SMU BBA6 BB0028 ENTREPRENEURSHIP DEVELOPMENT

ASSIGNMENT PROGRAM	BBA
SEMESTER	6
SUBJECT CODE & NAME	BB0028 ENTREPRENEURSHIP DEVELOPMENT
CREDITS	4

Q1. Write a note on types of Entrepreneurs as classified by Danhof.

Ans. On the basis of nature Clarence Danhof classified entrepreneurs into four categories. These are –

 (i) Innovating entrepreneur: An innovative entrepreneur in one, who introduces new goods, inaugurates new method of production, discovers new market and recognizes the enterprise. It is important to note that such entrepreneurs can work only when a certain level of development is already achieved and people look forward to change and improvement. Innovative entrepreneurs are generally aggressive and possess the art of cleverly putting the attractive possibilities into practice. An innovating entrepreneur is one who introduces new goods, inaugurates new methods of production, discovers new market and re-organizes the enterprise. He arranges money, launches an enterprise, assembles the various factors, chooses the competent managers and sets his enterprise go.

Schumpeter's entrepreneur is of this type. His entrepreneur belongs to that nation which has wide industrial base, modern banking facilities, rich infrastructure, up to date technology and the like. Innovative entrepreneurs do not exist in developing economies where lacks of capital, technological know-how block the path of innovativeness.

In developed countries, people are highly developed and consistently look forward for change. They want to consume such products which do not commonly exist in the world. They want progress as they have achieved high level of development. Innovating entrepreneur played a key role in the rise of modern capitalism, through their enterprising spirit, hope of making money, and ability to recognize and exploit opportunities.

(ii) Imitative entrepreneurs: These types of entrepreneurs creatively imitate the innovative technical achievement made by another firm. Imitative entrepreneurs are suitable for underdeveloped countries as it is hard for them to bear the high cost of innovation. Imitative entrepreneurs are characterized by readiness to adopt successful innovations inaugurated by successful innovating entrepreneurs. Imitative entrepreneurs do not imitate the changes themselves, they only imitate techniques and technologies innovated by others. Such entrepreneurs are significant for under-developed economies because they put such economies on high rate of economic development. Entrepreneurs prefer to imitate the technology already existing somewhere in the world.

However, the talent of imitative entrepreneurs should not be under-estimated. Even imitative entrepreneurs are revolutionary and agents of change. They have ability to do things which have not been done before even though, unknown to them, the problem may have been solved in the same way by others. Innovative entrepreneur is creative, while imitative entrepreneur is adoptive.

(iii) Fabian entrepreneur: Fabian entrepreneurs are characterized by very great caution and skepticism to experiment any change in their enterprises. They usually do not take any new challenge. They imitate only when it becomes perfectly clear that failure to do not so would result in a loss of the relative position in the enterprise. Fabian entrepreneurs are cautious and skeptical in experimenting change in their enterprises. Such entrepreneurs are shy, lazy and lethargic. They are imitative by nature but are not determined and also lack power. They imitate only when it becomes perfectly clear that failure to do so would result in a loss of the relative position of the enterprise.

(iv) Drone entrepreneur: Drone entrepreneurs are characterized by a refusal to adopt opportunities to make changes in production formulae even at the cost of severely reduced returns. They can suffer loss but are not ready to make changes in their existing production methods. When competition increases, they are pushed out of the market as it becomes uneconomical for them to exist and operate in a competitive market. They are characterized by a refusal to adopt any change even at cost of severely reduction of profit.

Q2. What is SIDO? Explain its functions. Ans. Small Industries Development Organisation (SIDO) an apex body at Central level for formulating policy for the development of Small Scale Industries in the country, is headed by the Additional Secretary & Development Commissioner (Small Scale Industries) under Ministry of Small Scale Industries Govt. of India. SIDO is playing a very constructive role for strengthening this vital sector which has proved to be one of the strong pillars of the economy of the country. It functions through a network of the field offices namely 30 SISIs, 28 Br. SISIs, 4 RTCs, 7 FTSs, various training and production centers and specialized institutes spread over different parts of the country. It is rendering the services in the following areas:- 1.      Advising the Govt. in policy matters concerning small scale sector. 2.      Providing techno-economic and managerial consultancy, common facilities and extension services. 3.      Providing facilities for technology up-gradation, modernization quality improvement & infrastructure. 4.      Human resources development through training and skill up-gradation. 5.      Providing economic information services. 6.      Maintaining close liaison and vital linkage with the Central Ministries, Planning Commission, Financial Institutions, State Govts. & similar other developmental organizations/agencies related to the promotion and development of SSI Sector. 7.      Evolving and coordinating policies for development of ancillaries. 8.      Monitoring of PMRY Scheme 9.      Monitoring the working of different Tool Rooms & PPDC's  Q3. Discuss MODVAT in detail. Ans. MODVAT stands for "Modified Value Added Tax". It is a scheme for allowing relief to final manufacturers on the excise duty borne by their suppliers in respect of goods manufactured by them. eg ABC Ltd is a manufacturer and it purchases certain components from PQR Ltd for use in manufacture. POR Ltd would have paid excise duty on components manufactured by it and it would have recovered that excise duty in its sales price from ABC Ltd. Now, ABC Ltd has to pay excise duty on toys manufactured by it as well as bear the excise duty paid by its supplier, PQR Ltd. This amounts to calculate multiple taxation. MODVAT is a scheme where ABC Ltd can take credit for excise duty paid by PQR Ltd so that lower excise duty is payable by ABC Ltd. The scheme was first introduced with effect from 1 March 1986. Under this scheme, a manufacturer can take credit of excise duty paid on raw materials and components used by him in his manufacture. Accordingly, every intermediate manufacturer can take credit for the excise element on raw materials and components used by him in his manufacture. Since it amounts to excise duty only on additions in value by each manufacturer at each stage, it is called value-added-tax (VAT) The MODVAT credit can be utilized towards payment of excise duty on the final product. Advantages of MODVAT » It reduces the effects of taxation at multiple stages of manufacture. » It facilitates duty free exports. » It increases the tax base. Disadvantages of MODVAT » It increases paper work and leads to multiplicity of records. » It leads to corruption. » It leads to litigation. The MODVAT scheme is regulated by Rules 57A and 57U of the Central Excise Rules and the notifications issued hereunder. Rule 57A This rule specifies the scope and applicability of the MODVAT. The MODVAT scheme applies to all finished excisable goods which have been notified by the Central Government in the Official Gazette for this purpose. The MODVAT scheme may be made applicable in respect of certain goods or classes of goods with restrictions and conditions. Q4. Explain New Small Enterprise Policy, 1991. Ans. The main characteristics of new Economic Policy 1991 are: 1. De-licensing. Only six industries were kept under Licensing scheme. 2. Entry to Private Sector. The role of public sector was limited only to four industries; rest all the industries were opened for private sector also. 3. Disinvestment. Disinvestment was carried out in many public sector enterprises.  4. Liberalization of Foreign Policy. The limit of foreign equity was raised to 100% in many activities, i.e., NRI and foreign investors were permitted to invest in Indian companies. 5. Liberalization in Technical Area. Automatic permission was given to Indian companies for signing technology agreements with foreign companies. 6. Setting up of Foreign Investment Promotion Board (FIPB). This board was set up to promote and bring foreign investment in India. 7. Setting up of Small Scale Industries. Various benefits were offered to small scale industries. Three Major Components or Elements of New Economic Policy: There are three major components or elements of new economic policy- Liberalization, Privatization, Globalization. 1. Liberalization: Liberalization refers to end of license, quota and many more restrictions and controls which were put on industries before 1991. Indian companies got liberalization in the following way: (a) Abolition of license except in few. (b) No restriction on expansion or contraction of business activities. (c) Freedom in fixing prices. (d) Liberalization in import and export. (e) Easy and simplifying the procedure to attract foreign capital in India. (f) Freedom in movement of goods and services (g) Freedom in fixing the prices of goods and services. 2. Privatization: Privatization refers to giving greater role to private sector and reducing the role of public sector. To execute policy of privatization government took the following steps: (a) Disinvestment of public sector, i.e., transfer of public sector enterprise to private sector (b) Setting up of Board of Industrial and Financial Reconstruction (BIFR). This board was set up to revive sick units in public sector enterprises suffering loss. (c) Dilution of Stake of the Government. If in the process of disinvestments private sector acquires more than 51% shares then it results in transfer of ownership and management to the private sector. 3. Globalization: It refers to integration of various economies of world. Till 1991 Indian government was following strict policy in regard to import and foreign investment in regard to licensing of imports, tariff, restrictions, etc. but after new policy government adopted policy of globalization by taking following measures: (i) Import Liberalization. Government removed many restrictions from import of capital goods. (ii) Foreign Exchange Regulation Act (FERA) was replaced by Foreign Exchange Management Act (FEMA) (iii) Rationalization of Tariff structure (iv) Abolition of Export duty. (v) Reduction of Import duty. As a result of globalization physical boundaries and political boundaries remained no barriers for business enterprise. Whole world becomes a global village. Globalization involves greater interaction and interdependence among the various nations of global economy. Impact of Changes in Economic Policy on the Business or Effects of Liberalization and Globalization: The factors and forces of business environment have lot of influence over the business. The common influence and impact of such changes in business and industry are explained below: 1. Increasing Competition: After the new policy, Indian companies had to face all round competition which means competition from the internal market and the competition from the MNCs. The companies which could adopt latest technology and which were having large number of resources could only survive and face the competition. Many companies could not face the competition and had to leave the market. For example, Weston Company which was a leader in Т. V. market with more than 38% share in T.V. market lost its control over the market because of all round competition from MNCs. By 1995-96, the company almost became unknown in the T.V market. 2. More Demanding Customers: Prior to new economic policy there were very few industries or production units. As a result there was shortage of product in every sector. Because of this shortage the market was producer-oriented, i.e., producers became key persons in the market. But after new economic policy many more businessmen joined the production line and various foreign companies also established their production units in India. As a result there was surplus of products in every sector. This shift from shortage to surplus brought another shift in the market, i.e., producer market to buyer market. The market became customer- oriented and many new schemes were made by companies to attract the customer. Nowadays products are produced/manufactured keeping in mind the demands of the customer. 3. Rapidly Changing Technological Environment: Before or prior to new economic policy there was a small internal competition only. But after the new economic policy the world class competition started and to stand this global competition the companies need to adopt the world class technology. To adopt and implement the world class technology the investment in R & D department has to increase. Many pharmaceutical companies increased their investment in R and D department from 2% to 12% and companies started spending a large amount for training the employees. 4. Necessity for Change: Prior to 1991 business enterprises could follow stable policies for a long period of time but after 1991 the business enterprises have to modify their policies and operations from time to time. 5. Need for Developing Human Resources: Before 1991 Indian enterprises were managed by inadequately trained personnel’s. New market conditions require people with higher competence skill and training. Hence Indian companies felt the need to develop their human skills. 6. Market Orientation: Earlier firms were following selling concept, i.e., produce first and then go to market but now companies follow marketing concept, i.e., planning production on the basis of market research, need and want of customer. 7. Loss of Budgetary Support to Public Sector: Prior to 1991 all the losses of Public sector were used to be made good by government by sanctioning special funds from budgets. But today the public sectors have to survive and grow by utilizing their resources efficiently otherwise these enterprises have to face disinvestment. On the whole the policies of Liberalization, Globalization and Privatization have brought positive impacts on Indian business and industry. They have become more customer focus and have started giving importance to customer satisfaction. 8. Export a Matter of Survival: The Indian businessman was facing global competition and the new trade policy made the external trade very liberal. As a result to earn more foreign exchange many Indian companies joined the export business and got lot of success in that. Many companies increased their turnover more than double by starting export division. For example, the Reliance Company, Videocon, MRF, Ceat Tires, etc. got a great hold in the export market. Q5. Elaborate the TQM Process in Small Scale Enterprises.  Ans. Basic Principles of TQM: In TQM, the processes and initiatives that produce products or services are thoroughly managed. By this way of managing, process variations are minimized, so the end product or the service will have a predictable quality level. Following are the key principles used in TQM: Top management: The upper management is the driving force behind TQM. The upper management bears the responsibility of creating an environment to rollout TQM concepts and practices. Training needs: When a TQM rollout is due, all the employees of the company need to go through a proper cycle of training. Once the TQM implementation starts, the employees should go through regular trainings and certification process. Customer orientation: The quality improvements should ultimately target improving the customer satisfaction. For this, the company can conduct surveys and feedback forums for gathering customer satisfaction and feedback information. Involvement of employees: Pro-activeness of employees is the main contribution from the staff. The TQM environment should make sure that the employees who are proactive are rewarded appropriately. Techniques and tools: Use of techniques and tools suitable for the company is one of the main factors of TQM. Corporate culture: The corporate culture should be such that it facilitates the employees with the tools and techniques where the employees can work towards achieving higher quality. Continues improvements: TQM implementation is not a onetime exercise. As long as the company practices TQM, the TQM process should be improved continuously. Rather than a specific management tool or process, Total Quality Management (TQM) is an approach that small business owners or managers hold in running their company. They focus on quality and price to gain and hold customers, striving to view the business through their customer eyes. Instead of focusing solely on profits, managers identify their core customer base in order to build and maintain market share through continuous improvement of products and services. Small businesses can benefit from implementing the principles of TQM into their business environment. Customer Focus: In a TQM approach, small businesses must understand who their current customers are (and are not), noting their key needs and requirements and keep these expectations at the forefront of their strategy and processes. This principle should extend to internal clients, as well, treating coworkers as customers and satisfying their demands. Leadership: Leaders create the environment in which their business operates. They set policy, plan strategy and launch tactics for staff to execute. Small businesses can take advantage of the necessity for participative management, as they are more likely to be intimately aware of all facets of their business and how they interconnect. Managers and owners can educate staff on business operations, industry developments and market trends, giving them a broader perspective on what it takes to make the company successful. Staff Involvement: As leaders set and communicate customer-focused strategy, they become smarter in acquiring and keeping quality staff. Selecting, training and motivating staff to work together, particularly in cross-functional teams, enables faster problem identification and resolution, process execution and overall productivity. In applying TQM, well-trained and motivated employees also have more control over their work and a greater sense of ownership in the company. Process Approach: In TQM, a well-informed staff, with a keener sense of what the customer expects, can help develop a proactive process that builds quality into each stage as they design and deliver products, rather than trying to catch flaws during post-production inspection, which wastes resources on potentially defective products. Statistical Quality Control (SQC): Small business owners can employ Statistical Process Control (SQC) to help make decisions. As the organization better understands customer demands, these requirements set features for the product line. Staff and management refine measurements for these features, even developing a product. The team can then continually monitor quality by assessing output against the parameters, halting fabrication in order to fix the problem when the goods being produced fall outside the acceptable limits. Supplier Relationships: Businesses can apply these TQM philosophies to suppliers. This will help them understand their attitudes, values and capabilities, as well as the minimum and maximum variations in the goods they deliver to the company, to monitor quality and create value across the supply chain. Continuous Improvement: Continuous improvement is fundamental in TQM. Essentially, in this practice, the business executes the first six principles continuously. The whole organization, from top leadership to front-line employee, must commit to the time and effort necessary in making modest gains in the operations. Rather than launching a revolution in how a company runs, step-by-step changes initiated by everyone in the organization ultimately convert the business and ingrain the TQM philosophy into the corporate culture.

Q6. Digital is a leading laptop manufacturing company. It decides to add some more new products to the existing product line like – digital cameras and MP4 players.

Help them to understand the basics for internal growth of business and discuss the advantages and disadvantages as well.

Ans. Internal growth is the highest measure of growth that is attainable by a business without having to look for external sources of finance. The rate of internal growth can be calculated by the company's retained earnings and then dividing them by the company's assets.

Internal growth strategy or expansion involves raising the market share, sales revenue and profit of the present product or services. The firm slowly increases its production and so it is called internal growth strategy. It is a good strategy for firms with a smaller share of the market. Three alternative strategies are available in this regard. These are:

(a)    Market Penetration– This strategy aims at increasing the sale of present product in the presented market through aggressive promotion. The firm penetrates deeper into the market to capture a larger share of the market. For example, promoting the idea of cold coffee during the summer season, also the idea of instant coffee, instant tea and tea bags.

(b)   Market Development– It implies increasing sales by selling present products in the new markets. For example selling electronic goods in rural areas or sale of chocolates to middle aged and old persons. Market development leads to increase in sale of existing products in unexplained markets.

(c)    Product Development: In this, the firm tries to grow by developing improved products for the present market. For example, A.C. with remote control, Refrigerator with automatic defreezing and flexible shelves.

Advantages of Intensive Growth Strategy

(1) Growth is slow and natural. Therefore, it can be handled easily.

(2) Capital required for expansion can be taken from the firm's own funds.

(3) Existing resources can be better utilized

(4) The growing firm is in a better position to face competition in the market.

(5) Only a few changes are required in the organisation and management systems of business.

(6) Expansion provides economics of large-scale operations.

Limitations of Intensive Growth Strategy

(1) Growth is very slow and it takes a long time for growth to actually happen.

(2) A business firm loses the possibility of exploiting many business opportunities by restricting its operations to the present products and markets.

(3)It is not always possible to grow in the present product market