guys; you focus on having a

great product.


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3. If your users are your best sales people, user experience is everything. Traditionally when

you sell to IT buyer, you satisfy the buyer they wanted control and customization. Thats

changed, what users demand are ease of use, adoption, software that solves a pain point in a

really easy way. Adoption is everything, so youre no longer just satisfying the need to an IT

manager, you have to have high adoption. We actually have an adoption guarantee; we guarantee

that if your users do not adopt Huddle within the first 90 days, youll get your money back.

Were gonna take away the risk of millions being spent; by the time you get thousand s of users

well give you the tools to manage your users.

We have a customer success team whose job it is to make our users successful, theyre the new

sales people. They support customers and grow, thats what they need to help grow. Zen desk

has exactly the same model; even Salesforce.com is starting to adopt it. When youve got it right,

your customers become your sales people as well.

4. Service is the new software. Before you would deploy software. It takes so long to deploy

and its expensive. In the cloud world, the vendors take all the work out of the technologydeployment. We provide all the support, hardware, maintenance, everything. Thats a huge shift.

When you pay a price for a user, you get everything. The biggest compliment is we compete

with big enterprise software called SharePoint, which is the antithesis of cloud adoption. What

we hear from our customers, they would spend 6 months customizing SharePoint, whereas

Huddle works out of the box. Instead of spending $5 million upfront, you just pay for what you

need. Its a much nicer model for everyone concerned.

5. Big data is the biggest trend there is right now.There was social, but thats come and gone.

There is more and more content being created every day, and if you can make sense of that

content and share it, then youre really a winner. Its figuring out from millions of documentscreated in a large organization, whats important and why should it be useful.

Steps involved in starting business in India

No: ProcedureTime to

complete:Cost to complete:

1 Obtain director identificationnumber (DIN) online from theMinistry of Corporate Affairs portal(National)

1 day INR 100

2 Obtain digital signature certificateonline from private agencyauthorized by the Ministry ofCorporate Affairs (National)

3 days INR 1,500


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3 Reserve the company name onlinewith the Registrar of Companies(ROC) (National)

2 days INR 500

4 Stamp the company documents atthe State Treasury (State) or

authorized bank (Private)

1 day INR 1,300 (INR 200 forMOA + INR 1,000 for

AOA for every INR500,000 of share capitalor part thereof + INR 100for stamp paper fordeclaration Form 1)

5 Get the Certificate of Incorporationfrom the Registrar of Companies,Ministry of Corporate Affairs(National)

5 days INR 14,133 (seecomments)

6 Make a seal (Private) 1 day INR 350 (cost depends onthe number of sealsrequired and the timeperiod for delivery)

7 Obtain a Permanent AccountNumber (PAN) from an authorizedfranchise or agent appointed by theNational Securities Depository Ltd.(NSDL) or the Unit Trust of India(UTI) Investors Services Ltd., asoutsourced by the Income TaxDepartment (National)

7 days INR 67 (INR 60application fee + 12.36%service tax + INR 5 forapplication form, if notdownloaded)

8 Obtain a Tax Account Number(TAN) for income taxes deducted atsource from the Assessing Office inthe Mumbai Income TaxDepartment

7 days INR 57 (INR 50application fee + 12.36%service tax)

9 Register with the Office ofInspector, Shops, and EstablishmentAct (State/Municipal)

2 days INR 6,500 (INR 2000 + 3times registration fee fortrade refuse charges)

10 Register for Value-Added Tax(VAT) at the Commercial TaxOffice (State)

12 days INR 5,100 (registrationfee INR 5000 + stampduty INR 100)

11 Register for Profession Tax at theProfession Tax Office (State)

2 days No cost

12 Register with Employees ProvidentFund Organization (National)

12 days No cost

13 Register for medical insurance atthe regional office of theEmployees State Insurance

9 days No cost


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Corporation (National)

Detailed Steps and Explanation of procedure to start Business in India

Procedure 1.

Obtain director identification number (DIN) online from the Ministry of Corporate Affairs portal

(National)

Time to complete: 1 day

Cost to complete: INR 100

Procedure: The process to obtain the Director Identification Number (DIN) is as follows:

1. Obtain the provisional DIN by filing application Form DIN-1 online. This form is on theMinistry of Corporate Affairs 21st Century (MCA 21) portal. The provisional DIN is

immediately issued.

The application form must then be printed and signed and sent for approval to the ministry by

courier along with proof of identity and (address):

a. Identity proof (any of the following): Permanent Account Number card, drivers license,

passport, or voter card;

b. Residence proof (any of the following): drivers license, passport, voter card, telephone bill,

ration card, electricity bill, and bank statement;

2. The concerned authority verifies all the documents and, upon approval, issues a permanent

DIN. The process takes about 4 weeks.

Procedure 2.

Obtain digital signature certificate online from private agency authorized by the Ministry of

Corporate Affairs (National)

Time to complete: 3 days

Cost to complete: INR 1,500

Procedure: To use the new electronic filing system under MCA 21, the applicant must obtain a

Class-II Digital Signature Certificate. The digital signature certificate can be obtained from one

of six private agencies authorized by MCA 21 such as Tata Consultancy Services. Company

directors submit the prescribed application form along with proof of identity and address. Each

agency has its own fee structure, ranging from INR 400 to INR 2650.


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Procedure 3.

Reserve the company name online with the Registrar of Companies (ROC) (National)


Cost to complete: INR 500

Procedure: Company name approval must be done electronically. Under e-filing for name

approval, the applicant can check the availability of the desired company name on the MCA 21

web site.

The ROC in Mumbai has staff members working full time on name reservations (approximately

3 but more if the demand increases). A maximum of 6 suggested names may be submitted. They

are then checked by ROC staff for any similarities with all other names in India.

The MCA receives approximately 50-60 applications a day. After being cleared by the junior

officer, the name requests are sent to the senior officer for approval.

Once approved, the selected name appears on the website. Applicants need to keep consulting

the website to confirm that one of their submitted names was approved.

In practice, it takes 2 days for obtaining a clearance of the name if the proposed name is

available and conforms to the naming standards established by the Company Act (1 day for

submission of the name and 1 day for it to appear on the MCA website).

Procedure 4.

Stamp the company documents at the State Treasury (State) or authorized bank (Private)


Cost to complete: INR 1,300 (INR 200 for MOA + INR 1,000 for AOA for every INR 500,000

of share capital or part thereof + INR 100 for stamp paper for declaration Form 1)

Procedure: The request for stamping the incorporation documents should be accompanied by

unsigned copies of the Memorandum and Articles of Association, and the payment receipt.

The company must ensure that the copies submitted to the Superintendent of Stamps or to the

authorized bank for stamping are unsigned and that no promoter or subscriber has written

anything on it by hand. The Superintendent returns the copies, one of which is duly stamped,

signed, and embossed, showing payment of the requisite stamp duty. The rate of stamp duty

varies from state to state.


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According to Article 10 and Article 39 of the Indian Stamp Act (1899), the stamp duty payable

on the Memorandum and Articles of Association for company incorporation in Mumbai,

Maharashtra, is as follows:

a. Articles of Association: INR 1000/- for every INR 500,000/- of share capital (or part thereof),

subject to a maximum of INR 50,000,000;

b. Memorandum of Association: INR 200;

c. Form-1 (declaration of compliance): INR 100.

Once the memorandum and articles of association have been stamped, they must be signed and

dated by the company promoters, including the company name and the description of its

activities and purpose, father-"s name, address, occupation, and the number of shares subscribed.

This information must be in the applicants handwriting and duly witnessed.

Procedure 5.

Get the Certificate of Incorporation from the Registrar of Companies, Ministry of Corporate

Affairs (National)


Cost to complete: INR 14,133 (see comments)

Procedure: The following forms are required to be electronically filed on the website of the

Ministry of Company Affairs:

Along with these documents, scanned copies of the consent of the initial directors, and also of

the signed and stamped form of the Memorandum and Articles of Association, must be attached

to Form 1.

The fees for registering a company can be paid online by credit card or in cash at certain

authorized banks. One copy of the Memorandum of Association, Articles of Association, Form

1, Form 32, Form 18 and the original name approval letter, consent of directors and stamped

power of attorney must be physically submitted to the Registrar of Companies. The certificate of

incorporation is sent automatically to the registered office of the company by registered or rush

mail.

The registration fees paid to the Registrar are scaled according to the companys authorized

capital (as stated in its memorandum):

a. INR 100,000 or less: INR 4,000. If the nominal share capital is over INR 100,000, additional

fees based the amount of nominal capital apply to the base registration fee of INR 4,000:


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B. For every INR 10,000 of nominal share capital or part of INR 10,000 after the first INR 1,

00,000, up to INR 500,000: INR 300;

C. For every INR 10,000 of nominal share capital or part of INR 10,000 after the first INR

500,000, up to INR 5,000,000: INR 200;

d. For every INR 10,000 of nominal share capital or part of INR 10,000 after the first INR

5,000,000, up to INR 1 10,000,000: INR 100;

E. For every INR 10,000 of nominal share capital or part of INR 10,000 after the first INR

10,000,000: INR 50.

The payment of fees can be made:

1. Offline: one can upload all incorporation documents and generate the payment challan.

Against this challan, the applicant must obtain a demand draft for filing fees amount in favour of

-" the Pay and Accounts Office, Ministry of Corporate Affairs, New Delhi" and this demanddraft is payable in Mumbai. The applicant must make the payment at specified branches of

certain banks. It takes around one week for clearance of payment. Only after the clearance of

payment does the ROC accept the documents for verification and approvals;

2. Online: the applicant makes the payment by credit card and the system accepts the documents

immediately. Please note that in Mumbai, the ROC requests for pre-scrutiny of documents for

any corrections, before they are uploaded. Once the documents have been uploaded, they can

then be approved without any further correction. The online filing mechanism requires only one

copy of scanned documents to be filed (including stamped MOA, AOA.

Schedule of Registrar filing fees for the articles and for the other forms (l, 18, and 32):

a. INR 200 for a company with authorized share capital of more than INR 100,000 but less than

INR 500,000;

B. INR 300 for a company with nominal share capital of INR 500,000 or more but less than INR

2,500,000;

c.INR 500 for a company with nominal share capital of INR 2,500,000 or more.

Procedure 6.

Make a seal (Private)


Cost to complete: INR 350 (cost depends on the number of seals required and the time period for

delivery)


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Procedure: Although making a company seal is not a legal requirement for the company to be

incorporated, companies require a seal to issue share certificates and other documents. The cost

depends on the number of words to be engraved, the number of seals required, and the time

period for delivery. The cost can range from INR 300 to INR 500.

Procedure 7.

Obtain a Permanent Account Number (PAN) from an authorized franchise or agent appointed by

the National Securities Depository Ltd. (NSDL) or the Unit Trust of India (UTI) Investors

Services Ltd., as outsourced by the Income Tax Department (National)


Cost to complete: INR 67 (INR 60 application fee + 12.36% service tax + INR 5 for application

form, if not downloaded)

Procedure: Under the Income Tax Act, 1961, each person must quote his or her Permanent

Account Number (PAN) for tax payment purposes and the Tax Account Number (TAN) for

depositing tax deducted at source. The Central Board of Direct Taxes (CBDT) has instructed

banks not to accept any form for tax payment (challan) without the PAN or TAN, as applicable.

The PAN is a 10-digit alphanumeric number issued on a laminated card by an assessing officer

of the Income Tax Department.

In order to improve PAN-related services, the Income Tax department (effective July 2003)outsourced their operations pertaining to allotment of PAN and issuance of PAN cards to UTI

Investor Services Ltd, which was authorized to set up and manage IT PAN Service Centers in all

cities where there is an Income Tax office. The National Securities Depository Limited (NSDL)

has also launched PAN operations effective June 2004, setting up TIN Facilitation Centers.

The PAN application is made through the above mentioned service centers using Form 49A,

with a certified copy of the certificate of registration, issued by the Registrar of Companies,

along with proof of company address and personal identity. A fee of INR 60 (plus applicable

taxes) applies for processing the PAN application. IT PAN Service Centers or TIN Facilitation

Centers will supply PAN application forms (Form 49A), assist the applicant in filling out theform, collect filled-out forms, and issue an acknowledgement slip. After obtaining PAN from the

Income Tax department, UTIISL or NSDL as the case may be, will print the PAN card and

deliver it to the applicant.

The application for PAN can also be made online but the documents still need to be physically

dropped off for verification with the authorized agent.


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Procedure 8.

Obtain a Tax Account Number (TAN) for income taxes deducted at source from the Assessing

Office in the Mumbai Income Tax Department


Cost to complete: INR 57 (INR 50 application fee + 12.36% service tax)

Comment: The Tax Account Number (TAN) is a 10-digit alphanumeric number required of

anyone responsible for deducting or collecting tax. The provisions of Section 203A of the

Income Tax Act require that all persons who deduct or collect tax at the source must apply for a

TAN. The section also makes it mandatory for the TAN to be quoted in all tax-deducted-at-

source (TDS) and tax-collected-at-source (TCS) returns, all TDS/TCS payment challan, and all

TDS/TCS certificates issued.

Failure to apply for a TAN or to comply with any of the other provisions of the section is subjectto a penalty of INR 10,000/- . The application for allotment of a TAN must be filed using Form

49B and submitted at any TIN Facilitation Center authorized to receive e-TDS returns.

Locations of TIN Facilitation Centers can be found at www.incometaxindia.gov.in and

http://tin.nsdl.com the processing fee for both applications (a new TAN or a change request) is

INR 50 (plus applicable taxes). After verification of application, the same is sent to the Income

Tax Department and upon satisfaction the department issues the TAN to the applicant.

The national government levies the income tax. Since outsourcing, any authorized franchise or

agent appointed by the National Securities Depository Services Limited (NSDL) can accept and

process the TAN application. The application for a TAN can be made either online through the

NSDL website (www.tin-nsdl.com) or offline.

Upon payment of the fee by credit card, the hard copy of the application must be physically filed

with the NSDL.

Procedure 9.

Register with the Office of Inspector, Shops, and Establishment Act (State/Municipal)


Cost to complete: INR 6,500 (INR 2000 + 3 times registration fee for trade refuse charges)

Procedure: A statement containing the employer-"s and manager-"s names and the

establishments name (if any), postal address, and category must be sent to the local shop

inspector with the applicable fees.


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According to Section 7 of the Bombay Shops and Establishments Act,-(1948), the establishment

must be registered as follows: Under Section 7(4), the employer must register the

establishment in the prescribed manner within 30 days of the opening of the business. Under

Section 7(1), the establishment must submit to the local shop inspector Form A and the

prescribed fees for registering the establishment. Under Section 7(2), after Form a and the

prescribed fees are received and the correctness of the statement on the form is satisfactorily

audited, the certificate for the registration of the establishment is issued on Form D, according to

the provisions of Rule 6 of the Maharashtra Shops and Establishments Rules of 1961.

Since the amendments in the Maharashtra Shops and Establishment (Amendment) Rules, 2003

dated 15th December 2003, the Schedule for fees for registration and renewal of registration (as

per Rule 5) is as follows:

a. 0 employees: INR 100;

b. 1 to 5 employees: NR 300;

c. 6 to 10 employees: INR 600;

d. 11 to 20 employees: INR 1000;

e. 21 to 50 employees: INR 2000;

f. 51 to 100 employees: INR 3500;

g. 101 or more employees: INR 4500.

Hence in the given case the registration fees would be INR 2000, as there are 50 employees Inaddition, an annual fee (three times the registration and renewal fees) is charged as trade refuse

charges (TRC), under the Mumbai Municipal Corporation Act,-(1888).

Procedure 10.

Register for Value-Added Tax (VAT) at the Commercial Tax Office (State)


Cost to complete: INR 5,100 (registration fee INR 5000 + stamp duty INR 100)

Procedure: Beginning April 1, 2005, the sales tax was replaced by the VAT, which requires

registration by filing Form 101.

The authorized representative signing the application must be available at the Sales-Tax Office

on the day of application verification. The applicant goes to the Sales-Tax Office and up to the

registration counter. The clerk at the counter verifies that the applicant has all the required


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documents and gives the applicant a token (waiting number). After a short wait, the applicant-"s

number is called and the applicant approaches the desk of a sales-tax officer.

There, all the information on Form 101 is manually entered into the system by the officer. Within

10 minutes, the system generates a Tax Identification Number (TIN) Thereafter, the company is

considered fully registered to pay taxes. However, the applicant must wait between 10 and 15days to receive the VAT registration certificate by mail.

In addition to Form 101, other accompanying documentation includes:

1) Certified true copy of the memorandum and articles of association of the company;-

2) Proof of permanent residential address. At least 2 of the following documents must be

submitted: copy of passport, copy of drivers license, copy of election photo identity card, copy

of property card or latest receipt of property tax from the Municipal Corporation, copy of latest

paid electricity bill in the name of the applicant;-

3) Proof of place of business (for an owner, in the case of Doing Business): Proof of ownership

of premises viz. copy of property card, ownership deed, agreement with the builder or any other

relevant documents;-

4) One recent passport-sized photograph of the applicant;-

5) Copy of Income Tax Assessment Order with PAN or copy of PAN card;-

6) Challan on Form No. 210 (original) showing payment of registration fee at INR 5000 (in case

of voluntary RC) and INR 500 (in other cases).

The whole process will be put online by the spring of 2009. This means that rather than

physically having to go to the office, companies will fill in all their details online for Form 101

and then go to the office only so that the Sales Tax Office can verify the above listed-

documentation.

Procedure 11.

Register for Profession Tax at the Profession Tax Office (State)


Cost to complete: No cost

Procedure: According to section 5 of the Profession Tax Act, every employer (not being an

officer of the government) is liable to taxation and shall obtain a certificate of registration from

the prescribed authority. The company is required to apply to the registering authority using

Form 1.


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The registration authority for the Mumbai area is located at Vikarikar Bhavan, Mazgaon in

Mumbai.

Depending on the nature of the business, the application should be supported with such

documents as proof of address, details of company registration number under the Indian

Companies Act (1956), details of the head office (if the company is a branch of companyregistered outside the state), company deed, certificates under any other act, and so forth.

Procedure 12.

Register with Employees Provident Fund Organization (National)



Procedure: The Employees Provident Funds and Miscellaneous Provisions Act (1952) applies to

an establishment, employing 20 or more persons and engaged in any of the 183 industries and

classes of business establishments, throughout India excluding the State of Jammu and Kashmir.

The applicant fills in an application and is then allotted a social security number. The Provident

Fund registration focuses on delinquent reporting, underreporting, or non-reporting of workforce

size. Provident Fund registration is optional if the workforce size is not more than 20. The

employer is required to provide necessary information to the concerned regional Provident Fund

Organization (EPFO) in the prescribed manner for allotment of Establishment Code Number. No

separate registration is required for the employees.

Nevertheless, all eligible employees are required to become members of the Fund and individualaccount number is allotted by the employer in the prescribed manner. As per an internal circular,

the code number is to be allotted within 3 days of submission, if the application is complete in all

respects. However, in many cases applicants have received the intimation letter with the code

number in 12 to 15 days. An online application facility is not provided so far.

Procedure 13.

Register for medical insurance at the regional office of the Employees State Insurance

Corporation (National)



Procedure: Registration is the process by which every employer/factory and every paid employee

is identified for insurance purposes and their individual records are set up for them.


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As per the Employees State Insurance (General), Form 01 must be submitted by the employer

for registration. It takes 3 days to a week for the Employer Code Number to be issued. The-"

"intimation letter""- containing the Code Number is mailed to the employer and that takes an

additional couple of days.

The Employee-"s individual insurance is a separate process that is initiated upon the employer-"sregistration. The employer is responsible for submitting the required declaration form and

employees are responsible for providing correct information to the employer. The employee

temporary cards (ESI Cards) are issued on the spot by the local offices in many places.

The temporary cards are valid for 13 weeks from the date of the employees appointment. It

takes about 4 to 5 weeks to get a permanent ESI card.

We also did a series of posts about the legal information of doing business in India in a 4 part

series. Here are those articles that you may find extremely useful in your quest to do business in

India.

The Legal Environment

Investment and Trade

Company Incorporation

Intellectual Property Rights

I have taken HCL as example for the topic given to me

HCLis a global technology and IT Enterprise that operates in 31 countries. Its headquarters isin Noida, India. The company comprises two publicly listed companies, HCL

Technologies and HCL Info systems.

HCL was focused on addressing the IT hardware market in India for the first two decades of its

existence with some activity in the global market.

HCL Info systems:-

HCL Info systems Ltd. offers a wide spectrum of products which include -

Computing, Storage, Networking, Security, Telecom, Imaging and Retail. The main business

areas of HCL Info systems are as follows: Distribution and Services

Services

Computing Products

Education and Learning

HCL Technologies:-


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HCL Tech is the information technology and software services arm of the

enterprise, providing Internet Infrastructure Solutions, Facilities Management & Infrastructure

Services, Network Management Systems and IT Hardware. The main business verticals of HCL

Technologies are as follows:

Product Engineering and R&D Enterprise and Custom Applications

Infrastructure Management

BPO Services

The Amazing Story How HCL Started

In 1976, during lunch time at Delhi Cloth Mills, DCM, a group of six young engineers in the

office canteen were discussing their work woes at DCM's calculator division.

Despite them all have having jobs that paid them well, they were an unhappy lot -- they wantedto do more, riding on their own gumption. They decided to quit their jobs and start a venture of

their own.

The man who was fuelling the ambitions of his five other colleagues at that canteen was a 30-

year-old engineer from Tamil Nadu, Shiv Nadar. And this is how the story of Hindustan

Computers Limited, HCL began.

Nadar and his five colleagues quit DCM in the summer of 1976. They decided to set up a

company that would make personal computers. They had gathered enough technical expertise at

DCM's calculator division, but like for all start-ups, getting funds was the problem.

However, Nadar's passion for his new dream company and the support of his enthusiastic

colleagues soon made the task very easy.

Founder, Chairman and CEO, HCL Technologies, Shiv Nadar told CNBC-TV18, "The first

person I met was Arjun and he was also a management trainee like me. He was a couple of

batches junior to me. We became very good friends and we are still very good friends. Then, the

rest of them all worked for DCM and we all are of similar age, so we used to hang out together,

crib together, have fun together, work together.

Nadar would first have to gather cash to give wings to his idea of manufacturing computers. He

floated a company called Microcomp Limited through which he would sell teledigital

calculators. This venture threw up enough cash to allow the founders to give shape to their

ultimate dream to manufacture computers in India, at a time when computers were just


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sophisticated cousins of the good old calculator but support also came from the Uttar Pradesh

government.

Finally, the founders put together Rs 20 lakh (Rs 2 million) and HCL was born.

The year after HCL was floated; the Indian government reigned in the ambitions of the foreigncompanies in India. This pronounced the death knell of companies like IBM and Coca-Cola

while bells began to ring for Indian entrepreneurships like HCL.

Managing Editor, the Smart Manager, and Dr Gita Piramal say, "Few Indian businessmen were

happy when George Fernandes became industry minister in 1977, when the Janata Party came to

power. Foreign businessmen were even less happy that Coca-Cola and IBM left India. IBM's

leaving, left a major vacuum and this was the vacuum in which Shiv Nadar spotted an

opportunity. He stepped in and customers began to trickle in."

HCL started shipping its in-house microcomputers around the same time as its American

counterpart Apple, and took only two more years to introduce its 16 bits processor.

By 1983, it indigenously developed a relational data base management system, a networking

operational system and client-server architecture, almost at the same time as its global peers. The

road to the top was now in sight and HCL took it a step further by exploring foreign shores.

HCL's first brush with international business came about in 1979 when it set up a venture in

Singapore; it was called Far East computers. HCL was only three years old and its net worth was

around Rs 3 crore Shiv Nadar set up an ambitious target for the venture and notched up sales ofRs 10 lakh in the very first year.

Co-Founder, HCL Technologies, Ajai Chowdhry says, "We discovered that there was a good

opportunity to enter Singapore with our own hardware we had manufactured in Singapore. But

the strategy was very clearly around selling computerization rather than computers and so we

actually took the whole idea of hardware, software solution and service and packaged it and

presented it as computerization."

Even as it was basking in its success in Singapore, HCL planned a whole new area of expansion

and it tapped into a territory that was lying unexplored in the country - computer education.Sensing the increasing demand for computer training, HCL set up NIIT in 1981 to impart high

quality IT education in India.

Nadar explains, "We knew many people in IIT and Indian Institute of Science. We formed an

advisory panel and asked them, can you help us navigate this whole thing and they were very


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enthusiastic about this and they of course shaken up a little bit when they saw that we started

advertising in Bombay -- selling education as a commercial project."

From calculators to IT education, the first five years of HCL was a combination of growth and

expansion riddled with uncertainty but the company was now gearing up to set a much bigger

target for itself and an announcement from the government would help it takeoff to those soaring

heights.

In 1984, the Indian government announced a new policy that would change the fortunes of the

entire computer industry. The government opened up the computer market and permitted import

of technology. With new guidelines and regulations in place, HCL grabbed the opportunity to

launch its own personal computer.

The demand for personal computers was slowly but surely mounting in the Indian market. Most

banks were shifting to the UNIX platform. A few companies approached HCL for personalcomputers, so, the founders flew all over the world to bring back PCs they could take apart,

study and reproduce and indigenously upgrade. Their first innovative personal computer was

ready in three weeks' times and soon they launched their first range of computers, and they called

it the Busybee.

Chowdhry says, "In a lot of ways, it opened up the market because one thing was that, you no

longer had to develop basic stuff in India - like operating systems but on the other hand it opened

new opportunities like banking because as per government policy, all banking computers must be

UNIX based. So, feverishly we set out creating a UNIX based computer and we bought theUNIX source code and created that product out of nothing."

In two years, HCL became one of the largest IT companies in India. The founders now went to

different corners of the country to set up sales and marketing offices and it now needed the

brightest minds to take it to the next level of competition.

Campus recruitment in management and technical institutes began in full swing and HCL

grabbed some of the best talent by offering pay packages that outscored some of the best

companies of the time -- Rs 2,000 per month to start with.

The adrenaline rush of the first half of the 1980s and the rapid expansion strategy soon caught up

with HCL. A turning point came in 1989, when HCL on the basis of a report by McKinsey and

Company decided to venture into the American computer hardware market.

HCL America was born but the project fell flat on its face. HCL had failed to follow a very

crucial step necessary to enter the US market. A big disappointment was on its way.


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Piramal says, "For every entrepreneur, the US will always remain the dream market. It's the

biggest market in the world and Shiv Nadar obviously was drawn to it but he really didn't know

what he was getting into. The computers he made didn't get environmental clearances. In fact,

HCL probably turned into his biggest mistake but HCL and Shiv himself, he is a very strong

person, he understood he was making a mistake, he saw that Infosys and Wipro are doing really

well in software and he was not too proud to change gears and finally HCL did enter the software

market."

It didn't take too long for HCL to brush off the disappointment in the US. Its first failure in the

US was set aside in 1991 and HCL entered into a partnership with HP (Hewlett-Packard) to form

HCL HP Limited. It opened new avenues for HCL and gave opportunities to firm up its

revenues.

In three years, another new possibility came knocking at its door and in 1994, HCL looked

beyond PCs and tied up with Nokia cell phones and Ericsson switches for distribution.

Chowdhry explains, 'In 1991, when India didn't have enough foreign exchange. We were in the

hardware business and we didn't have enough funds. That's the time when a clear thought entered

our minds - that we should globalize and in the very early days, we actually created a joint

venture with Hewlett-Packard.

In 1997, HCL was already a multi-dimensional company spun off HCL Technologies Limited to

mark their entry into the global software space. It made up its mind to focus on software

development, which was twenty years behind its entrepreneurial journey; Shiv Nadar was nowready to take on global competition with all his might.

From 70s to 90s, the HCL story was one of steady rise but in the face of its rapid expansion and

continuous flow of achievements, Shiv Nadar didn't anticipate that he would be in for a rude

shock and that it would come from someone very close.

In 1998, Arjun Malhotra, Shiv Nadar's comrade and friend decided to leave the company to start

his own TechSpan, headquartered in Sunnyvale, California. He was also one of the largest

shareholders in HCL Info systems at that time. For Shiv Nadar, it was time to think afresh.

The revenues were shrinking from the hardware sector and Nadar now decided to redesign HCL.

The company once again needed funds to grow and this time around, Nadar decided to look at

the capital market. An initial public offer (IPO) was made on the Indian Stock Exchange in 1999,

which was a stupendous success.


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President, HCL Technologies, Vineet Nayar says, "The shareholders supported us and then I

think we started with Rs 580 an IPO and went up to Rs 2,800 or something like that. So, it was a

dream run, I think the shareholders bought the argument we were making, they liked the

articulation of the strategy, they liked the management team and they liked the vision we were

painting and they supported the stock full time and that was a turning point for HCL."

Shiv Nadar now put aside his dream of becoming a global hardware major and venture into

software with an open mind and a clean slate. Technology was opening up vistas of opportunities

in the software sector and HCL now wanted to build new businesses.

Global business became a priority, so, now they started a BPO in Ireland in 2001. His partner in

this ambitious venture was British Telecom.

The years that followed saw HCL in an expansion mode. In 2005 alone, HCL signed a software

development agreement with Boeing for its 787 dreamliner programme. Next come a venturewith NEC, Japan.

It even brought out the joint ventures Deutsche Bank and British Telecom's Apollo Contact

Center. In the same year, HCL Info systems launched it sub Rs 10,000 personal computer and

joined hands with AMD and Microsoft to bridge the digital divide.

The successes of 2005 spilled over into 2006 and the company now produced over 75,000

machines in a single month, with more parallel joint ventures growing on its list. But in spite of

this overwhelming success, Shiv Nadar would not rest. There was a nagging sense of

dissatisfaction and perhaps not having exploited its full potential that still drove Nadar and the

company to achieve much more.

Thirty years after starting his company, Shiv Nadar really does not have much to complain

about. Hindustan Computers Ltd today is an empire worth $3.5 billion with staff strength of

34,000.

But then dissatisfaction has been the quintessential factor that has made Shiv Nadar the visionary

that he was and continues to be. Dissatisfaction once drove him to quit his job at DCM and it is

that same quality even today that is driving him to achieve much more when he can quite easily

rest on his laurels.


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31

Conclusion

From the above topic we came to know about how to start a large enterprise. It includes lots of

investment as well as experience to start a new enterprise there are various steps which are to be

followed to start an enterprise. We must have complete knowledge of what we kind of business

we are starting. Because there is lots of risk involved as we know changes cant be made easily

in business, so choose right business the first time if we are unsuccessful we cant get another

chance like first one. We have taken example of HCL which was being successfully started by

Shiv Nadar and story behind it is also explained I an amazing way, so if Shiv Nadar can do this

then we are also capable of doing this kind of work. We can inspire from Shiv Nadar for setting

up a large enterprise


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