BA 1734 – ENTREPRENEURSHIP DEVELOPMENT

PART A

1. Define Entrepreneurship.
Entrepreneurship is the purposeful activity of an individual or group of
associated individuals , undertaken to initiate, maintain, or aggrandize profit by
production or distribution of economic goods and services.

2. What is an enterprise ?
It is the basic unit of economic organization. It is an undertaking which involves
uncertainty and risk and requiring innovation.

3. Who is an intrapreneur?
Breed of entrepreneurs who emerge from within the confines of the existing
organizations are called intrapreneurs. In big organizations, the top executives
are encouraged to catch hold of new ideas and then convert these into products
through Research and Development activities within the framework of the
organization. They are called as intrapreneurs.

4. Who is an imitative entrepreneur?

Imitative entrepreneurs have the willingness to adopt successful innovations
introduced by innovative entrepreneurs. Imitative entrepreneurs do not
innovate change themselves. They only imitate techniques and technology
innovated by others.

5. What do you mean by achievement motivation?

It is the individual’s need for for personal accomplishment whivh is nothing but
the drive to excel, to strive for success and to achieve in relation to a set of
standards. People with high achievement motives would like to take calculated
risks and want to win. They wish to take personal responsibility for solving
problems and want to know how well they are performing.

6. What do you mean by entrepreneurial Competencies?

The underlying characteristics of an entrepreneur resulting in superior
performance of his or her job are termed as Entrepreneurial Competencies.
Knowledge and skill set are vital for enhancing Competencies.

7. What is training?
Training may be defined as any procedure , initiated by an enterprise, which
intends to foster and enhance learning among the employees working in the
enterprise.
 8. Point out some of the important objectives of EDPs.

 Help the trainees in analyzing environmental set up relating to small

industry and small business
 Selection of the appropriate product
 Formulate project for the product
 Make the trainees aware of the various sources of help and support
available for entrepreneurs.
 Development and strengthening of entrepreneurial quality.
 Guide the trainees in understanding the process and procedure involved
in setting up of the small enterprise

9. Write a note on SISI.

Small Industries Service Institutes(SISIs) are set up to provide consultancy and

training to small entrepreneurs – both existing and prospective. The activities of
SISIs are coordinated by the Industrial Management Training Division .
The main functions of SISIs include:
 To serve as an interface between Central and State Governments.
 To render technical support services
 To conduct Entrepreneurship Development Programmes.
 To initiate promotional programmes.

10. What are incentives and subsidies?

Entrepreneurs in India are offered a number of incentives with their strategic

contributions to economic development. The term “incentive’, means encouraging
productivity. It is a motivational force, which makes an entrepreneur take a right
decision and act upon it Broadly, incentives include concessions,subsidies and
bounties. “Subsidy” denotes a single lump sum, which is given by a Government to
an entrepreneur to cover the cost. The objective of incentive is to motivate an
entrepreneur to set up a new venture in the larger interest of the
nation and the society.

11. What are the important problems faced by Entrepreneurship Development

Programmes?

 Triner Motivations are not found up to the mark in motivating the

trainees to start their own enterprises.
 ED Organisations lack in commitment and sincerity in conducting EDP s.
In some cases, EDPs are even used as a means to generate surplus for the
ED organizations.
 The antithetic attitude of the supporting agencies like banks and financial
institutions serve as stumbling block in the success of EDPs.
  Selection of wrong trainees also lead to the low success rate of EDPs.

12. What is a Greenfield Project?

A green field project is one which is not constrained by prior work. It is

constructing on unused land where there is no need to remodel or demolish an
existing structure. Such projects are often coveted by engineers. Some examples of
green field projects are new factories, power plants or airports which are built from
scratch. Green field projects can also be defined as those projects which do not
create any environmental nuisance (pollution), follows environmental management
system and EIA (environment impact assessment). These projects are usually of big
magnitude.

13. What is Franchising?

Franchising refers to the methods of practicing and using another person's business
philosophy. The franchisor grants the independent operator the right to distribute
its products, techniques, and trademarks for a percentage of gross monthly sales
and a royalty fee. Various tangibles and intangibles such as national or international
advertising, training, and other support services are commonly made available by
the franchisor.

14. Specify the various growth strategies that can be adopted by entrepreneurs.

 Expansion
 Diversification
 Joint Venture
 Merger
 Sub-Contracting
 Strategic Alliances

15. What is Product Launching?

Once a product is developed, effectively product launch becomes the critical step to
its success. Product Launching includes all the activities that are necessary to start
volume production, plan and execute marketing activities, develop needed
documentation, train sales and support personnel (internal and external), fill
channels, and prepare to install and support the product. An improved product
launch process results in faster time-to-market and time-to-profit. Activities are
better planned and coordinated and more tightly integrated.

16.What do you mean by economic viability?

All the project alternatives may not be economically viable. A test of viability needs
to be applied to the chosen alternative, and to any subprojects within it. The basic
test for economic viability is whether or not there are other projects in the national
economy that, when estimated in the same way, would yield a greater increase in net
output. The way this comparison is done is to specify a rate of discount representing
the next best alternative project in the economy, and to ensure that the project being
analyzed creates net benefits in present value at a rate that exceeds those of the next
best alternative.

17. Write a note on TCOs.

A network of Technical Consultancy Organisations was established by the All India

Financial Institutions with the state level financial/ developmental institutions and
commercial banks to cater to the consultancy needs of small industries and new
entrepreneurs. Functions of TCOs include:

 To prepare project profiles and feasibility profiles

 To undertake industrial potential surveys
 To identify potential entrepreneurs and provide them with technical and
managerial assistance
 To undertake market research and surveys for specific products
 To undertake export consultancy for export oriented projects based on
modern technology
 To conduct Entrepreneurship Development Programmes
 To offer merchant banking services

18. Why a business plan is so very important for an Entrepreneur. Give any four
reasons.

A business plan is a formal statement of a set of business goals, the reasons why they
are believed attainable, and the plan for reaching those goals. It may also contain
background information about the organization or team attempting to reach those
goals. The reasons for writing a business plan are:

 To test the feasibility of the business idea.

 To give your new business the best possible chance of success
 To secure funding, such as bank loans
 To make business planning manageable and effective.

19. What is project formulation?

Project Formulation is defined as taking a first look carefully and critically at a

project idea by an entrepreneur to build up an all round benefit to project after
carefully weighing its various components. It can be formulated by the entrepreneur
with the help of experts and consultants. It is therefore a process whereby the
entrepreneur makes an objective and independent assessment of the various aspects
of as investment proposition of a project idea for determining its total impact and
also its liability.

20. What is a Tax Holiday?

Under Section 80J of the Income Tax Act 1961, new industrial undertakings ,
including small scale industries, are exempted from the payment of income tax on
their profits subject to a minimum of 6% per annum of their capital employed. This
exemption in tax is allowed for a period of five years from the commencement of
production. A small scale industry has to satisfy the following two conditions to
avail this tax exemption facility:

 The unit should not have been formed by the splitting or reconstitution of an
existing unit.
 The unit should employ 10 or more workers in a manufacturing process with
power or at least 20 workers without power.

21. What is rehabilitation allowance?

A rehabilitation allowance is granted to small scale industries under section 33-B of

the Income Tax Act 1961 whose business is discontinued on account of the following
reasons:

 Flood, typhoon, hurricane, cyclone, earthquake or other natural upheavals

 Riot or civil disturbance
 Accidental fire or Explosion
 Action by an enemy or action taken in combating an enemy

The rehabilitation allowance should be used for business purposes within three
years of unit re-establishment, reconstruction or revival. The rehabilitation
allowance is allowed to a unit equivalent to 60 percent of the amount of deduction
allowable to that unit.

22. What is a sick unit?

According to RBI :

 A sick unit is one which incurs cash losses for one year and in the judgement
of the bank , it is likely to incur losses continually for the current year and
also for the following year
 The unit has an imbalance in its financial structure such as the current ratio
of less than 1:1 and worsening debt-equity ratio
 When the cumulative losses exceed capital and reserve
23. What is plant location?

Plant location refers to the choice of region and the selection of a particular site for
setting up a business or factory. But the choice is made only after considering cost
and benefits of different alternative sites. It is a strategic decision that cannot be
changed once taken. If at all changed only at considerable loss, the location should
be selected as per its own requirements and circumstances. Each individual plant is
a case in itself. Businessman should try to make an attempt for optimum or ideal
location.

24. What is Break- Even Pricing?

Break-even pricing is a strategy that yields zero profit on a transaction. At break-

even pricing the sales revenue equals expenses and is calculated by totaling the fixed
and variable costs.Break-even pricing may be used as an aggressive marketing tool
for market expansion or penetration. Understanding break-even price points gives
management the tools to work toward generating profits or whether or not to even
enter a particular market.

25. What are Industrial Estates?

Industrial estates are specific areas zoned for industrial activity in which
frastructure such as roads, power, and other utility services is provided to facilitate
the growth of industries and to minimize impacts on the environment. The
infrastructure may include effluent treatment, solid and toxic waste collection,
treatment, and disposal; air pollution and effluent monitoring; technical services on
pollution prevention; quality management and laboratory services.

26. What are SEZs?

Designated areas in countries that possess special economic regulations that are
different from other areas in the same country. Moreover, these regulations tend to
contain measures that are conducive to foreign direct investment. Conducting
business in a SEZ usually means that a company will receive tax incentives and the
opportunity to pay lower tariffs.

27. Write a note on EOUs.

EOUs: The Export Oriented Units (EOUs) scheme, introduced in early 1981, is
complementary to the SEZ scheme. It adopts the same production regime but offers
a wide option in locations with reference to factors like source of raw materials,
ports of export, hinterland facilities, availability of technological skills, existence of
an industrial base and the need for a larger area of land for the project.

28. What are EPZs?

Export Processing Zones (EPZs) can be summarized as a unit bearing clusters of
specially designed zones of aggressive economic activity for the promotion of export.
The main concept of Export Processing Zones was conceived in the early 1970s to
promote the growth of the sickening export business of India. Further, the meaning
of Export Processing Zones (EPZs) can be broadly defined as an area enjoying
special government of India support with respect to fiscal incentives, tax rebates and
other exclusive benefits for the growth of export

29. What are the various causes of industrial sickness?

(i) External Causes - They are beyond the control of the business unit

 Changes in the industrial policy of the government from time to time

 Inadequate and untimely availability of necessary inputs like raw materials,

power, transport and the skilled labour

 Lack and shrinkage of demand for the product

 Recessionary trends hovering in the economy

 Frequent industrial strikes and labour unrest

 Natural calamities like flood, draught etc

(ii) Internal Causes – They are within the control of the Business unit

 Internal deficiencies in various functional areas like finance, production,

marketing personnel etc.,

 Problems of poor Management

 Poor Implementation

 Shortage of Working Capital

30. Point out the various factors that motivate people to go to business?

(i) Internal Factors:

 Desire to do something new

 Educational Background

 Occupational Background or experience

(ii) External Factors:

  Government assistance and support

 Availability of labour and raw material

 Encouragement from big business houses

 Promising demand for the product

31. Define the concept of Capitalization

Capitalisation means the total amount of capital employed in the enterprise. It

means the determination of the amount of finance and also the mode of finance. The
amount of capitalization of the enterprise is the total of the cost of fixed assets,
working capital and the cost involved in setting up of the enterprise.