Professional Documents
Culture Documents
Ertificate: Rural Entrepreneurship in India
Ertificate: Rural Entrepreneurship in India
PROJECT REPORT ON
RURAL ENTREPRENEURSHIP IN INDIA
SUBMITTED BY
PRADNYA SHETTY
M.Com Part II- Semester IV
2014-15
PROJECT GUIDE
Prof. PRASHANT SHINDE
SUBMITTED TO
UNIVERSITY OF MUMBAI
Certificate
BUNTS SANGHA MUMBAI
ANNA LEELA COLLEGE OF COMMERCE &ECONOMICS
1
This is a bonafide project work & the information presented is true &
original to the best of our knowledge and belief.
PROJECT
GUIDE
COURSE
PRINCIPAL
EXTERNAL
CO-ORDINATOR
EXAMINER
DECLARATION
I, Mrs.PRADNYA SHETTY of Anna Leela College Of Commerce & Economics,
Shobha Jayaram Shetty College For B.M.S, M.Com Part II Semester IV, hereby declare
that I have completed the project on RURAL ENTREPRENEURSHIP IN INDIA in
academic year 2014-15.
[PRADNYA SHETTY]
ACKNOWLEDGMENT
First of all I would like to thank the principal, Dr. K.S. Cheema and the
coordinator Prof. Prashant Shinde, who gave me the opportunity to do this
project work. They also conveyed the important instructions from the
university from time to time.
Last but not the least; I am thankful to the University of Mumbai for
offering the project in the syllabus. I must mention my hearty gratitude
towards my family, other faculties and friends who supported me to go ahead
with the project.
Table of Contents
1. Introduction to the study .......................................................................................................6-13
1.1 Introduction of Product Planning........................................................6
1.2 What is Product Planning....................................................................7
1.3 Meaning of Product Planning..............................................................7
1.4 Definition of Product Planning............................................................8
4
Executive Summary..........................................................................15
Introduction of Subway....................................................................16
History of Subway.......................................................................16-17
Mission Statement...........................................................................17
Goals and Objectives........................................................................17
Product........................................................................................17-18
Competitive Advantages...................................................................18
Competitive Analysis.......................................................................20
SWOT Analysis............................................................................20-22
P.E.S.T Analysis...........................................................................23-24
Five Forces Analysis....................................................................24-26
Mission............................................................................................26
Core Values and Philosophy......................................................26-27
Marketing Objectives......................................................................27
Targeting.................................................................................... 29-30
Positioning........................................................................................30
Strategies.......................................................................................31-33
4Ps.................................................................................................34-35
Recent and Future Changes in marketing Environment at Subway...36
5. Bibliography...............................................................................................................................37
CHAPTER 1
INTRODUCTION TO RURAL ENTREPRENEURSHIP
1.1 ENTREPRENEUR
1.2 ENTREPRENEURSHIP
.
The concept of entrepreneurship has a wide range of meanings. On the one extreme an
entrepreneur is a person of very high aptitude who pioneers change, possessing characteristics found in
only a very small fraction of the population. On the other extreme of definitions, anyone who wants to
work for himself or herself is considered to be an entrepreneur.
The word entrepreneur originates from the French word, entreprendre, which means "to
undertake." In a business context, it means to start a business. The Merriam-Webster Dictionary presents
the definition of an entrepreneur as one who organizes, manages, and assumes the risks of a business or
enterprise.
The entrepreneur may or may not be of rural origin. The entrepreneurs may be from anywhere, but
their enterprises have to be located in a rural area, using mainly local resources both material as well as
human. Also, the enterprises have to be located in a rural area though it need not be actually using 100%
local material and human resources. Some amount of material and some people may be from urban cities.
But certainly large portion of material used has to be locally produced and an appreciable number
of people engaged in the production of finished goods should be people based or living in rural areas.
Even a unit set up by the government or a large company in a rural area could promote rural
entrepreneurship depending on how much opportunities it throws up for entrepreneurs to use local
resources, to fulfil the demands of such large units and the multiplier effect such large units create. Any
large unit coming up in rural areas more or less does have an impact in activating the surrounding
economy for entrepreneurs to take advantage of. This is precisely the reason why it is recommended to
shift industries from urban centres to neighbouring rural areas. Such shifting initially may be a difficult
proposition but in the long run beneficial in many ways. Moreover, it would throw up lots of
opportunities in the rural areas and result in decongestion of the urban centres. Urban slums would start
disappearing with large number of industries getting shifted to rural areas resulting in increasing
opportunities in the rural areas. Thus, both the rural as well as urban areas get benefited by setting up
more industrial units in the rural areas, making rural areas attractive locations for investments.
Sr. No.
1.
Constraints
Low self-image and confidence.
Inputs
Motivational inputs, unfreezing and
2.
3.
No exposure to industry/business.
4.
5.
guidance.
6.
7.
8.
9.
10.
CHAPTER 2
TYPES OF RURAL ENTREPRENEURSHIP
Rural entrepreneurial activity can be broadly classified in four types such
as:
10
1] INDIVIDUAL ENTREPRENEURSHIP/PROPRIETORSHIP
In this; it is the entrepreneur who is the only (100%) owner. The entrepreneur bears full
responsibility for each and every activity and is alone the strategic thinker and decision maker to make
the unit viable as well as profitable. There is hardly any difference between personal assets and business
assets. The entrepreneur has "unlimited liability under the law". This type of entrepreneurship is quite
prevalent in rural areas where an entrepreneur has limited resources.
2] GROUP ENTREPRENEURSHIP
It is classified into mainly three types such as i) Partnership; ii) Private
Limited
Company and iii) Public Limited Company.
a. Partnership
In this case there is no individual ownership of the unit. There is another partner with you who
works with you and also bears the responsibility and shares profit. Like proprietorship, the liability is Joint
and Several. For partnership type of entrepreneurship, mutual trust is a must. Besides both the partners in
partnership must understand their respective responsibilities and complement each other for common
objectives and goals. The characteristics of partnership are
a)
b)
c)
d)
e)
f)
g)
11
large
financial resources,
transferability of shares, benefits of large scale operations, professional management, public confidence,
scope of expansion and growth, social benefits, tax benefits, etc.
3] CLUSTER FORMATION
It is primarily a formal and non-formal group of people to achieve a common objective. It
basically covers Non-Governmental Organizations (NGOs), Voluntary Organization (VOs), Self-Help Groups
(SHGs), Community-Based Organizations (CBOs) and networking of all these.
12
management.
b) VOs
These are voluntary agencies initiated by individual for welfare and development. They
may or may not be registered under any appropriate Act. Generally these are registered under any
appropriate Act like Societies Registration Act, 1860, Indian Trusts Act, 1882 or Religious Act, 1920.
These frame their own Memorandum of Associations, rules and regulations and systems for their
governance. The VOs receive funds from various donor agencies including NGOs.VOs are generally
managed by persons with motivated leadership and commitment. Their main promoters are honorary with a strong
desire to serve the people.
c. SHGs
Self-help groups are a platform of 10-20 people mainly, below the poverty line (BPL) to form a
social group not only to mutually help each other but also to achieve common objective. Only one
member from a family is eligible for membership group. The Swanjayati Gram Swarozgar Yojana (SGSY)
of the Ministry of Rural Development, Govt. of India covers all aspects of self-employment of the rural poor
viz. organisation of the poor in SHGs and their capacity building, training, selection of , key activities,
planning of activity clusters, infrastructure building up, technology and marketing support. This is a non-
13
d. CBOs
These are community based organizations and are informal in nature. Specific
community with a specific avocation forms a group to carry out various activities in a group. A CBO is a
group of people from a common living area of habitat who get together for a common cause. The overall
objective is to enhance the bargaining strength of individuals in the group. For example: fishermen group,
cobbler group, milk producers, etc.
4] COOPERATIVES
According to ILO, a cooperative organization is an association of persons usually
of limited means, who have voluntarily joined together to achieve a common economic end, through
formation of a democratically controlled business organisation making equitable contributions to the
capital required and accepting a fair share of risks and benefits of the undertaking. According to
International Cooperative Alliance (ICA) "A cooperative is an autonomous association of
persons
united voluntarily to meet their common economic, social and cultural needs and aspirations through a
jointly-owned and democratically controlled enterprise".
14
CHAPTER 3
DOMAINS OF RURAL ENTREPRENEURSHIP
There are large number of products and service in rural areas, which can be
leveraged by entrepreneurs to set up new small and micro enterprises. In fact entrepreneurship can be
pursued in virtually any economic field. The idea here is to make the readers aware of the linkages
between various economic activities within a particular category in the Indian context. The
following indicative sectors may be taken into consideration for gainful employment:
a) Original enterprises created out of opportunities in supplying rural products to urban consumers and
new products to rural consumers.
b) Replication of urban experiences in Rural Setting.
15
1. Food Processing
16
round the year or to reduce the cost and /or difficulty in packaging, handling, transporting and storing, by
converting it to a dry solid by reducing its weight and volume. Of course, there are other benefits to the
user such as price stability, and also availability for immediate use without preparation. Grapes,
bananas, mango, jackfruit, pineapple, papaya among others are highly nutritious and delicious and can be
used as preserved food which has got high potential. Similarly most of the vegetables are seasonal and
dehydration under hygienic conditions makes them available throughout the year at a reasonable cost.
These are convenient enough to be used by large scale catering establishments and for defense services
and in various expeditions, etc.
4. Mushrooms
17
5. Chikki Industry
Chikki is a popular and traditional Indian sweet. It is known by different names in
different languages and in different States. The ingredients which go into production chikkies are
puffe&rmsted Bengd gram, groundnut, puffed rice, beaten rice, coconut scrapings individually
or in combination. The sweetening agents are added to the preparation. is a popular item and has potential
both in internal as well as export markets.
The main production areas of Chikki are Lonawala & Khandala in Maharashtra which are
located on the Mumbai-Pune highway. In this area several smallscale units produce Chikki with over 100
varieties which are of very high quality products.
6. Poultry Industry
Poultry farming is one of the fastest growing industries in India. It is quite profitable and
can be managed by persons of all ages from all walks of life in all sections of the country. It may be
conducted as an exclusive
business or as a side
18
15) Some medicines and tonics are obtained from poultry as by-products.
19
7.
family members without any hired labour, with the use of locally available raw materials and by making
little capid investment. The major industrial activities in this scheme include pot making, match
making, ghani oil extraction, bee-keeping, bamboo cane works, basket- making, korai mat weaving,
stone weaving items, clay folks.
8.
Oil Industry
The vegetable oils are essential ingredients of food needed for the growth and maintenance of
human body. Crushing of oil seeds to obtain edible oil for human consumption has been an age-old
village industry in India. The Telis have been an important component of the village society. Either they
have been crushing oil-seeds procured by them or providing oil extraction service to oil-seed producers.
This provides nutritious oil with natural flavour and taste. The village oil industry employs lakhs of artisans
in rural areas. This industry renders service to the society in two-ways; it supplies fresh, flavoured and
nutritious oil to the consumers on the one hand and provides employment to the traditional artisans and
others unemployed, on the other. In order to increase the production of oil, all sources of equipment must
be utilized Since Ghani is a simple machine, which needs low capital and small quantity of raw materials, it
must be encouraged.
9.
Pottery
The pottery is traditional industry of rural India. In fact it is age-old industry where the
pottery products are used within rural India by rural folks for cooking (Handi), storing water (Matka &
Surai) and crockery and cutlery in the form of Kullar, etc. The urban Indians are using the pottery products
for plants, very special kitchen items made up of china clay for serving tea, coffee, clay bowels for
preparing curds and serving food.
20
11. Entertainment
In the absence of leisure time Bs well as purchasing power, the rural folks are generally
devoid of the entertainment which everyone needs for rest and relaxation. With the reach of electronic
media the rural youth has developed a taste towards music, dance, acting, etc. in addition to traditional
songs, folk dances, cultural activities, traditional games and sports which can be used as source of
revenue generation. This type of service can be provided either by an individual having good financial
background or by a small group rendering and promoting such activities and services in rural India on
various occasions such as social functions, VIP visits, etc.Such events are attracting not only the domestic tourist
but international tourist also is now keen to observe Indian customs, culture and costumes thus becoming a
very good source of income for the rural unemployed youth.
With the Government efforts to extend the development initiatives to rural India especially
indeveloping States, the Modem industries are being given special packages and relief with tax benefits for
setting up the industries at a subsidized cost with the aim to provide job opportunities, infrastructure
development in terms of road, power, water supply, e t ~T.h is, in consequence, leads to overall increase
in the living standards of local people where the modem industries are being set up by various
national and international companies. As a matter of policy, the industries are being asked to shift from
the large townships like metros especially to decongest and lessen the burden on the urban centres.
These industries offer great opportunities of varied nature of jobs for local youth who are
educated and are willing take challenging assignments, whether wage-employment or self- employment
type. The employment opportunities are basically based on qualifications, skills and expertise while selfemployment opportunities or indirect employment opportunities are based on the various types of industry
21
ever
since
Government came into existence and it has definitely helped the rural youth in finding suitable vocation
CHAPTER 4
PLANNING A RURAL ENTERPRISE
P lanning is the foremost function in decision making to set up a rural enterprise.
Project planning aims at formulation of all the future project activities well in advance, determine the
quantum of resources required for the purpose and coordinate various activities to complete the activities as
per schedule at the right time. The first and foremost step to initiate the planning process is the identification
of a suitable project followed by information accessibility, market assessment, preparation of feasibility
report, etc. Besides, one has to know the registration procedure of the enterprise and various legal aspects of
business.
PROJECT IDENTIFICATION
For identifying a new project, there are many institutions/agencies such as Entrepreneurship
Development Institutes (EDIs)/Centers, Small Industries Service Institute (SISI), Technical Consultancy
22
Once one decides to set up own business, one has a wide choice before her/him. In other words, one has
a choice of starting
a) Manufacturing unit - Setting up an industry means one has to organize many things like planning,
arranging for technical know-how, buying and installing machinery, building a factory, managing several
departments like production, sales, quality control, personnel and administration, finance and so on and so
forth.
b) Trading - Trading involves planning, purchase, sale, stock control and financial management. A retail
grocery shop, compared to an industry, is a simpler business. A large departmental store, however, is not so
simple.
c) Service enterprise - A service enterprise can either be simple or complex. For instance, setting up a
photocopying centre and managing it may be simple but inspection of offshore oil-gas lines is a rather
complex business.
To set up an industry or a service enterprise, one can start an enterprise in sectors like chemical,
pharmaceuticals, basic metal industries, metal products, machinery other than electrical machinery, electrical
machinery, electronics, transport equipments, textile, rubber, plastic, food, mineral-based industries,
ceramics, agro-based but non-food industries (e.g. making briquette from agricultural waste), paper, or
glass.
INFORMATION ACCESSIBILITY
One needs various types of information about several aspects such as opportunities, market,
technology, finance, policies, location, etc. The different sources of information could be:
23
Information on Business Ideas - There are numerous directories, handbooks and databases published by
the Govt. of India, Associations and other agencies for obtaining information on opportunities.
These are information in the following forms:
Feasibility studies
Project profiles
Industry studies
24
Ideas
An ability of a business idea among various alternatives being considered is a
must.
The key questions in settling down to a viable business idea are as under:
Possible scales of production or operation for which economies of scale is to be looked into
Investment for a given scale and the sources of funds and related expenses there on
Market prospects
Technical arrangements
Capital Organization
Capital is the prime requirement for any project. Term lending institutions such as State
Financial Corporations (SFCs), State Industrial Development Corporations (SIDCs), State Industrial
Investment Corporations (SIICs), Commercial Banks, etc. are the prime sources for meeting the project
cost such as :
Construction of buildings,
Contingencies, etc.
While sanctioning loans, the financial institutions consider the credit worthiness of the project beside the
payback capacity of the project. Hence assessment of financial viability is a must before releasing the
funds.
Support System
Information about supp ort system is a must for an enterprise. In short-term it is the
information which helps in-sound decision making. The information could be on infrastructure
facilities, incentives available, financial tie-ups, availability of raw materials, tax concessions, etc.
26
MARKET ASSESSMENT
For sound market assessment three things are important such as
Analysis of Market Dema nd
Market demand for a product is the total volume that would be bought by a defined customer group, in a
defined geographical area, in a defined time period, in a defined marketing environment, under a defined
marketing programme. Hence, there are eight elements of variables which must be analyzed in order to
determine market demand.
The Competition
For a particular product of different brands, the competitive situation could be assessed by analyzing the
market share, price, product features, product age, discount to dealers, credit terms, major customers, etc. of a brand
vis-a-vis the other.
Trading Practices
An Entrepreneur must try to understand the trade practices that are relevant to her/his
product. The intermediaries in the channel, prevailing sales tax, legal implications, etc. have to be
understood properly for assessing market. In selection of a product of service, there is the need to analyze
the market through primary and secondary data. These data can help to assess the current demand, the
27
Secondary Data: Information which already exists in documented form. Such sources can be
a) Annual reports of the companies
b) Trade publication and records
c) Libraries and trade information centers
d) Directories of manufacturers
e) Newspaper, business magazines, etc.
f) Govt. publications (e.g. DCSSI profiles)
g) Data agencies, consultancy firms, etc.
h) Information from dealers, various agencies
Market Research (MR)
It helps to collect primary data. The more accurate and fresh the data, the greater are the benefits. The
American Marketing Association defines marketing research as "The systematic gathering, recording and
analyzing of data about problems related to the marketing of goods and services".
There are five steps in marketing research process which are:
1. Problem definition
2. Research design
28
FEASIBILITY REPORT
It is very essential to prepare a feasibility report covering all the activities and the resources
needed for the project. The feasibility report broadly contains the following:
a) The background of the entrepreneur i.e. the educational background, family background and
professional exposure
b) Market potential and marketing strategy
c) Selection of location of the project which should be on the basis of proximity to the source of raw
materials and/or markets, availabilities of labour, infrastructural facilities, incentives, etc.
d) Requirements of land and building. It is to be ensured that the land is free from any legal
encumbrances
e) Requirement of plant and machinery including their installation
f) Manufacturing process
g) Requirements of utilities such as water and electricity
h) Requirements of raw materials and sources of supply
i) Estimated cost of the project
j) Means of finance
k) Cost of production, taxes and profitability
h) Break-even point
m) Cash flow statement
29
This Act is applicable where the number of employees is ten or more and where power is
used and twenty or more where power is not used. Under this Act the entrepreneur has to take necessary
measures for health, safety and welfare of the workers as per the Act besides taking necessary
precautionary measures against fire. Further, necessary records have to be maintained for working hours,
annual leaves, overtime, advances, wages, deductions, etc. The adherence to various provisions of the Act
shall be regulated by the Chief Inspector of Factories.
30
Thus Act is applicable to every trade, business, service, etc. which is also considered as
an industry under this act. Industrial disputes are common in a workplace. Such disput es may arise
between employers and employees or among the employees. This dispute may be related to employment
or non-employment or terms of employment or the conditions of labour of any person. The Authorities
under the Act are Works Committee, Conciliation Officer, Board of Conciliation, and Courts of
Inquiry, Labour Court, Industry Tribunals and National Tribunal. An entrepreneur has to follow
necessary procedures in case such a dispute arises
3. Social Legislation
Social security is a need for any employee. The Employees Provident Fund and Miscellaneous
Provisions Act, 1952 are applicable to any establishment employing 20 or more employees. Under this Act,
the minimum contribution payable by the employer towards provident fund is 8.33% of the salary. The
employee has to make an equal contribution. The details and modalities could be obtained from the
Regional Provident Fund Commissioner. Various other schemes which are covered under this Act are
a) Employee Family Pension Fund and
b) Deposit Linked Insurance Scheme.
4. Wage Legislation
It covers the following Acts:
i) Payment of Wages Act, 1936,
ii) Payment of Gratuity Act, 1972,
iii) Payment of Bonus Act, 1965, and
iv) Minimum Wages Act, 1948.
i) Payment of Wages Act, 1936 - This Act is applicable to establishment where ten or more workers are
employed on any day of the preceding 12 months with the aid of power and twenty or more workers
31
ii) Payment of Gratuity Act, 1972 - It is applicable in all establishments in which 10 or more persons are
employed. Gratuity shall be payable to an employee who has put in uninterrupted service for a minimum
period of five years.
iii) Payment of Bonus Act, 1965 - The Act applies to establishments employing ten or more persons.
Under the Act the employer is liable to pay bonus to employees as an annual statutory payment
irrespective of profits. This Act includes all employees drawing wage or salary up to Rs. 3500 per month.
To become eligible for bonus, every employee must have worked for 30 working days in the
establishment in the relevant accounting year. A minimum 8.33% of wages actually earned during the
financial year subject to minimum of Rs. 1,0001- is payable to each eligible employee irrespective of
profit or loss.
iv) Minimum Wa ges Act, 1948 - This is applicable in 44 scheduled industries. Basic wages are fixed for
different industries and special allowances are announced by the labour commissioner every six months.
Necessary registers have to be maintained.
CHAPTER 5
HUMAN RESOURCES FOR DEVELOPING
RURAL ENTREPRENRURS
Human Resources are amongst the most essential resources that are required for fostering
rural entrepreneurship. The importance of human resources cannot be over emphasized, for it is this
resource alone that makes the greatest impact on socioeconomic development of rural areas. Achievement
32
33
A brief sketch of the training and support programmes launched by the government is given to enable the
reader get a comprehensive view of the efforts of human resources development for rural
entrepreneurship.
34
Swaranjayanti Gram Swarozgar Yojana (SGSY) was launched by Government of India in 1999
with a focus on providing effective self employment through self help group approach and activity cluster
approach for rural poor families below poverty line. The self help groups are motivated through training
and capacity building for taking up thrift and credit activity and start their own small rural enterprises
through the financial assistance of Revolving Fund Assistance.
The Scheme also seeks to associate reputed non-governmental organisations in implementation
of SGSY Scheme Rural Employment Generation Programme (REGP): On the basis of recommendation of
the High Power Committee submitted in May 1994, headed by the then Prime Minster of India, the KVIC
launched Rural Employment Generation Programme (REGP) with effect from 1st Nov 1995, for
generation of two million jobs under the KVI sector in the rural areas of the country.
The main objectives of REGP are a) to generate employment in rural areas, b) to
develop entrepreneurial skill and attitude among rural unemployed youth, c) to achieve the goal of
rural industrialization, And d) to facilitate participation of financial institutions for higher credit flow to
rural industries. The REGP scheme is applicable to all village industries project set up in rural areas. The
eligible agencies under the scheme are (i) individuals (rural artisans/entrepreneurs) ii) institutions
cooperative societies, Trusts & SHGs for projects up to Rs. 25.00 lakhs. Under the scheme, the borrower is
required to invest her/his own contribution of 10 percent of the project cost. In case of SC/ST and other
weaker section borrowers, the beneficiary's contribution will be 5% of the project cost. Banks will
sanction 90 percent of the project cost in case of general category borrowers and 95 percent of the
project cost to the weaker section beneficiaries/institutions and disburse full amount of the loan. After the
sanction of the credit facility by the Bank branch, eligible amount of Margin Money will be kept in Term
Deposit of two years in the account of the borrower at the leading bank branch, which will be credited
to the borrower's loan account after a period of two years from the date of first disbursement of loan.
35
CHAPTER 6
36
The expected share of roads in total traffic would be 65 percent of freight traffic by the end of 2007,
which can be achieved through the national highways development programme. Rural roads are also
37
38
CHAPTER 7
39
40
41
Decision-Making:
Usually every rural entrepreneur takes several decisions, on a regular basis, for handling
daily operations of production, assessing the sale volumes for production, assessing working capital
requirements, maintaining quality of\products or services, reducing costs, increasing profits, etc.
Appropriate decision-making is the hallmark of successful entrepreneurs. An element of risk taking
willingness of an entrepreneur plays a key role in taking right decisions. Usually the decisions taken
would prove to be right or wrong only after the results start coming and after assessing the consequences.
Product Choice:
Entrepreneurs make several decisions about product choice. When an entrepreneur attempts
to make a difficult or complex product, say an electric mains switch, marketing it is relatively easier
than the items which can be easily produced. Running around marketing of simple and easy
products consumes more time and pays fewer dividends. Moreover, with difficult products in hand,
the entrepreneur can even monopolize the market, while with simple products he/she faces heavy
competition due to many players in the market.
Technology Choice:
Appropriate choice of technology plays a significant role in getting better product quality and
market share. A spice manufacturer had installed an imported machine that enabled him to powder the
spices at low temperatures so that the quality is not affected, which otherwise normally happens with the
indigenous machines because of heat generated in the grinding process. Costs may increase in such cases
but it is the quality of final product that gets an entrepreneur the money back.
Successful entrepreneurs usually end up taking decisions that yield desired results and may prove to be
right in retrospect. So, practicing appropriate decision-making in their enterprises may be one of the
reasons for their entrepreneurial success.
Organizing Production/Services
A rural entrepreneur needs to organize the production process or service operations for
achieving entrepreneurial success. So he/she starts installing the equipment and machinery, organizes
space and sets up the enterprise according to the project proposal.
42
experience as
the
entrepreneurs
experienced managerial personnel. They often learn their job according to the exigencies without much
prior practical training. Due to shortage of management staff, it is imperative for the entrepreneur-owner to
also handle other's jobs to ensure that the work does not get held up in case someone is absent. Managers
have also to be recruited suiting their abilities and temperament. A good manager diagnoses the problem
objectively and does not get carried away by emotions and tempers. Similarly the capable and competent
supervisors and foremen on the shop floor make a great difference in production performance and quality
control.
Training the unskilled labour : Getting the skilled labour may become difficult as the better skilled people
may not opt for working in a rural industry. But the unskilled labour may take long time as they learn
everything on the job and through experience may acquire necessary skills. In such cases, where skilled
labour are hired from outside, they may soon quit for better opportunities elsewhere. So when these
people leave the enterprise, the lower level unskilled labour may take over operations with mixed results.
In the process, the enterprise slows down and suffers. The lower skilled or unskilled labour force are
usually not provided any technical training for the fear of losing them as they may leave for better options
after acquiring the training. Adequate specialized training needs to be given to the employed man power
for running the machinery in order to develop masters of some specific tasks. Employed staffs need to be
observed critically for their competencies and weaknesses and they need to be assigned tasks accordingly,
and developed appropriately to become experts in a particular field. Otherwise, the employee may
become jack-of-all-trades but master of none.
44
machinery, equipment, and other fixed assets, and also recruited and selected required work force, she
would start production. She/he is ready and set to start operations of her/his enterprise. The entrepreneur
needs working capital for starting production. She tries to understand the operating cycles of production
assesses working capital requirements and sets about producing goods. So s/he needs to understand
operating cycle, Working capital, etc. Then the new entrepreneur would make attempts at production,
engages in trial production- and adopts a pricing policy based on the costing of making the products
Working Capital: An entrepreneur needs finance for various operating expenses. She needs to buy raw
materials, consumables, packaging materials, etc., and needs money for salary and wages, rent,
premium and other services. So, in order to cover all these, expenses she would need money, which is
known as the working capital. This money can be recovered once the entrepreneur sells the finished goods.
Till that time, the funds gets locked up in the production process. So, working capital can be defined as the
amount of capital perpetually locked up in the form of current assets viz. raw materials, work-inprogress, finished goods, credit may lead to wrong decisions and result in a chaos in the enterprise, which
tin be easily avoided given and cash required to sustain a specified level of activity in terms of
production and sales. To find out the requirement of working capital, one needs to understand the
concept of operating cycle.
Operating Cycle: One needs to buy and maintain the stock of raw materials for a certain minimum period.
This will depend upon various factors like nearness of the market, cost of procurement, availability of the
raw materials and their shelf life. The stocking period will vary from a day to even 5-6 months. To
convert the raw material into finished products will also take certain time. This will depend upon the
process involved and timely availability of all the needed resources. Once the product is ready it has to
reach the buyers and in return the sale proceeds are to be collected. This also takes some time depending
upon the demand and terms of sales. The time taken for all the three stages above, i.e., the stocking
period, production time and sales realization time put together constitute an operating cycle of the
business. The working capital is the total funds required to meet all the expenses of one operating cycle.
Usually, the small entrepreneurs consider the production expenses only as working capital. They
neither consider the stocking period nor presume the sales realization time. So it is very important to
understand the concept of operating cycle and calculate the working capital required for the entire period.
And working capital is the sum total of all operating expenses for the period of one operating cycle.
Working capital management is the most dynamic concept of financial management in an enterprise.
Effective working capital management would lead to:
45
Marketing Management
Marketing is perhaps the most crucial of all management functions in rural enterprise
management. If the entrepreneur can understand the preferences of customers and adopts an effective
strategy for marketing and selling, distributes products and services directly or through agencies to
customers, then probability of success is very high. A good entrepreneur makes prior agreements for
assured marketing and adopts an effective marketing strategy and thus earns profits through marketing.
Marketing involves assessment of the needs of customers, a good pricing policy, promotional and
advertising approach and distribution system, and finally good profit.Hence, a customer is the focus point of
all marketing management and strategies. The customers decide:
a) What they want and need,
b) What they will pay for the product or service to satisfy that need, and
c) Where and from whom they will buy it.
Hence the customer is focused in marketing and promotion strategies. The entrepreneur needs to
understand that marketing is the backbone of one's enterprise as this alone can bring in cash for
further production and sustenance. Since marketing is assumed to be crucial to entrepreneurial success,
marketing management needs to be taken up ardently by the new entrepreneurs.
c. FINANCIAL MANAGEMENT FUNCTIONS
The financial management functions include those functions that deal with handling
cash and finances, costing, pricing, break-even analysis, managing cash flows, accounting and bookkeeping, writing a balance sheet and income statement for budgeting.Financial management is a very
important area of control. It involves management and long-term finance for establishing enterprise,
46
47
48
Statement :
Income
statement
summarizes
the
enterprise's
financial
capability.
An
entrepreneur, after all, works to earn an income from her/his enterprise. If she is not aware of how much
she had earned over a period of time, she is not in a position to decide whether to continue or stop or
change the course of action. Through an income statement, the entrepreneur will have a fair idea of the
operational costs, cost of products sold, administrative expenses; taxes and interests paid, and the net
income earned. The income statements of over; a period of years or cycles of production will also help the
entrepreneur to actually know whether there are incremental gains or losses in her/his enterprise.
Effective financial management practices form the core of managing a rural enterprise. The rural
entrepreneurs need to grasp the intricacies of costing, pricing and breakeven analysis in order to attain
entrepreneurial success
SOURCES OF FUNDS
Normally an entrepreneur tries to meet at least part of the funds requirement from ones own
sources, which we call as capital of the promoter. He/she arrange this fund either from friends,
family members or from own saving. In most cases it is founds that this funds is quit insufficient to run the
business. Therefore he approaches various agencies for meeting the requirements.
The credit and landing agencies operating rural areas can be divided into two types:-
1) Institutional
2) Non- Institutional
The former comprise commercial banks, co-operative societies, development banks, regional
rural banks
and
non banking
environment and observe fixed norms & guidelines enumerated by the government. Since they are
49
, National Bank of
Agricultural and Rural Development Bank (NABARD), National Housing Bank (NHB)
3) Non banking financial companies
TYPES OF CREDIT FACILITIES AVAILABALE TO RURAL ENTREPRENEUR
Credit facilities can be fund based or non fund based. In case of non fund based facilities
bank do not lend funds directly. They issue Letter of Guarantee and letter of Credit (LC), which are simply
commitments on the part of the bank to pay for the borrower in case of contingencies. Fund based
facilities are those where banks have to land funds directly. It include
1) Cash Credit (for Working capital Requirement)
2) Term Loan (for appearing Fixed Assets)
3) Bridge Loan (short term finance)
d. SUSTENANCE MANAGEMENT FUNCTIONS
Once the production process is on, the rural entrepreneurs need to concentrate their energy and
efforts on sustaining the activities of the enterprise. The major management functions that would help
sustain the enterprise are coordination, controlling, delegating and supervising.
Coordination
50
employees
monitoring and completion. This act of assigning work related to management coupled with formal
authority and responsibility is called delegation. Entrepreneurs delegate work to others in order to manage
the enterprise efficiently and successfully. In this process, the entrepreneur personally handles some of the
most essential jobs and gets other less critical jobs done under her/his instruction and supervision.
Usually many entrepreneurs learn something about all the tasks of their enterprise. An entrepreneur who
can handle all operations of one's unit is more likely to succeed only because she pays equal attention
51
52
CHAPTER 8
PITFALLS IN MANAGING A RURAL ENTREPRISE
A promoter of a rural enterprise faces a plethora of problems, usually called 'teething
troubles' when he/he sets up her/his enterprise. First, arranging working capital becomes the major task
as she runs out of money to buy raw materials though she may not yet have earned any reputation in the
market to get raw materials on credit. Similarly, she makes several production trials, refines the
finished products, improves quality, attempts to set a price for her/his products, etc. In the process, she
learns from the customers and distributors about the preferences and prices.
Common Pitfalls
A person who does not believe in long-term strategic plans but gets entangled in daily
chores of running the enterprise usually meets with failure for lack of preparedness for future eventualities.
Among rural entrepreneurs, the practice of strategic planning is found to be quite inadequate. Since the
rural people, in general, have often fallen victims to vagaries of monsoons, prices and other uncertainties,
they seldom venture to think of future plans and are usually ill-prepared for any contingencies. They
were also found to be confusing the term strategic planning with daydreaming. The usual dictum is "Do
not count your chickens before they are hatched!" But successful entrepreneurs believe in "Hope for
the best, but prepare for the worst", and hence success. Most of the managerial staffs recruited have very
little experience. They often learn their job according to the exigencies without much prior practical
training. However, the scope for specialization is limited. Due to shortage of managerial staff, it is
imperative for one to handle other's jobs to ensure that work does not get held up in case someone is absent.
The managerial jobs are plural in nature to a greater degree in the small-scale sector than in the medium and
large-scale industries.
53
54
CHAPTER 9
BIBILOGRAPHY
http://www.scribd.com
http://www.google.com
http://en.wikipedia.org/wiki/preference
55